Netskope (NTSK) Q4 2026 Earnings Call Transcript

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DATE

Wednesday, March 11, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer and Co-Founder — Sanjay Beri
• Chief Financial Officer — Andrew Del Matto
• Chief Communications and Investor Relations Officer — Michelle Spolver

TAKEAWAYS

• Annual Recurring Revenue (ARR) -- $811 million, reflecting 31% year-over-year growth.
• Net New ARR -- $57 million in the quarter, marking a company record.
• Revenue -- $196 million, up 32% year over year; full-year revenue reached $709 million with the same growth rate.
• Free Cash Flow -- $12 million positive for the full year, noted as the first year of positive free cash flow and a $163 million improvement year over year.
• Operating Margin -- Improved five percentage points year over year to negative 10% in the quarter and 18 percentage points for the full year.
• Gross Margin -- 76%, representing a five percentage point year-over-year increase, driven by efficiencies in the NewEdge architecture.
• Net Retention Rate (NRR) -- 116%, with churn and down-sell rates at historic lows.
• Customers Over $100,000 in ARR -- 1,531, up 22%, with this group representing over 85% of total ARR; average ARR per customer in this cohort exceeds $450,000.
• Multiproduct Adoption -- 56% of customers use four or more products, and 27% use six or more, both rising from prior-year levels.
• AI and Product Innovation -- Four new AI security products announced, all with transaction-based pricing; company now offers 25 products on a unified platform.
• Geographic Revenue Mix -- Americas grew 32%, EMEA 36%, APJ 26% during the quarter.
• Cash Position -- Ended the quarter with $1.2 billion in cash, cash equivalents, and marketable securities.
• Guidance: Q1 Revenue -- Forecasted at $197 million to $199 million, approximately 26% growth at the midpoint.
• Guidance: Full-Year Revenue -- $870 million to $876 million projected, about 23% annual growth at the midpoint.
• Guidance: Full-Year Gross Margin -- Targeted at 77% with progress expected to be more gradual going forward.
• Sales Force Ramping -- Significant portion of newly hired sales reps are expected to reach full productivity in the second half of the year.
• First Year Public Company Transition -- Guidance incorporates conservatism due to early ramping of sales reps, macro, and geopolitical factors.
• Free Cash Flow Guidance -- Q1 expected negative $50 million to $60 million due to annual billings transition; full year forecasted positive margin of 2%-4%.
• EPS Guidance -- Q1 net loss per share of $0.06 to $0.07 (approximately 405 million shares); full year forecast net loss per share of $0.19 (approximately 415 million shares).
• AI Strategic Framework -- Company highlighted four pillars: AI-native platform, real-time AI security, differentiated NewEdge infrastructure, and architecture for the Agentic economy; underpins positioning as a "definitive source of enterprise AI data usage and trends."

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RISKS

• CFO Andrew Del Matto said, "we expect negative free cash flow in Q1 of $50 million to $60 million," citing the transition to annual billings as the main driver.
• CFO Andrew Del Matto noted, "our path to sustainable positive free cash flow is not expected to be linear," with timing of cash collections and continued investment possibly increasing volatility quarter to quarter.
• CFO Andrew Del Matto referenced "geopolitical, macro headwinds that have emerged over the last couple of weeks," which were factored into forward guidance and described as requiring "prudence."

SUMMARY

Netskope (NASDAQ:NTSK) delivered strong reported growth across ARR, revenue, and free cash flow, while also marking its first full year of positive free cash flow and improved operating efficiency. The company's rapid product innovation included the launch of four new AI security solutions with a transaction-based pricing model, broadening its platform to 25 products and fortifying differentiation around its AI-native architecture and NewEdge infrastructure. Management's guidance balances growth with caution, reflecting impacts from an accelerated transition to annual billings, macroeconomic uncertainty, and the ramping of a larger sales force, resulting in near-term negative free cash flow but a trajectory to positive margins by year end.

• Management unveiled the Netskope AI Index, offering real-time global AI usage visibility by customer, geography, and vertical.
• Announced that all new products released in the current quarter will be priced by transaction to monetize both human and Agentic AI traffic.
• Customer usage metrics indicated increased product adoption, with the average number of products per customer reaching 4.4, signaling expansion opportunities within the existing base.
• Company extended its strategic GSI and technology partnerships, including AWS Security Competency status for AI security, expanding global channel presence and vertical reach.
• Portfolio expansion and improved product velocity are supported by operational efficiencies and investment in AI-driven R&D productivity, with plans to reduce R&D as a percentage of revenue while increasing output.
• Additional commentary highlighted that over 80% win rates are achieved once in proof-of-concept (POC) stages for competitive deals, underscoring strong positioning in bake-off scenarios.

INDUSTRY GLOSSARY

• SASE: Secure Access Service Edge; a framework integrating networking and security functions for cloud-first enterprises.
• ZTNA: Zero Trust Network Access; security model restricting access based on verification, not broader network location.
• SD-WAN: Software-Defined Wide Area Network; software-based approach to managing WAN connectivity used for network modernization.
• MCP: Model Context Protocol; protocol for managing interactions between AI models, prompts, and responses.
• Agentic: Refers to autonomous AI agents and associated traffic, i.e., systems executing tasks independently from users.
• DSPM: Data Security Posture Management; technology to discover, monitor, and secure sensitive data across environments.
• POC: Proof-of-Concept; demonstration phase used by customers to evaluate product effectiveness before commitment.
• NewEdge: Netskope's proprietary global private cloud network architecture offering high-speed and resilient network performance for security and AI workloads.
• CASB: Cloud Access Security Broker; security policy enforcement point between cloud users and applications.
• GSI: Global System Integrator; a consulting and implementation partner for large-scale technology transformation projects.

Full Conference Call Transcript

Operator: Thank you for standing by, and welcome to Netskope, Inc. Class A Common Stock Fourth Quarter and Full Year Fiscal 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. I would now like to hand the call over to Michelle Spolver, Chief Communications and Investor Relations Officer. You may begin.

Michelle Spolver: Good afternoon, and thank you for joining us today. With me on the call are Netskope, Inc. Class A Common Stock CEO and Co-Founder Sanjay Beri and CFO, Andrew Del Matto. The press release announcing our financial results for the fourth quarter and full year fiscal 2026 was issued earlier today and is posted to our Investor Relations website at investors.netskope.com along with a supplemental presentation. Before we begin, let me remind everyone that some of the statements we make on today's call are forward-looking, including statements related to our guidance for the first quarter and full 2027 fiscal year, growth opportunities, competitive position, and the impact of AI adoption.

These forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements. Additionally, these statements apply only as of today, and we undertake no obligation to update them in the future. For a detailed description of risks and uncertainties, please refer to our SEC filings as well as our earnings press release. Finally, unless otherwise noted, all financial metrics we discuss on this call other than revenue will be on an adjusted non-GAAP basis. We have provided reconciliations of these non-GAAP financial measures against the most directly comparable GAAP financial measures in our earnings press release.

Now let me turn the call over to Sanjay to discuss our business and high-level Q4 financial performance. Thanks, Michelle.

Sanjay Beri: Welcome, everybody, and thank you for joining us to discuss Netskope, Inc. Class A Common Stock's fourth quarter and fiscal year 2026 results. We ended the year on a high note with results that exceeded our guidance across all key metrics. Our focus on delivering a market-leading platform for networking, security, and analytics for the modern world of cloud and AI is resonating well with customers and driving both new and expansion business. Strong global execution resulted in robust fourth quarter results, highlighted by record net new ARR of $57 million and ending ARR of $811 million representing true organic growth of 31% year over year.

Revenue in Q4 grew 32% year over year to $196 million, and revenue for the full fiscal year 2026 also grew 32% to $709 million. We continue to leverage the investments we have made in our Netskope One platform and NewEdge global private cloud network to drive efficient growth, which is reflected in the five percentage point improvement in operating margin in Q4 and an 18-point improvement for the full fiscal year 2026. We are also very pleased to generate $12 million in free cash flow for fiscal year 2026, marking a notable milestone of Netskope, Inc. Class A Common Stock's first-ever year of positive free cash flow.

We also saw a strong mix of both new logo growth and customer expansion across key verticals and geographies. The average number of products per customer increased to 4.4. Customers are solving key use cases through the adoption of our Netskope One platform of 25 security, networking, analytics, and AI products. This is reflected in our net retention rate of 116% and 22% growth in customers with over $100,000 in ARR year over year. Andrew will give more color on our Q4 and full year fiscal 2026 financials in a few minutes.

We have had many innovations go-to-market and operational highlights during the quarter, and one theme that threaded prominently across all of these was AI. Netskope, Inc. Class A Common Stock is uniquely positioned as a significant beneficiary of the AI super cycle because we have engineered a unified AI-native fabric that eliminates the legacy tradeoff between performance and security. We have organically built the Netskope One platform as the intelligent edge—an inherently adaptive architecture where our native AI fluency and active context are seamlessly integrated into our global infrastructure defined by its performance, resilience, and dynamic orchestration. I would like to spend some time today walking through the four pillars of our AI strategic framework, which demonstrate why Netskope, Inc.

Class A Common Stock is the essential engine powering the scale of the modern AI enterprise. First, Netskope, Inc. Class A Common Stock is an AI-native platform with sovereignty and privacy by design. From day one, we were engineered as an AI-native platform. Our competitive moat is architectural, not a single bolt-on feature. Since our inception, we have leveraged and integrated AI as foundational across our platform. In the early days, we used shallow and deep learning, and today, we further augment these capabilities with generative AI models to deliver maximum impact for our customers. Every implementation follows our core principle of privacy by design.

We believe intelligence should never come at the cost of data privacy or sovereignty, and we operate a library of more than 190 proprietary, purpose-built, specialized AI models optimized for security and network performance. This quarter, we continued to enhance those models, and our AI labs released additional models that are used in our new AI security products. Unlike competitors using just generic LLMs, Netskope, Inc. Class A Common Stock's intelligence is purpose-built, high-speed, and hyper-accurate.

The second key pillar in our AI strategy is enabling and securing AI in real time. While legacy and first-generation SASE vendors perform so-called post-event autopsies with out-of-band scanners, Netskope, Inc. Class A Common Stock provides real-time, in-line, AI security for corporate and shadow AI. We do not just see that an AI transaction is happening. We understand the data and intent within it and take real-time granular action. Let me explain. Most solutions simply see a connection. Netskope, Inc. Class A Common Stock understands the deep interaction. Because our proxy is natively AI fluent, we possess the active context to determine dynamically in real time the specific AI app instances, activities, data, and more. We also determine the semantic intent of prompts and responses in real time and enforce in-line policy. Our Netskope One Agentic Broker, one of a number of new AI products we announced earlier today, also seamlessly applies this to all MCP transactions, either sanctioned or unsanctioned. This is why at Netskope, Inc. Class A Common Stock, we are not just observing and enabling the AI revolution. We are the engine generating the high fidelity data that secures it. In today's world, the most valuable asset is not just the AI model. It is the unique real-time data and transaction telemetry that understands the intent and lineage behind every interaction. Netskope One generates a vast and proprietary set of AI-fluent metadata and data for trillions and trillions of transactions a month that traditional security tools simply cannot see or generate, decoding the complex language of AI agents, generative AI apps, AI tools, and cloud JSON in midflight. But while the power of our unique data is a competitive moat, our purpose is singular: the dynamic protection of our customers and their nonhumans and humans. We leverage this unprecedented visibility to protect our customers, ensuring that they can innovate at the speed of AI without ever compromising the integrity or sovereignty of their most sensitive information. We apply in-line decisiveness, or put another way, we make granular go or no-go decisions in flight. This allows us to stop sensitive data from entering prompts and block poisoned AI responses or injection attacks before they ever reach a customer's environment, protecting users, apps, and autonomous agents alike. And our Netskope One AI Guardrails, also announced today, takes this to the next level.

These deep contextual controls are necessary for enterprises to move from prohibiting AI to enabling AI with confidence. We do not just see more. We protect better, turning our unique data into the ultimate foundation of trust for the Agentic era.

Our third AI strategy pillar centers around providing differentiated and unmatched performance and resilience through our NewEdge AI infrastructure. AI transactions are uniquely sensitive to latency. Legacy networks create a latency tax that breaks AI performance. Conversely, our NewEdge infrastructure—the world's largest, high-performance private security cloud—is the AI Fastpath. It is the most resilient, high-speed highway for AI transactions globally, including AI applications and agents hosted in public, private, and neo clouds. It is also an agile edge. Our infrastructure is defined by performance, resilience, and dynamic orchestration.

