SailPoint Inc. (SailPoint (SAIL)) had a rough Tuesday. The identity security software company reported fiscal first-quarter results that beat Wall Street's expectations, but its outlook for the current quarter suggested growth is cooling off. Investors didn't love that, sending the stock down more than 11%.

For the quarter ended April 30, SailPoint's annual recurring revenue (ARR) hit $1.163 billion, up 26% from a year ago. SaaS ARR grew even faster, climbing 36% to $781 million. Total revenue rose 22% to $280.1 million, edging past the $276 million analysts were looking for. Subscription revenue, the bread and butter, increased 23% to $265.8 million.

The company also showed progress on profitability. Adjusted gross margin expanded 30 basis points to 76.6%. The GAAP operating loss narrowed to $79.8 million from $185 million a year earlier, and adjusted income from operations jumped to $37.8 million from $23.6 million. Adjusted operating margin improved to 13.5% from 10.2%. On an adjusted basis, SailPoint earned $0.05 per share, a penny above the consensus estimate of $0.04.

CEO and founder Mark McClain said the company had a strong start to fiscal 2027, driven by demand for identity security. He noted that SailPoint's platform helps enterprises secure human identities, cloud resources, and autonomous AI agents through a unified framework. He also pointed to growing regulatory requirements around non-human identities as a tailwind, especially as organizations deploy more AI technologies.

The company ended the quarter with $390.8 million in cash and generated $38.2 million in operating cash flow.

Now for the part that spooked the market: the second-quarter outlook. SailPoint expects ARR of $1.218 billion to $1.222 billion, revenue of $308 million to $312 million (versus the $309.9 million estimate), and adjusted earnings of $0.07 to $0.08 per share (versus the $0.08 consensus). That guidance implies ARR growth of about 24% and revenue growth of roughly 17% to 18% — both down from the first quarter's 26% and 22% clips.

For the full fiscal year 2027, SailPoint raised its ARR forecast to $1.364 billion to $1.374 billion, up from its prior range of $1.356 billion to $1.366 billion. It also bumped revenue guidance to $1.265 billion to $1.275 billion from $1.260 billion to $1.270 billion. But even the higher full-year ARR forecast implies growth of about 21% to 22%, compared with 28% growth in fiscal 2026. That deceleration seems to be what caught investors' attention.

Analysts are expecting full-year revenue of $1.266 billion and adjusted earnings of $0.32 per share. SailPoint's own adjusted earnings guidance of $0.30 to $0.34 per share and adjusted income from operations of $239 million to $244 million bracket that estimate.

By Tuesday's close, SailPoint shares were trading at $15.72, down 11.11% on the day. The market's message was clear: a beat is nice, but slowing growth is hard to ignore.