Two cybersecurity stocks have recently announced share repurchase programs, marking a big shift in their capital allocation policies. Neither has ever engaged in discretionary share repurchases. In fact, both companies have traditionally issued many shares instead. This dilutes existing shareholders, providing the opposite effect of share buybacks. Thus, the outlook for current and potential shareholders has moved in a positive direction. Dilution is likely to slow significantly, halt altogether, or even begin to reverse.
Below are the details on these two names. All metrics use data as of the June 6 close unless otherwise indicated.
SentinelOne Says It’s Undervalued, Buybacks Are Coming
First up, is the vastly smaller of these two cybersecurity stocks, SentinelOne (NYSE: S). Compared to calendar Q1 2022, SentinelOne managed to nearly triple its quarterly revenues by calendar Q1 2025. The firm’s adjusted operating margin has also shifted from -73% to just -1.7%. Adjusted earnings per share (EPS) have been at or above zero for the last four quarters. The figure was negative every quarter prior.
[content-module:Forecast|NYSE: S]At first glance, this sounds like a company that would have seen its shares gain significant value. However, that is far from the case. Since the beginning of June 2022, shares of SentinelOne are down by nearly 26%.
One factor that likely hasn’t helped is SentinelOne’s penchant for share issuance. The company’s outstanding share count has increased by nearly 19% over this three-year period, a major headwind for EPS growth. Now, the company may be reversing course. SentinelOne has announced a $200 million share buyback program. This represents around 3.3% of the company’s approximately $6.1 billion market cap.
This is a moderately-sized buyback program, but the overall takeaway is bigger. The program aims to "reduce dilution over time," signaling that the damaging effect issuance has on shareholders will become mitigated. The company also believes that the market is undervaluing its shares. SentinelOne stated that the decision reflects its view that “our current stock price does not fully reflect our underlying fundamentals or future potential.” This argument seems far from unreasonable. The company has seen huge financial gains over the years, but its share price has dropped significantly.
CrowdStrike: Red-Hot Cyber Leader Likely to See an End to Dilution
CrowdStrike (NASDAQ: CRWD) is one of the behemoths of the cybersecurity industry and has also achieved massive financial accomplishments over the past several years. It has grown its quarterly revenues by around 2.3 times since calendar Q1 2022. Additionally, its full-year adjusted EPS increased by 156% from 2022 to 2024. However, unlike SentinelOne, markets have rewarded CrowdStrike handsomely for its strong financial performance. Since the beginning of June 2022, shares are up by around 187%.
[content-module:Forecast|NASDAQ: CRWD]CrowdStrike has been issuing new shares instead of repurchasing them. This has led to an increase of more than 7% in its total outstanding share count over the three-year period. However, this trend may also be about to change. The company recently announced a $1 billion buyback authorization. It said this decision “reflects our confidence in CrowdStrike's long-term strategy, including M&A, growth prospects, and robust cash flow generation capabilities."
This buyback authorization is small for CrowdStrike. It represents only about 0.9% of its roughly $117 billion market cap. However, this is again not the main takeaway. The fact that the company is now able to buy back shares, which it has not done before, signals that dilution will likely stop or begin to reverse. The company’s share issuance has averaged a value of around $21 million over the last 12 quarters. Using this historical rate, the $1 billion buyback program could theoretically offset nearly 12 years of new share issuance.
With the buyback program being so much larger than the company’s historical share issuance, it is likely that the company’s outstanding share count will start coming down. This is a positive sign for shareholders, as dilution is likely to end, and returns of capital are more likely to begin.
Slowing, Ending, or Reversing Dilution Are Tailwinds for SentinelOne and CrowdStrike
These share buyback announcements are good news for current and potential investors in SentinelOne and CrowdStrike. The authorizations seem modest compared to the size of these firms, but they mark a key shift in capital allocation policy.
For investors, shifting from ongoing shareholder dilution to possible shareholder accretion represents a highly positive change.
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