We process complex security at the edge, closest to the agent, app, or user, reducing lag for secure real-time inference, while allowing the network to dynamically adapt to the high-velocity traffic patterns of the AI era.

And lastly, our fourth AI strategy pillar is a platform built organically and natively for the Agentic economy, with an AI-fluent proxy and for autonomous operations. The perimeter has shifted from being filled with people to entities. Netskope, Inc. Class A Common Stock uniquely addresses this with a platform that specifically speaks the language of AI. As we mentioned, our architecture and native AI-speaking proxy innately understands APIs and JSON. This AI-native visibility enables hyper-granular zero-trust control over AI transactions that other vendors simply cannot see. Through our just-announced Netskope AI Gateway, we extend this enforcement anywhere—public cloud, private data center, or the edge.

We also just released our first autonomous Netskope AI agents, which have already been met with exceptional customer feedback. One of the areas our agents will address will be automating operations. These classes of agents from Netskope, Inc. Class A Common Stock automate complex network and security tasks, drastically reducing the human-in-the-loop requirements for global enterprises. Our recently released ZTNA AI agent has been received very well in this area. And finally, we offer universal governance. By marrying our market-leading data protection with our newly introduced Netskope AI Guardrails, we secure and moderate for acceptable use all communications, whether via Model Context Protocol (MCP) via our Agentic Broker, prompts, or ShadowAI, for humans and nonhumans alike.

Because of these unique and highly differentiated four pillars of our AI strategic framework, many of the world's most sophisticated enterprises choose to secure, accelerate, and analyze their AI transactions through Netskope, Inc. Class A Common Stock. As a result, Netskope, Inc. Class A Common Stock has become one of the most definitive sources of enterprise AI data usage and trends in the world. We were pleased to announce today the Netskope AI Index, which consists of a first-of-its-kind interactive view of real-time AI usage across the world—data covering virtually every country, industry vertical, and company size—providing a granular view of AI adoption and attributable intelligence that positions Netskope, Inc.

Class A Common Stock as the authority that customers and the public can cite when describing the real-world trajectory of the AI economy.

We have also kept our foot on the gas innovating across our Netskope One platform of security, networking, and analytics products, in other related areas. Let me share a few recent examples. On the data security front, we strengthened our competitive edge with the introduction of Netskope One Data Lineage. Data lineage enables security teams to track and visualize the movement of sensitive data across their entire organization through various levels of origin, usage, and access, including visibility into when that data propagates or evolves. We also introduced new capabilities and integrations to improve secure connections to enterprise applications from unmanaged or BYOD devices.

Enterprise browser support was expanded to a new range of iOS and Android mobile devices, while deeper integration with our remote browser isolation and private access solutions provides a range of highly secured deployment models to enable users to connect to private apps through web browsers on their unmanaged devices. And on the networking and infrastructure side, we delivered our DNS-as-a-Service that enables customers to point their DNS traffic to Netskope, Inc. Class A Common Stock for resolution, which can then use our DNS content filtering and security to provide secure access for often overlooked and unprotected use cases like guest Wi-Fi access.

Our continued innovation expands our robust Netskope One unified platform of 25 security, networking, analytics, and AI solutions, providing more opportunity to land and expand with customers. We are an organically built, truly integrated, modern platform for the AI and cloud era. I want to emphasize this point about platforms in the context of what we repeatedly hear from customers. They are telling us that while they desire truly unified platforms over a slew of point solutions, they also are not seeking a single platform for all their security and networking needs. The unification they desire in a platform is what Netskope, Inc. Class A Common Stock uniquely delivers.

We built our AI-native Netskope One organically, not through M&A, which results in a disjointed, cobbled-together solution and often frustration for customers. Our 25 products share one common code base, one engine, one console, and one network, providing both better efficiency and a seamless customer experience. And our NewEdge private cloud runs Netskope, Inc. Class A Common Stock's full stack of products at high speed at all of our more than 120 locations.

To illustrate how our customers are adopting our Netskope One platform, let me pivot to our go-to-market accomplishments during Q4. We saw significant customer wins across verticals and geographies, with customers turning to the Netskope One platform to enable AI adoption, modernize their security and infrastructure, consolidate vendors, and replace legacy and first-generation cloud security products. I will touch on some key wins and expansions across common use cases. First, customers are choosing the Netskope One platform for modernization to facilitate secure access from human and nonhuman identities to their AI ecosystem, including generative AI apps and LLMs, cloud apps, web apps, and private apps.

One notable win was a large global manufacturer who sought better data visibility and control and the ability to safely allow the use of AI in cloud. They chose six Netskope, Inc. Class A Common Stock products to secure generative AI and cloud access, protect their data, and improve their network performance. We also landed a top regional health system in the U.S. who initiated a modernization selection process to replace its legacy security and network infrastructure after previously suffering a severe and costly breach.

We shined in this competitive bake-off, and the customer purchased 11 products within our Netskope One platform, including our next-generation SWG with AI controls, ZTNA Next, Advanced DLP (which includes proprietary AI models from our AI labs team), Borderless WAN, Cloud Firewall, Enterprise Browser, and other products to replace legacy firewall and networking products.

Customers also continue to turn to Netskope, Inc. Class A Common Stock for our superior unified data protection. For example, one of the largest hotel companies in the world with operations in nearly 150 countries was a notable unified data expansion win during the quarter. This client needed continuous, real-time visibility into the full breadth of its data security posture. They also needed to confidently manage and protect sensitive data across cloud, on-premises, and hybrid environments, including AI and cloud data stored. They purchased Netskope, Inc. Class A Common Stock's DSPM solution and are now using 14 products in the Netskope One platform across its organization.

Many customers also deploy our suite of Netskope One to modernize their infrastructure, including replacing legacy VPNs with our zero-trust architecture, branch firewalls with our Borderless SD-WANs, and migrating their networks to our high-performance private cloud—especially as they adopt more AI and cloud where performance becomes even more critical. For example, we landed a Canadian gaming company that needed to modernize their network for AI and cloud, provide secure remote access to their global workforce, and meet governmental regulatory requirements. This customer replaced legacy hardware products at more than 5,000 locations with Netskope, Inc.

