Samsara Inc. (IOT): A Bull Case Theory

We came across a bullish thesis on Samsara Inc. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on IOT. Samsara Inc.'s share was trading at $36.42 as of October 16th. IOT’s forward P/E was 69.93 according to Yahoo Finance.

Samsara ($IOT) delivered a robust Q2 FY2025, reporting ~30% YoY revenue growth and signs of stabilizing execution across its Connected Operations Cloud platform. The company is expanding its enterprise footprint, highlighted by a record 17 new $1M+ ARR customers, marquee wins including Alaska Airlines, and accelerating adoption in the public sector. Product innovation remains strong, with Asset Tags, Samsara Intelligence, AI-enhanced features, and Connected Workflows driving engagement and measurable ROI for clients.

Operational metrics are improving: gross margin reached 78%, non-GAAP operating margin ~15%, and free cash flow increased to 11%, reflecting both scale and efficiency gains. Samsara’s platform benefits from network effects, strong switching costs, and growing brand trust, underpinning a narrow but defensible economic moat, while ARR grew 29.8% YoY and net revenue retention for large customers remained 115%. Key clients, such as Maxim Crane, Mohawk Industries, SRM Concrete, and Bonnie Plants, illustrate tangible operational improvements and cost savings. International expansion is gaining traction, particularly in Europe, alongside sustained growth in construction, manufacturing, and public-sector verticals.

The balance sheet is healthy, with $702M cash exceeding $77M debt, while stock-based compensation and dilution remain elevated but improving. Despite trailing billings and ongoing GAAP losses, Samsara’s scale, AI integration, and multi-product adoption position it for continued growth. Valuation has reset, trading at a forward EV/Sales of 12.4x, modestly below historical norms, creating a compelling risk/reward scenario. With high-margin, sticky customer relationships and accelerating AI-driven capabilities, Samsara presents an attractive investment opportunity, offering both revenue expansion and operational leverage while targeting long-term enterprise and international adoption.

Previously we covered a bullish thesis on Samsara Inc. (IOT) by Compounding Your Wealth in April 2025, which highlighted FY2025 revenue growth, record margins, AI-driven products, and enterprise expansion. The company's stock price has depreciated approximately by 4.98% since our coverage. The thesis still stands as Samsara maintains durable growth, while Sergey shares a similar thesis but emphasizes Q2 stabilization and measurable ROI from Asset Tags and Samsara Intelligence.

Samsara Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 41 hedge fund portfolios held IOT at the end of the second quarter which was 35 in the previous quarter. While we acknowledge the potential of IOT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.