Netskope NASDAQ: NTSK reported first-quarter fiscal 2027 revenue above its guidance and raised its full-year revenue outlook, as executives said demand remains healthy for the company’s cloud security, networking and emerging AI security products.
Chief Executive Officer and Co-Founder Sanjay Beri said customers are continuing digital and AI transformations and are turning to Netskope as they reassess legacy security and networking architectures. “Our results demonstrate that as customers are continuing their digital and AI transformations, moving to leverage AI in the cloud, and readying themselves for the reality of a large amount of autonomous AI agents in their environments, Netskope is a mission-critical innovative partner for now and the future,” Beri said.
Revenue Tops Guidance as ARR Grows 29%
Netskope ended the quarter with annual recurring revenue, or ARR, of $845 million, up 29% year over year. Net new ARR was $34 million, compared with $39 million in the same quarter last year. Revenue rose 28% year over year to $201.6 million, ahead of the company’s guidance.
CFO Drew Del Matto said revenue growth was broad-based across regions. Revenue in the Americas increased 27%, EMEA grew 31%, and APJ grew 25%. Remaining performance obligations rose 33% year over year to more than $1.2 billion, while contracted future billings increased 71%.
The company reported a net retention rate of 113% for the quarter. Beri said gross retention reached the highest level in the company’s history, adding that Netskope has consistently operated with gross retention rates above the mid-90% range.
Netskope also cited continued growth among larger customers. The number of customers generating more than $100,000 in ARR increased 23% year over year to 1,600, and Del Matto said those customers account for more than 85% of total ARR. Platform adoption broadened as well, with 57% of customers using four or more Netskope One products, up from 49% a year earlier. Customers using six or more products increased to 28% from 23%.
Margins Improve, Cash Flow Remains in Transition
Gross margin was 77%, up about three percentage points from the year-ago quarter. Operating margin improved four percentage points year over year to negative 14%, also ahead of guidance. The company reported a non-GAAP net loss of $0.06 per share, based on 400 million weighted average shares outstanding.
Free cash flow was negative $57 million, which Del Matto said was in line with guidance as Netskope continues transitioning customers with multiyear contracts to annual billing. He said the company expects the first quarter to be the low point of that transition, with free cash flow improving in the second quarter and returning to positive quarterly free cash flow in the back half of the year.
Company Raises Full-Year Revenue Outlook
For the second quarter of fiscal 2027, Netskope guided for revenue of $213 million to $215 million, representing growth of about 25% at the midpoint. The company expects an operating margin of approximately negative 14% to negative 15% and a net loss of $0.06 to $0.07 per share.
For the full fiscal year, Netskope now expects revenue of $879 million to $883 million, or roughly 24% growth at the midpoint. The company also forecast gross margin of about 77%, operating margin of negative 9.5% to negative 10%, a net loss of $0.18 per share, and positive free cash flow margin of 2% to 4%.
Del Matto said the company raised its full-year revenue outlook by more than the amount of the first-quarter revenue beat, reflecting management’s confidence in demand. He said Netskope still expects ARR growth to be within one point of revenue growth.
AI Security Products Drive Pipeline Commentary
Beri devoted much of the call to the company’s positioning around AI security. He said conversations with CIOs and CISOs increasingly center on safely and compliantly adopting AI at enterprise scale. Netskope’s AI Index shows that the average Global 2000 company tracked by the company uses more than 140 AI applications, and about 90% of AI usage is led by business units rather than IT.
The company recently introduced several AI-focused products, including AI Gateway, AI Guardrails, Agentic Broker and Red Teaming. Beri said those products are priced per transaction, defined as each prompt and response. He also discussed the newly announced AI Command Center, which is intended to provide visibility across an organization’s AI footprint, connect AI assets and data flows into a real-time view of risk, and recommend remediation actions.
“These new AI security products generated significant excitement and early pipeline right out of the gate, translating into some initial early deals closed with beta customers,” Beri said. He cited a U.S. fintech customer that purchased the full AI security suite and a large U.S. bank that deployed AI Guardrails for real-time visibility, data loss prevention enforcement, user behavior analytics and inline threat protection.
During the question-and-answer session, Beri said Netskope’s AI security product pipeline is the fastest-growing pipeline the company has seen for any new product category. He also said Netskope maintains an over 80% win rate when it reaches proof-of-value or proof-of-concept stages.
CFO Announces Planned Retirement
The company also announced that Del Matto plans to retire after more than seven years with Netskope. Beri said Del Matto will continue serving as CFO during the search for a successor and will transition to an advisory role afterward.
“During his tenure, he has played a critical role in helping us scale to where we are today, including leading the company through its recent IPO, strengthening our financial and strategic foundation, and building a world-class finance organization,” Beri said.
Del Matto said it has been “one of the great privileges” of his career to be part of Netskope’s growth, noting that the company scaled from approximately $70 million of ARR to its current level during his tenure. He said he remains fully committed through the transition.
Executives said sales capacity remains a key factor for the remainder of the year. Beri said about half of Netskope’s sales representatives are newly hired or still ramping, and Del Matto said the company expects a larger portion of net new ARR to come in the second half of fiscal 2027 as those representatives become more productive.
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.
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