Class A Common Stock's Borderless SD-WAN and ZTNA Next secure access solutions and purchased our NextGen Secure Web Gateway with added AI protections for secure generative AI usage. In another win, a European government chose us to modernize its legacy on-prem security infrastructure and drive data sovereignty. They wanted to consolidate multiple point solutions into a single centrally managed platform to protect sensitive data while meeting strict government regulatory requirements. The organization purchased our comprehensive Netskope SSE platform covering security for AI, web, cloud, and data. Finally, our global fast and resilient NewEdge private cloud network makes us particularly well-suited to deliver globally distributed and highly regulated customers the data sovereignty and regulatory compliance that they require.

For example, we landed two of the largest banks in Africa, in two separate deals. One was a unified data protection deal that we successfully baked off against a primary competitor. The other was a network modernization deal where we replaced the same competitor with Netskope, Inc. Class A Common Stock's market-leading SSE solutions and higher-performing NewEdge private cloud. Our local data centers in Africa were a driver for the wins, as we are able to deliver superior performance and data sovereignty to these customers.

The geographic and vertical diversity of these customer wins and use cases is a testament to our clear technical differentiation and disciplined execution across all regions. Our new customer wins were all competitive bake-offs against primary competitors, where the capabilities of the Netskope, Inc. Class A Common Stock platform proved itself in extensive POVs. We continue to land with multiple products and have seen strong growth in multiproduct adoption across our customer base. As of the end of Q4, 56% of our customers were using four or more Netskope One products, and 27% were using six or more products. I am pleased with the strong performance of our go-to-market team across the globe.

Our newly hired sales reps are ramping, and our tenured reps are delivering strong productivity. We put great leaders in place and recently filled some of our remaining key sales leadership positions, including the appointment of Joe Welch to lead our U.S. public sector vertical, an area where we are underpenetrated but have strong opportunities. Joe is a seasoned veteran with decades of public sector experience in this space. We are also continuing to hire highly talented reps in all geographies, many of whom are joining us from key competitors across our space. I just returned from our annual sales kickoff, and I can tell you that our team's excitement, energy, and conviction is truly palpable.

Our momentum is only building.

As part of our comprehensive go-to-market strategy, we also continue to strengthen our relationships with system integrators and strategic partners. During Q4, we partnered with the largest GSI in the world on a major enterprise deal in the energy sector, supporting digital transformation and zero trust for approximately 80,000 employees. Other recent engagements include a large government defense customer in Asia Pacific and a major healthcare customer in North America. This key partner holds over 150 certifications on the Netskope, Inc. Class A Common Stock platform, and their support extends our global operations. This is just one example of how we are partnering well on large-scale, partner-driven enterprise transformations globally. On the technology partner side, Netskope, Inc.

Class A Common Stock also recently achieved the Amazon Web Services Security Competency status for AI security. This competency assures AWS customers that Netskope, Inc. Class A Common Stock has met technical and quality standards to deliver best-in-class solutions for securing AI workloads across AI security use cases.

In closing, I want to reiterate that we are in the early innings of an AI super cycle that is exposing a fundamental flaw in legacy and first-generation SASE architecture. Legacy security acts as a latency tax on AI performance, forcing enterprises to choose between safety and speed. We believe the next decade will be defined by a structural shift towards an intelligent edge architecture built specifically for an autonomous Agentic economy. Netskope, Inc. Class A Common Stock is uniquely positioned for this era for three reasons. First, we have an architecture for the future. While legacy vendors proxy the past, Netskope, Inc.

Class A Common Stock is the distinctly AI-native proxy with innate fluency to secure the languages of the future—APIs, JSON, and the emerging protocols like MCP. Two, we also scale without friction. We have eliminated the security tax. Our AI Fastpath infrastructure has unique capabilities to perform complex, real-time security at the speed of AI inference. And three, finally, we are an intelligence moat. Our advantage is rooted in active context and the real-time AI-fluent proprietary data we generate. While others count traffic, we understand intent. Our proprietary data from trillions of real-time transactions, validated by the Netskope AI Index, makes us the indispensable source of truth for the AI economy.

Sitting squarely at the intersection of cloud, AI, networking, and security, Netskope, Inc. Class A Common Stock has a massive market opportunity, which is projected to grow to at least $149 billion by 2028. We have just begun to scratch the surface and look forward to what is to come. The plumbing of the AI era is being laid today, and it will take many years to fully realize. By unifying high-speed performance with deep semantic intelligence, Netskope, Inc. Class A Common Stock is not just selling a platform. We are providing the essential adaptive fabric to the modern AI enterprise. For the next 2026 was an incredible year of growth and expansion for Netskope, Inc.

Class A Common Stock, and our IPO in September was just the beginning of our public company journey. We see an incredible path ahead as we attack the AI security and networking opportunity with exciting new products, continue to bring more customers onto our platform, expand business with existing ones, drive further innovation, ramp our sales team, and drive awareness globally. I am proud of what we have accomplished, particularly our first full year of positive free cash flow generation and industry-leading ARR growth at scale.

I look forward to seeing many of you at RSA in a few weeks, where we will demonstrate and share more about our AI strategy and new products, and engage in other ways in the months ahead. With that, let me now turn it over to Andrew to provide financial details on the fourth quarter and our outlook for the first quarter and fiscal year 2027. Andrew?

Andrew Del Matto: Thank you, Sanjay, and hello, everyone. As Sanjay shared, Netskope, Inc. Class A Common Stock had a very successful fourth quarter, closing out the year on a strong note. We continue to deliver significant growth as our investments in NewEdge, new product innovation, and our go-to-market organization continue to pay off. Before I share Q4 and fiscal year 2026 results, let me remind you that all financial comparisons are on both a year-over-year and non-GAAP basis unless stated otherwise. For the full year 2026, we are proud of what we accomplished.

We delivered revenue of $709 million, or 32% growth; ARR of $811 million, up 31% year over year; net new ARR of $193 million, up 35% versus fiscal 2025; operating margin improvement of 18 percentage points while continuing to invest in our innovation and go-to-market engines; and we generated $12 million in positive free cash flow, which marks Netskope, Inc. Class A Common Stock's first fiscal year of positive free cash flow and an improvement of $163 million over fiscal 2025. This translates to a 30 percentage point free cash flow margin improvement year over year.

