Overview
I recently became aware of Netskope (NTSK). As I have seen only passing comments on this forum, I am sharing my initial research.
What they do
Netskope is a network security platform that offers secure remote access, cloud-hosted application protection, and secure internet access solutions based on zero trust principles.
Summary
- The Investor Presentation for FY2026Q3 has an excellent overview of the company and its pre-IPO history.
- As of 2025, Gartner Magic Quadrant Leader for Secure Services Edge (SSE) for four consecutive years.
- This is a recent IPO (September 2025) with 1 quarter of public earnings. Many numbers I provide here are from the S-1 IPO filing.
- The stock price has been a victim of market fear surrounding AI.
- Primary competitors: Z-Scaler (ZS) and Palo Alto (PANW). Netskope is gaining market share.
- YoY Revenue Growth: 33%
- EPS FY2026Q3: $-.10
- Positive Free Cash Flow
- Gross Margin 75%, +5% YoY, with a target of 80%
- Current guidance is very conservative for two reasons: (1) new public company, and (2) billing was recently changed from from multi-year contracts to annual.
- Technology alliances with Microsoft (MSFT) and CrowdStrike (CRWD).
- Strong focus on R&D, particularly related to AI security requirements.
Searching the web for more information about Netskope, I countered one article by Contrary Research that has a nice overview of the company. Primarily, information from the S-1 filing and first public earnings release, but also a fair bit of added detail to help understand the company.
Personal Thoughts … Some notable concerns / risks:
- Not yet profitable. Though if it seems likely non-GAAP profitability will be possible within 1 - 2 years, particularly if they reach their goal of 80% gross margins.
- The stock price is a victim of AI fears. Valid or not is irrelevant, the company must overcome that market fear in order for the stock price to go up. That will be very challenging for a new IPO that is not yet profitable.
- The company is focused heavily on R&D. While I view this as necessary to stay relevant with AI changing the world, especially in a small company, it also adds a high degree of uncertainty and will likely delay profitability.
- Zscaler (ZS) and Palo Alto (PANW) are competitors. Netskope seems to offer a different type of solution to the same security task, but I do not know enough about cybersecurity to determine the growth potential for Netskope in the face of this competition.
- I am always highly skeptical of a recent IPO.
I have no position in the company at this time.
Neskope (NTSK) Company Overview
Website: https://www.netskope.com/
IPO Date: 2025-09-18
S-1 IPO Filing: https://www.sec.gov/Archives/edgar/data/2063196/000095017025110855/ck0002063196-20250822.htm
Company Overview:
Our Mission from Investor Relations
Netskope’s mission is to help organizations successfully modernize their businesses for the era of cloud and AI. Netskope converges critical security, network, and analytics capabilities into Netskope One, a powerful, unified platform, whose unique architecture of Netskope One applies zero trust principles and AI innovations to optimize access, protect data, stop threats, and enable secure, work-from-anywhere connectivity.
Thousands of customers, including more than 30 of the Fortune 100, trust the Netskope One platform, its Zero Trust Engine, and its powerful NewEdge network to reduce risk and gain full visibility and control over cloud, AI, SaaS, web, and private applications—providing security and accelerating performance without trade-offs.
Finances
NOTES:
- FY2026Q3 is the only quarter with earnings data as a publicly traded company.
- FY2026Q4 is the high end of provided guidance.
- FY2025Q1 through FY2025Q2 are from the IPO S-1 SEC filing.
| Revenue | Fiscal Quarter | ||||
|---|---|---|---|---|---|
| Fiscal Year | 1 | 2 | 3 | 4 | Total |
| 2025 | $ 120,997 | $ 130,253 | $ 138,532 | $ 148,486 | $ 538,268 |
| 2026 | $ 157,736 | $ 170,758 | $ 184,173 | $ 190,000 | $ 702,667 |
| Revenue YoY Growth | Fiscal Quarter | |||
|---|---|---|---|---|
| Fiscal Year | 1 | 2 | 3 | 4 |
| 2026 | 30.36% | 31.10% | 32.95% | 27.96% |
| Revenue Seq Growth | Fiscal Quarter | |||
|---|---|---|---|---|
| Fiscal Year | 1 | 2 | 3 | 4 |
| 2025 | 7.65% | 6.36% | 7.19% | |
| 2026 | 6.23% | 8.26% | 7.86% | 3.16% |
| Free Cash Flow | Fiscal Quarter | ||||
|---|---|---|---|---|---|
| Fiscal Year | 1 | 2 | 3 | 4 | Total |
| 2025 | $ (66,407) | $ (60,100) | $ (28,644) | $ 4,052 | $ (151,099) |
| 2026 | $ 17,456 | $ (19,653) | $ 10,594 | $ 8,397 |
Earnings FY2026Q3 on 2025-12-11
Earnings Release
Investor Presentation
Highlights:
Third Quarter Fiscal Year 2026 Financial Highlights
- Annual Recurring Revenue (ARR): ARR grew 34% year-over-year to $754 million as of October 31, 2025.
