SailPoint (NASDAQ: SAIL) delivered a quarter where the headline revenue miss was noise and the underlying metrics were the signal. Total ARR hit $1.231 billion, up 25% year over year, with SaaS ARR climbing 36% to $847 million. Net new SaaS ARR accounted for 97% of net new ARR, confirming that the cloud migration story is not just intact but accelerating. Revenue of $308.8 million was a hair below the $310.3 million consensus, but adjusted EPS of $0.09 beat the $0.08 estimate by a penny.
The real story is the AI-driven ARR figure, which crossed $70 million and represented over 30% of net new ARR in the quarter. Existing customers who adopted an AI solution increased their annual spend by more than 60%. That expansion rate is the kind of number that justifies the premium the market assigns to platform companies with AI hooks. It also suggests that SailPoint's bet on unifying human and machine identity under one control plane is gaining traction with the buyer base, not just the analyst community.
Remaining performance obligation (RPO) growth accelerated to 30% year over year, reaching $1.9 billion, and current RPO grew 27% to $931 million. Those are forward-looking indicators that the sales engine is firing on all cylinders. When RPO growth outpaces revenue growth by that margin, it implies a lengthening of the revenue tail and increasing visibility into the next several quarters. The company also completed the acquisition of Entro Security, extending its platform to govern machine and agentic identities alongside human ones, a move that aligns with the AI-driven ARR narrative.
Adjusted operating margin held steady at 20.3%, essentially flat versus 20.4% a year ago. That's a disciplined result given the 17% revenue growth and the investments required to scale the SaaS platform and integrate acquisitions. GAAP operating loss widened to $59 million from $41 million, driven largely by stock-based compensation of $68.3 million, which is a non-cash item that management excludes from its adjusted metrics. The gap between GAAP and adjusted profitability remains wide, but that is structural for a company still in its high-growth phase post-IPO.
Guidance for Q3 calls for total ARR of $1.288 billion to $1.292 billion, representing 24% year-over-year growth, and revenue of $326 million to $330 million. Full-year FY2027 guidance implies ARR of $1.375 billion to $1.385 billion, or 22% to 23% growth, and revenue of $1.265 billion to $1.275 billion, or 18% to 19% growth. Adjusted EPS for the full year is guided to $0.30 to $0.34. The guidance range for Q3 revenue implies sequential acceleration from Q2's $309 million, which is consistent with the RPO build and the typical back-half weighting of enterprise software deals.
The company also reiterated its FY2029 targets: at least $2.1 billion of ARR, at least $800 million of AI-driven ARR, at least 22% adjusted operating margin, and at least $400 million of free cash flow. Those targets now look more credible given the Q2 print. The AI-driven ARR trajectory, in particular, is running ahead of what a linear extrapolation from the $70 million base would suggest. If AI-driven ARR continues to account for 30% of net new ARR, the $800 million target by FY2029 is not aspirational; it is a function of compounding.
What to watch next: the pace of SaaS migrations and the attach rate of AI solutions. More than two-thirds of migrations completed in Q2 included an AI-driven solution. If that ratio holds or increases, the revenue per customer metric should continue to climb. The SaaS customer count grew 16% year over year, but ARR per SaaS customer grew 17% to over $400,000, indicating that land-and-expand is working. The Entro Security acquisition adds a new vector for machine identity governance, which could open up a new customer segment in DevOps and cloud infrastructure teams. For now, SailPoint is executing on the playbook it laid out at its June Investor Day, and the numbers back the narrative.