Moving on to Q4 results, ARR grew 31% to $811 million at the end of Q4. As Sanjay noted, we also had a record quarter for net new ARR of $57 million. Q4 revenue grew 32% to $196 million. We also experienced strength across geographies. In Q4, revenue in the Americas grew 32%, EMEA increased 36%, and APJ grew 26%. Our teams executed well, and our investments in our sales organization are paying off. In terms of customer metrics, the number of customers generating more than $100,000 in ARR in Q4 grew 22% year over year to 1,531. Enterprise and large enterprise customers are our focus, and more than 85% of our ARR comes from $100,000-plus ARR customers.

Note that the average ARR from this customer cohort grew to more than $450,000 per customer. This is indicative of our success in both expanding our installed base and securing significant new enterprise deployments. Our Q4 net retention rate, or NRR, was 116%, while our churn and down-sell rates remained at historic lows. Composition of deals varies quarter by quarter, but our consistently strong NRR reflects our customers' ongoing confidence in Netskope, Inc. Class A Common Stock's platform and expansion of their deployments as they consolidate vendors and modernize their infrastructure. Customers view Netskope, Inc.

Class A Common Stock as a long-term strategic partner given our commitment to innovation and ability to deliver products that solve the complex and evolving security challenges in the cloud and AI era. In addition to NRR, we look at multiproduct adoption to demonstrate our expansion opportunity within our customer base. As Sanjay mentioned, at the end of Q4, 56% of our customers were using four or more products versus 48% a year ago, and 27% were using six or more products, up from 22% a year ago.

We are pleased with this progress and believe our 25-product Netskope One platform gives us a clear opportunity to continually expand within our growing customer base as they consolidate more of their security and networking stack with us.

Moving on to the rest of the income statement, we saw the benefits of Netskope, Inc. Class A Common Stock being built to scale. Gross margin was 76%, an increase of approximately five percentage points from Q4 last year. Our gross margin expansion is being driven by the efficiency of our NewEdge architecture, which is generating better unit economics as we scale. Q4 operating expenses totaled $171 million, up approximately 3% sequentially. Operating margin improved five percentage points year over year to negative 10%. R&D expenses improved 100 basis points year over year to 36% of revenue, driven by earlier investments in a common data platform and hiring in high-talent, cost-efficient locations.

Sales and marketing expenses remained flat at 40% of revenue as we continue to invest in quota-carrying sales reps. Our consistent improvement in gross margin and operating margin reflect the operating leverage we have unlocked as our earlier strategic investments in infrastructure and talent begin to compound. Net loss per share was $0.04 using 395 million weighted average shares outstanding. As a reminder, our non-GAAP EPS excludes the change in fair value of the convertible notes we issued prior to our IPO. Fully diluted share count using the treasury stock method was approximately 503 million shares as of 01/31/2026. We generated $4 million in free cash flow in Q4, representing a 2% free cash flow margin.

Note that this was driven by our laser focus on efficiencies and in the first year of our transition to annual billings. We are pleased with our ability to drive positive free cash flow, as this demonstrates the leverage inherent in our model. While we will continue to realize the benefits of being built to scale on margins and cash flow, our path to sustainable positive free cash flow is not expected to be linear. The timing of cash collections can vary quarter to quarter, and we expect to continue investing in the business for long-term growth. And finally, we ended the fourth quarter with $1.2 billion in cash, cash equivalents and marketable securities.

Before I share our guidance for the first quarter and fiscal year 2027, let me briefly outline some factors that should be considered. We are continuing to make investments in our business, most notably in R&D and sales and marketing. We are continuing to hire sales reps across the globe to support our expanding market opportunity aligned to the AI super cycle that Sanjay noted. At the same time, we are leaning further into our AI roadmap and expanding our AI-native Netskope One platform with additional products to support our customers' AI adoption journeys both today and in the future.

While we are adding AI engineers and data scientists to drive further innovation in this important emerging area, we are also empowering our teams with AI tools to drive efficiencies in development and other areas of our business. We expect to see most of the impact from these investments to operating margin during the first half of the year, leading to improving operating margin in the second half of the year. As we look at gross margin, we are on track to achieve our long-term target of 80%. With the foundational investments we have made in NewEdge, we now expect margin gains to come through top-line growth and continued optimization.

Now that gross margins improved into the mid-seventies, we expect progress from here to be more gradual and may not follow the linear step function seen in recent quarters. Also, as we have discussed in the past, we are shifting customers to annual billing on multiyear contracts where possible. Billing annually will improve predictability and consistency of our cash flows. I am pleased to highlight that this transition is occurring faster than we originally expected. While it is difficult to predict exactly how this will impact future free cash flow, we expect to see the most significant impact in Q1 with negative free cash flow in the range of $50 million to $60 million.

We expect that to improve in the second quarter, return to positive free cash flow during the second half of the year, and to end the full year with positive free cash flow in the range of 2% to 4%. We will continue to provide you with quarterly updates as we progress throughout the year. We began this billing transition a year ago and expect to see the bulk of the impact this year. And finally, we believe we are uniquely positioned as a significant beneficiary of the AI super cycle due to our unified AI-native fabric that eliminates the tradeoff between performance and security.

At the same time, we are early in the year, still have a large portion of our sales reps ramping, and we are continuing to establish our reporting cadence as a public company. And while AI and cloud adoption are driving significant interest in platforms like Netskope, Inc. Class A Common Stock, we recognize that macro and geopolitical factors have the potential to impact customer spending plans. We have built our guidance with these factors in mind.

Let me now provide our guidance for Q1 and fiscal year 2027. As a reminder, these numbers are all non-GAAP unless stated otherwise. For Q1 fiscal 2027, we expect revenue in the range of $197 million to $199 million, representing growth of approximately 26% at the midpoint; operating margin of approximately negative 16%; net loss per share of $0.06 to $0.07 using approximately 405 million weighted average common shares outstanding. We expect to see the largest free cash flow impact of our transition to annual billings in 2027, with much of that impact in Q1. As I mentioned, we expect negative free cash flow in Q1 of $50 million to $60 million.

For the full year fiscal 2027, we expect revenue in the range of $870 million to $876 million, representing growth of approximately 23% at the midpoint; gross margin of approximately 77%; operating margin of approximately negative 10%, gradually improving from negative 16% in the first half of the year; net loss per share of $0.19 using approximately 415 million weighted average common shares outstanding; free cash flow margin in the range of 2% to 4%. Note that the annual billings transition is estimated to reduce our free cash flow margin by approximately six percentage points, which is reflected in this guidance.