- Revenue: Q3 Revenue was $184.2 million, an increase of 33% year-over-year.
- Gross Profit and Margin: GAAP gross profit was $106.6 million, compared to $91.8 million for the third quarter of fiscal 2025, and GAAP gross margin was 58%, compared to 66% for the third quarter of fiscal 2025. Non-GAAP gross profit was $137.6 million, compared to $97.5 million for the third quarter of fiscal 2025, and non-GAAP gross margin was 75%, compared to 70% for the third quarter of fiscal 2025. Non-GAAP gross profit excludes $28.6 million in stock-based compensation expense and related taxes, compared to $0.6 million in the prior year period, due primarily to the vesting of certain equity awards in conjunction with the initial public offering.
- Loss from Operations and Operating Margin: GAAP loss from operations was ($447.0) million, compared to a loss of ($53.8) million for the third quarter of fiscal 2025, and GAAP operating margin was (243%), compared to (39%) for the third quarter of fiscal 2025. Non-GAAP loss from operations was ($28.2) million, compared to a loss of ($35.5) million for the third quarter of fiscal 2025, and non-GAAP operating margin was (15%), compared to (26%) for the third quarter of fiscal 2025. Non-GAAP loss from operations excludes $416.2 million in stock-based compensation expense and related taxes, compared to $12.3 million in the prior year period, due primarily to the vesting of certain equity awards in conjunction with the initial public offering.
- Net Loss Per Share: GAAP net loss per share was ($1.85), compared to ($0.72) in the third quarter of fiscal 2025. Non-GAAP net loss per share was ($0.10), compared to ($0.37) in the third quarter of fiscal 2025. Non-GAAP net loss per share excludes $0.04 for the loss on the change in fair market value of convertible notes, compared to $0.18 in the year ago period. As of October 31, 2025, the weighted average common stock outstanding was 245 million and the fully-diluted share count under the treasury stock method was approximately 506 million.
- Cash Flow: Net cash generated from operations was $11.2 million, compared to ($10.9) million used in operations in the third quarter of fiscal 2025 and operating cash flow margin was 6%, compared to (8%) in the third quarter of fiscal 2025. Free cash flow was $10.6 million, compared to ($28.6) million in the third quarter of fiscal 2025 and free cash flow margin was positive 6%, compared to (21%) in the third quarter of fiscal 2025.
- Cash, Cash Equivalents, and Marketable Securities: Total cash, cash equivalents and marketable securities at the end of the third quarter was $1.2 billion.
Recent Business Highlights
Completed our Initial Public Offering in September, raising $992.2 million in IPO proceeds, net of underwriting discounts and commissions.
In addition to being recognized as a Leader in both the 2025 Gartner Magic Quadrant for Secure Services Edge (SSE), for four consecutive years and a Leader in the 2025 Magic Quadrant for SASE platforms for two consecutive years, during Q3 Fiscal 2026, Netskope was also recognized as:
- A leader in The Forrester Wave™: Secure Access Service Edge Solutions, Q3 2025 report. Netskope was the highest scoring vendor in the report overall and also the highest scoring vendor in Forrester’s “Strength of Offering” category.
- A Leader in GigaOMs DLP Radar report and SD-WAN Platforms Radar report.
Expanded our NewEdge private cloud network with new data centers in Malaysia, Toronto, Hawaii, and Oman to meet growing customer demand. NewEdge now covers close to 80 major metropolitan areas, with over 120 data centers globally, all of which are available to every customer, have full edge compute, and run all services.
Announced updates to our Netskope One platform, including:
- Universal Zero Trust Network Access (UZTNA) enhancements to extend to IoT and OT use cases. Netskope’s UZTNA solution helps customers modernize their networks by enabling the consolidation of legacy technologies beyond just Virtual Private Networking (VPN), to also include Network Access Control (NAC) and Virtual Desktop Infrastructure (VDI).
- New AI-powered innovations which improve efficiency and effectiveness of security teams. This includes an integrated AI agent for Netskope One Private Access, which provides insight into an organization’s existing ZTNA network topologies and private application configurations.
Deepened our collaboration with Microsoft through enterprise security and AI integrations, including Netskope One integration with Microsoft Purview. In addition, we released Netskope One Advanced SSE for Microsoft Entra Global Secure Access (GSA), and new protections for Microsoft 365 Copilot conversations - including GenAI queries, responses, and AI-generated content - using our market-leading data and threat protection delivered through our new CASB API for Microsoft 365 Copilot.
