Netskope (NASDAQ:NTSK) reported fourth quarter and full-year fiscal 2026 results that exceeded its guidance across key metrics, driven by what management described as strong new and expansion demand for its networking, security, and analytics platform in the cloud and AI era. On the company’s earnings call, CEO and co-founder Sanjay Beri and CFO Drew Del Matto highlighted record net new annual recurring revenue (ARR), improving margins, and the company’s first full fiscal year of positive free cash flow.
Fourth quarter and full-year results beat guidance
Beri said Netskope ended fiscal 2026 “on a high note,” pointing to record net new ARR of $57 million in the fourth quarter and ending ARR of $811 million, representing 31% year-over-year organic growth. Fourth-quarter revenue increased 32% year-over-year to $196 million. For the full year, revenue rose 32% to $709 million.
Customer expansion, multi-product adoption, and retention
Management emphasized both new logo wins and customer expansion. Beri said the average number of products per customer increased to 4.4, and described the Netskope One platform as comprising 25 security, networking, analytics, and AI products. Netskope reported a 116% net retention rate (NRR) and 22% year-over-year growth in customers with more than $100,000 in ARR.
Del Matto added that the number of customers generating more than $100,000 in ARR grew to 1,531, with more than 85% of total ARR coming from that cohort and average ARR per customer in the group rising to more than $450,000. He said churn and downsell remained at “historic lows,” while noting that NRR can vary quarter to quarter depending on the mix of upsell versus new logo activity. He also said Q4 of fiscal 2025 was a particularly strong upsell quarter, creating a tougher comparison.
Multi-product adoption also increased. As of the end of Q4:
- 56% of customers used four or more products, up from 48% a year ago.
- 27% of customers used six or more products, up from 22% a year ago.
Margins, cash flow, and balance sheet
Netskope highlighted operating leverage as it scales its NewEdge private cloud network. Del Matto reported Q4 gross margin of 76%, up about five percentage points from the prior year quarter, which he attributed to improving unit economics from NewEdge. Q4 operating margin improved to -10%, and Q4 net loss per share was $0.04 on 395 million weighted average shares outstanding.
Free cash flow was a focal point for management. Netskope generated $12 million of free cash flow for fiscal 2026, which Beri called the company’s “first-ever year of positive free cash flow.” Del Matto said this was an improvement of $163 million over fiscal 2025 and equated to a 30 percentage point improvement in free cash flow margin year-over-year. In Q4, free cash flow was $4 million (a 2% margin), which Del Matto said was supported by a focus on efficiency and the company’s first year transitioning customers to annual billings.
The company ended Q4 with $1.2 billion in cash, cash equivalents, and marketable securities.
AI strategy, product announcements, and go-to-market themes
Beri framed Netskope as a beneficiary of what he called an “AI super cycle,” describing four pillars of an AI strategic framework: an AI-native platform with privacy and sovereignty by design; real-time inline AI security; performance and resilience through NewEdge infrastructure; and a platform built for the “agentic economy,” including an AI-fluent proxy and autonomous operations.
During the call, Beri discussed multiple AI-related product announcements made that day, including the Netskope One Agentic Broker and Netskope One AI Guardrails, and referenced a Netskope AI gateway and newly released autonomous AI agents, including a ZTNA AI agent. He also said Netskope operates a library of more than 190 proprietary AI models optimized for security and network performance.
Netskope also introduced the Netskope AI Index, which Beri described as an interactive view of real-time AI usage around the world. He positioned the index as evidence of the volume of AI traffic traversing the NewEdge network and as a source of insight into enterprise AI adoption trends.
Beyond AI, Beri cited additional innovations, including:
- Netskope One Data Lineage, designed to track and visualize movement of sensitive data across an organization.
- Expanded enterprise browser support to additional iOS and Android devices and deeper integration with Remote Browser Isolation and private access for unmanaged/BYOD use cases.
- DNS as a service to route DNS resolution through Netskope for filtering and security, including use cases like guest Wi-Fi.
Management highlighted customer wins across regions and verticals, including deals involving multi-product adoption to secure generative AI, modernize infrastructure, consolidate vendors, and replace legacy security. Beri also pointed to partner activity, including a major enterprise energy deal with what he called the “largest GSI in the world,” and said Netskope achieved AWS security competency status for AI security.
In Q&A, Beri said most organizations are still in the “first inning” of AI security maturity and estimated that “90%” of AI usage is currently shadow AI. He also described pricing dynamics, saying user traffic is typically charged per user, while new AI products announced are charged by transaction, which he defined as a prompt and response.
Outlook: slower growth, investment ramp, and annual billing transition
For fiscal Q1 2027, Netskope guided revenue of $197 million to $199 million, with an operating margin of approximately -16% and net loss per share of $0.06 to $0.07 using about 405 million weighted average shares outstanding. For the full fiscal year 2027, the company guided revenue of $870 million to $876 million, gross margin of approximately 77%, operating margin of about -10%, and net loss per share of $0.19 using approximately 415 million weighted average shares outstanding. The company expects a 2% to 4% free cash flow margin for the full year.
A key modeling item is Netskope’s shift to annual billings on multi-year contracts. Del Matto said the transition is happening faster than expected, but is expected to weigh on near-term free cash flow. Netskope expects Q1 free cash flow to be negative $50 million to $60 million, improving in Q2 and returning to positive free cash flow in the second half of the year. Del Matto also said the annual billings transition is estimated to reduce free cash flow margin by about six percentage points in fiscal 2027.
On revenue guidance, Del Matto said the company is remaining prudent as a newer public company, noting sales rep ramping and citing macro and geopolitical considerations as factors incorporated into guidance. He emphasized that these considerations were more about broader macro risk than direct exposure to a specific region.
About Netskope (NASDAQ:NTSK)
We are redefining security and networking for the era of cloud and AI. The cloud and AI have completely revolutionized work. We are more dispersed, more productive, and more automated than ever before, and the rate of change is only accelerating. Not since the internet has there been such a transformative tectonic shift. But, with it has come collateral damage-traditional security and networking are now broken. We founded Netskope to address this revolution. We built Netskope One, our unified, cloud-native platform from the ground up to solve the challenge of securing and accelerating the digital interactions of enterprises in this new era.