As noted earlier, we expect that to improve in the second quarter, return to positive free cash flow during the second half of the year, and end the year with positive free cash flow. We have highlighted these modeling points in the appendix of our investor presentation. In closing, we remain confident in our ability to execute on our long-term strategy and innovation, driving strong and durable revenue growth and capturing share of our expanding opportunity. We remain focused on prioritizing disciplined execution and strategic investments that strengthen our competitive advantage and continue to drive growth and margin expansion. Innovation drives our flywheel for growth.

As such, we will continue to invest in data and AI engineers while utilizing AI to drive efficiency and product velocity. We will also continue to invest in go-to-market while remaining fiercely committed to delivering profitable growth. Thank you for your time today. We will now open for questions.

Operator: Thank you. To withdraw your question, please press 1-1 again. Our first question comes from the line of Brian Essex with JPMorgan. Your line is open.

Brian Essex: Great. Good afternoon. Thank you for taking the question, and congrats on some solid results. Maybe one question for Sanjay and then a follow-up for Andrew. Sanjay, where would you assess that we are in the maturation cycle with respect to enterprises knowing what they need to secure AI? Are your AI security announcements ahead of the curve, or are these approaches that you are already seeing CIOs demand as they look to secure their AI estate? And then for Andrew, could you maybe just help us understand the context of the sequential revenue guide? Looks like 1Q would imply only up a couple of million dollars. So we would love to understand the puts and takes there.

Sanjay Beri: Yes. Great question, Brian. So I think, first of all, from an AI perspective, most organizations are in the infancy. They are in the first inning. 90% of their usage of AI is shadow AI, meaning they actually did not bring it in. Their end users did. And so when you think about that concept, you harken back to this really just being very early. And so from an AI security perspective, our focus is always to kind of skate to where the puck is going, anticipate what they will need, and deliver a best-of-breed solution to solve this problem, discover their AI, guardrail it, control it, and then enable it with precision.

And so that is what these new products do, building upon our previous capabilities to enable AI. So we will share more at RSA and beyond as well on that. Andrew?

Andrew Del Matto: Yeah. Thanks, Brian. In terms of the Q1 guidance—again, first year as a public company—so we are going to remain prudent, as we have said in the past. We do have reps ramping, and they tend to ramp more later in the year. We still have quite a bit of ramping going on with reps who have come in over the last year. And then finally, there are some geopolitical, macro headwinds that have emerged over the last couple of weeks.

Michelle Spolver: Right. Thank you both. Very helpful on both fronts.

Operator: Thank you. Our next question comes from the line of Meta Marshall with Morgan Stanley.

Meta Marshall: Great. Thanks, and echo congratulations. Maybe for Sanjay, during the IPO process, you talked about four main use cases that customers were coming in with. Are you seeing any changes in what those use cases are? Or as you start to expand more of the product portfolio that you are selling, any changes to where a majority of people are coming in? And then as a follow-up, net new ARR growth this quarter—net expansion stepping back from Q3—any commentary on what you saw there would be helpful.

Sanjay Beri: Thanks. Great question. From a use case perspective, our top use cases have been enabling cloud and web no matter where users are; second, securing and enabling AI. I will say that has moved up in the stack. Every conversation I have, people come to us and say, look. We already run all our AI traffic through you. We released the Netskope AI Index today. It is probably the first definitive source of worldwide AI tracking by vertical, by geo, and by size of customer. That shows you the amount of AI traffic traversing the NewEdge network.

People are coming to us and saying, you are the fast path to AI—help us secure it, enable it, guardrail it, and let us say yes to it. That is now a top use case. The other ones—remote access, modernize my infrastructure, converge and consolidate my network and security—remain top of mind, but AI has been elevated. We are very excited about that because this is what we were born for. Our proxy is really a JSON, API, MCP-fluent proxy—start with cloud and now AI. It is a one-two punch for us, and we are early in the AI super cycle. As far as net new ARR, we had a high comp in Q4 of last year.

We are happy to report the highest net new ARR we have ever had. You saw the growth in customers over $100,000 in ARR at 22% and strong upsell. We really started hiring and ramping our reps midyear, beginning in Q3 last year. It takes about 12 months for them to ramp to full productivity, and that is another big piece we continue to drive.

Operator: Thank you. Our next question comes from the line of Robbie Owens with Piper Sandler.

Robbie Owens: Great. Appreciate you taking my question this afternoon. Wanted to ask more high level around the revenue model as you think forward. I know it has been disclosed that you are primarily a seat-based model, and there are concerns in the market about seat-based models in light of recent layoffs. As you add new modules and capabilities, do you see that shifting more either towards traffic or capacity, or will it remain an underlying seat-based model protected by adding more modules on top?

Sanjay Beri: Great question. We run the traffic for most enterprises—all their generative AI traffic, Agentic traffic, cloud traffic, on-prem traffic—it goes through us. There is no free lunch on our network. If you are going to run users through our infrastructure, you pay by user. If you are going to run Agentic traffic—server-side or client-side, via AI agents—you pay by transaction. All of the new products we released today are charged by transaction. A transaction is a prompt and a response. That is the token for the Agentic economy, and that is how we charge. So no matter what people run and how the balance shifts over time, we will monetize that.

You have seen four new products today, all transaction-based, which essentially maps to tokens.

Operator: Thank you. Our next question comes from the line of Gray Powell with BTIG. Your line is open.

Gray Powell: Okay. Great. Thanks for taking the question. Maybe one on the product side. One of your larger network security peers appears pretty bullish on the potential for improved demand in the SD-WAN market and the opportunity for legacy replacement this year. Netskope, Inc. Class A Common Stock also often receives high marks on WAN capabilities. What are you seeing in your pipeline, and how often are you having discussions where both security and networking buying centers are involved in deals?

Sanjay Beri: Great question. In an organization, you typically have a CIO, a security leader, an infrastructure/ops leader, and now an AI leader. We train our reps to engage all four. Buying decisions can be in one or multiple, and we hunt across all of them. We are a networking and a security company for the cloud and AI era, so we think about consolidating both. SD-WAN is for speed, performance, and resilience, and we offer it in software on the endpoint and in your infrastructure. We have seen great growth. You saw a large distributed organization combine our SD-WAN as a smart on-ramp to our NewEdge network and all our security functionality. That concept—often called unified SASE—can be delivered by us.