Earnings Call FY2026Q3
A few quotes I found noteworthy for understanding the company:
Sanjay Beri, CEO and Co-founder
We do not play marketing games with how many regions or data centers we have. Unlike others, all our regions and data centers are available to every customer, and all have full edge compute and run all services. We also released several new products stemming from our technology alliances with Microsoft and CrowdStrike. Netskope One now uniquely fully integrates with Microsoft Purview, combining Netskope’s deep DLP enforcement with Purview’s data classification policies. We also announced general availability of Netskope One Advanced SSE for Microsoft Entra Global Secure Access and new protections for Microsoft 365 Copilot conversations, including GenAI queries, responses, and AI-generated content, all using our market-leading data and threat protection delivered through our new CASB API for Microsoft 365 Copilot. Together, these integrations help Microsoft customers accelerate their zero-trust journey while protecting users’ data and applications without compromising performance or experience.
Finally, through our strong technology alliance with CrowdStrike, we released a new direct-to-zero trust app, which provides out-of-the-box integration between Netskope One and CrowdStrike Falcon to enable the bidirectional sharing of indicators of compromise without the need for extensive manual integration work by the customer.
Sanjay Beri, CEO and Co-founder
We operate in a market where superior technology matters a lot. We often get asked, “What sets Netskope apart from others? What drives customer adoption and satisfaction, and what fuels our market leadership?” As market analysts and our thousands of customers validate, the core of our differentiation is our technology and the vision that it was born from. Innovation is the heartbeat of Netskope. We are committed to continuing to invest in R&D to drive innovations that expand our industry-leading security networking and analytics platform and help our customers safely unleash the power of cloud and AI to stay ahead of the cybersecurity curve.
Drew Del Matto, CFO
Before I share our guidance for the fourth quarter and fiscal year 2026, let me briefly outline some factors that should be considered. We plan to focus our investments on innovation as well as growth. This includes hiring engineers and data scientists in focused areas to drive Netskope’s roadmap and innovation strategy. We’ll also continue to focus on hiring and ramping reps to address growing market demand for our cloud security, networking, analytics, and AI solutions. Also, we expect continued improvement in our gross margin as we work toward an 80% target over the long term. The foundational investments we made in building our NewEdge private cloud network allow us to scale efficiently going forward. Also, as a reminder, we are in the midst of a shift in our customers’ billing terms, where our multi-year contracts are now primarily billed annually.
Q&A: Matt Hedberg, Managing Director of Equity Research
Great, guys. All of them, congrats as well. Sanjay, for you, obviously, agents and agentic technology is on everybody’s mind, and it feels like you guys are well-positioned to help customers think through their agentic journey. Just kind of curious on how you think of that piece as part of the growth story here. Thanks, guys.
Sanjay Beri, CEO and Co-founder
I recently did a tour kind of across the world with customers’ prospects and agentic AI, agentic workflows, securing enabling AI top topic. If you look at where we’re positioned, we see the traffic of all of our customers. We see their human traffic, their non-human traffic. All their AI applications go through us. So they could be using ChatGPT, they could be using AI within a SaaS app, an AI agent could be originating that. We see that, and because we understand the language of AI, APIs, we see it at a more granular level than anybody else. We see, oh, they’re using Gemini, a personal instance, and they’re about to say, “Reformat this healthcare data.” Well, guess what? Netskope can stop that, yet still allow them to use that AI, and so I call that the front door of AI.
It’s users, AI agents, applications using LLMs and using AI. We see it, we understand it, we can protect that data, and then we can put guardrails around it. And so absolutely right in our wheelhouse, and it’s a big reason that we’re seeing sort of the success across different verticals that we are.
Q&A: Brad Zelnick, Managing Director of Equity Research
Drew, any help that you can offer in how we should think about ARR and net new ARR seasonality into Q4 and anything we might contemplate maybe even into next year? And I appreciate your comments about all the assumptions and your guidance, but also as a brand new public company, I mean, you guys are growing in excess of 30% at real scale.
I mean, it really stands out, really great, but anything you can do to help calibrate the kind of beats that we might expect going forward would be helpful. Thank you.
Drew Del Matto, CFO
Okay, well, I think there’s a couple of questions there. I think the first question really was on ARR, Brad, so we’re not guiding ARR, but I do think it’s helpful. We may want to just help you a little bit from a modeling perspective. If you look over really the last year, you could see that ARR was growing about a point faster than revenue, so it’s just one way to kind of think about how to think about that, and then also, last Q4 was very strong. It’s a very strong quarter for us, so what I would consider a high bar, and Q3, also a very strong quarter. You just saw ARR accelerating to 34%.
In terms of just the guidance, again, newly public company, we are being prudent. And we also, what Sanjay was just talking about, we have a lot of reps ramping. We continue to hire, and it’s very hard to predict the rate at which we’ll hire and the rate at which they’ll ramp.