Looking ahead at Agentic traffic, it will come from remote users, oil rigs running AI, and server-side agents—traffic that all needs acceleration. That is what the AI Fastpath is. We are the best path for Agentic and non-Agentic traffic, whether you are doing inference or beyond. SD-WAN is one part of that story.

Gray Powell: Thank you very much. That was helpful.

Operator: Next question comes from the line of Matthew Hedberg with RBC. Your line is open.

Matthew Hedberg: Great. Thanks for taking my question, guys. Andrew, I think in your prepared remarks you said deal composition can change from quarter to quarter. Is that the reason why NRR ticked down by a couple hundred basis points? Just trying to get a little more clarity on that.

Andrew Del Matto: First of all, we view a 116% NRR as very strong. Anything in the mid to upper teens is something we would be very happy with, Matt. NRR does vary quarter to quarter. Some quarters, we have more upsell; some quarters, more new logo revenue. We have said that before. Note that Q4 a year ago was one of the strongest, if not a record, from an upsell perspective—Q4 of FY '25. Looking forward, we have a large installed base. The average customer has 4.4 products. We have 25-plus products, four new products announced today—transaction-based—so a lot of white space and upside. Down-sell and churn remain at historic lows. Retention remains very strong.

Matthew Hedberg: Got it. Thanks, Andrew.

Operator: Thank you. Our next question comes from the line of Brad Zelnick with Deutsche Bank. Your line is open.

Brad Zelnick: Great. Thank you so much for taking the questions. A lot of good information in these results. One for Sanjay and one for Andrew. Sanjay, it is great to see the unveiling of Netskope One AI Security today. There is consensus that network traffic will grow exponentially as AI agents are rolled out into production. With the massive throughput requirements that Agentic east-west traffic may demand, why is SASE—and more specifically Netskope, Inc. Class A Common Stock—best positioned to secure this traffic versus maybe a virtual firewall vendor? And then for Andrew—why is the shift to annual billings happening faster, and should we expect to see that result in any benefit to ARR and revenue as you get better pricing?

Sanjay Beri: Thanks for the question. When you look at Agentic traffic, what is an AI agent doing and what are people most worried about? An AI agent will access your endpoint—Netskope, Inc. Class A Common Stock monitors that with endpoint data protection. It will access your cloud apps over the Internet—we monitor that, understand what is being accessed, and restrict dynamically whether it is a shadow agent or not. It will access your on-prem data—that is what our AI-enabled ZTNA does. In summary, we have sensors that see traffic going back on-prem, to your cloud, to your AI applications, to websites, and we have an endpoint sensor. We also have out-of-band visibility via CASB and beyond.

We are in a unique spot where the world is about whether you have unique, proprietary data that no one else can see. That is what we do. Because we operate the largest, most performant private cloud network and interpret data at a granular level, we understand Agentic interactions in depth and enforce policy accordingly. That is why thousands of enterprises have chosen us to secure their Agentic traffic.

Andrew Del Matto: And, Brad, on billings—reminder that the billings transition provides stronger predictability and consistency of both billings and free cash flow. We added a slide to help illustrate the transition and where we are. I would point you to the 78% growth in future committed billings. The interesting part is we can see what is coming—we can see billing dates and model collections better. We have been free cash flow positive and expect that to tilt up later in the year. As for why it is going faster—strong execution. We have been very focused on it, inspecting deals, and communicating with sales and customers to help them through the transition. In terms of pricing, we focus on value.

We have high win rates, and pricing is about selling the value of our products. With new AI products, we have a stronger story, which should support pricing over time.

Operator: Thank you. Our next question comes from the line of Jonathan Ho with William Blair. Your line is open.

Jonathan Ho: In terms of your profitability guide for 2027, I know you talked a little bit about investments. Can you help us understand where you see the most opportunity to place those investments? And what would be the timeframe for us to see perhaps an inflection in growth as you spend more on R&D and sales and marketing?

Sanjay Beri: Great question. From an investment perspective, you saw our yearly guide and that we are investing upfront, primarily in AI—continuing to AI-enable our R&D team. Every engineer can be a 10x engineer with AI. It is about making elite engineers more productive and focused on architecture. To enable that, we invest in AI orchestration—automating workflows, validation, testing, and rote tasks—so they can focus on the unique parts. That is what we are doing in the first half: investing in AI tooling. In the second half and beyond, we do not need to ramp R&D headcount as much as you might have thought, driving more efficiency. You will see that in R&D as a percentage of revenue trending down.

The second area is sales and marketing. Mid last year, we started bringing on more reps, and they take about 12 months to ramp. We continue to invest in enabling them and are hiring more teams to address the durable TAM in front of us for the next decade. We operate the network and infrastructure—the highway to everything. We want to take advantage of that while being responsible and efficient in R&D by investing in tooling. Those are the upfront investments in the first half, which is reflected in our Q1 and Q2 guide versus the rest of the year.

Operator: Thank you. Our next question comes from the line of Richard Polin with Wells Fargo. Your line is open.

Richard Polin: Hey. Thanks for taking my question. I think it was Andrew—you mentioned geopolitical macro headwinds over the last couple of weeks. Is that something you are starting to see show up in demand and pipeline, or are you observing what is going on in the macro environment and taking some extra cautionary steps in the guide?

Andrew Del Matto: Fair question, Rich. We can all recognize there have been more events in the last couple of weeks. It is something to consider in terms of being prudent. In that area of the world, we have a very small percentage of our business. It is less about direct exposure and more about broader macroeconomic risk. Just prudence.

Richard Polin: Okay. Great. Thanks, guys.

Operator: Thank you. Our next question comes from the line of Shrenik Kothari with Baird. Your line is open.

Shrenik Kothari: The AI Fastpath, as you said, shifts focus from not just securing AI to securing at speed with your AI-native fabric and the new modules you announced. As it pulls the conversation away from traditional models toward a broader discussion, can you talk about how the AI Fastpath has been progressing in your pipeline right now? And then I have a quick follow-up.

Sanjay Beri: Great question. We have always believed nobody implements security unless it delivers a great end-user experience. In the Agentic world, performance matters even more. Agents can communicate at rates far beyond humans, accentuating the need for a fabric that performs and is resilient worldwide. Our infrastructure is the largest private cloud in the world—the largest highway or airspace for AI. With 120-plus data centers and our software operating at high speed on all Agentic traffic, that is a huge advantage. We tell customers: just try it and measure it—you will see a noticeable performance difference whether you are an AI agent, an application, a user, or an IoT device. The AI Fastpath is the next evolution for the AI era.

When you go to coding applications or any of the thousands of generative AI apps on the AI Index, we will be the fastest path. We will not throw it on the public Internet—we will get you there directly. For us, AI Fastpath is about performance and resilience in addition to security, and we are combining them all.

Operator: Thank you. Our next question comes from the line of Eric Heath with KeyBanc. Your line is open.

Eric Heath: Hey, thanks for squeezing me in, and solid finish to the year. Sanjay and Andrew, maybe one for you, Sanjay, and a quick one for Andrew. Sanjay, following up on your comment that all the customer wins in the quarter were competitive bake-offs: the competitive set has been fairly static for a while, but some incremental competitors have popped up in the last couple of years. Is the competitive set changing at all—who you are bumping into in deals? And Andrew, any high-level guardrails you can give us on ARR for the year?

Sanjay Beri: Great. We have 25 products and just released four. Our R&D efficiency is increasing—R&D as a percent of revenue is going down while velocity is increasing, supercharged by AI. Historically, we said we release on average two products a year; we have already released four-plus, and that trend should continue. Because of our breadth, we see different competitors. In data protection—data drives the Agentic world—we see a lot of legacy vendors: Broadcom/Symantec (Blue Coat), Trellix, etc. In traditional web proxying, you see the usual Magic Quadrant names. When it comes to the AI Fastpath and performance, you do not see much because our network is very different and unique.

Noteworthy is our win rate: over 80% when we get to a POC. Our goal is to get to a POC—enabling and securing AI, securing cloud, converging and consolidating network infrastructure. That is why we are growing sales, partnering with GSIs (including a win with the largest GSI), and powering through the mid-market with MSPs. Going public helps drive awareness. When we get in the door, we win.

Andrew Del Matto: On ARR—while we do not guide ARR, for modeling, last quarter we ported the history, and I would do the same. You can see ARR was about a point below revenue growth. I would model ARR growth roughly within a point above or below revenue growth—right in that range.

Eric Heath: Awesome. Thank you, gentlemen.

Operator: Thank you. Our next question comes from the line of Shaul Eyal with TD Cowen. Your line is open.

Shaul Eyal: Thank you. Hi, good afternoon. Andrew, maybe talk to us about ASP patterns in light of rising memory prices?

Sanjay Beri: I will take that. Our average ARR per deal size continues to go up. When people talk about memory prices, that often applies to selling boxes and appliances with memory. That is not what we do in the majority of cases. For us, it is our infrastructure and network, and our software running on it. We feel good about our guide for this year, which incorporates what you mentioned. It is a fluid environment, and we will watch it for next year, but we feel good about the guidance we have given. Ultimately, we process a lot of traffic—you can see it at ai-index.netskope.com. What matters is what you do when you see it.

Our moat is turning those transactions into unique granular data that informs security policies, analytics, optimization, guardrails, and more. We are excited to continue to drive more into our existing infrastructure, which can more than handle what we need for this year.

Operator: Thank you. Our next question comes from the line of Trevor Walsh with Citizens. Your line is open.

Trevor Walsh: Hey, team. Thanks for taking the question. Sanjay, you said the AI revolution is exposing legacy architectures within SASE. Will that result in breaking those legacy solutions or more general dissatisfaction with performance? And is there a leading indicator investors could use to determine whether more of that breaking or dissatisfaction is coming as AI and Agent traffic grows—maybe the AI Index you just released gives clues there?

Sanjay Beri: Good question. Look at it in two parts: infrastructure/network and security—you need both. On the infrastructure side, the Agentic era will expose networks built, for example, primarily in the public cloud, where you get worse performance. With more back-and-forth interactions, the performance difference becomes bigger. It became big with cloud; it will be bigger with AI. We run all services everywhere—120 data centers. Everything runs everywhere. We do not hairpin traffic to a public cloud for one service and your infrastructure for another. The purity and modernity of our architecture lead to better performance, and AI accentuates that. On security, since the beginning we have said we were not building a web proxy; we were building a modern API/JSON proxy.

The language of AI is APIs and JSON. The AI era is about that. How do I say you cannot use a personal instance of Gemini but can use the corporate version, and only send sensitive data to the corporate version? To have policies that guardrail and enable AI while satisfying business policies, you need something that understands the new language of the Internet. One of the engines of our platform is a high-speed, distributed, in-memory API/JSON proxy. A customer told me they bought a SASE that worked until they adopted AI and cloud; then they had to bypass 70% of traffic because it could only block or allow.

They did not want to block AI or allow it outright; they wanted granularity. They moved all their traffic—close to 100,000 users and agents—to Netskope, Inc. Class A Common Stock and are very happy. That transition will happen more over time, but enterprises move over years, not instantly.

Operator: Ladies and gentlemen, due to the interest of time, our last question will come from the line of Michael Romanelli with Mizuho. Your line is open.

Michael Romanelli: Hey, thanks for squeezing me in. Sanjay, how does your sales capacity today compare to a year ago, both in total as well as in the number of ramped reps? And how would you characterize your pipeline as we head into fiscal 2027?

Sanjay Beri: Great question. We started hiring more reps in earnest last year—you can see that in S&M spend ramping early/midyear. It takes about 12 months to ramp a rep. For us, many of those reps will be fully ramped in the second half of the year. When we onboard reps, we do not just give them a bunch of existing accounts; they are hunting greenfield. They build pipeline, get POCs, complete MSAs—that is why ramp times are what they are. We are continuing to hire and building the rep funnel for next year as well. So think of a significant cohort of fully ramped reps coming online in the second half, and a healthy, building pipeline into FY 2027.

Operator: Thank you. I would now like to turn the call back over to Michelle for closing remarks.

Michelle Spolver: Thank you, and thank you all for joining us today and also staying a few minutes over. We look forward to engaging with you in the weeks and months ahead, including at RSA this month, where we will be sharing more about our AI strategy as well as demonstrating our newly announced AI products.

Operator: Thank you all. Have a good evening. Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

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