Why Netskope Stock Crashed Today
Key Points
Netskope beat on sales and earnings, but still lost money in Q1.
Worse, free cash flow that was positive a year ago has now turned negative.
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AI-focused cybersecurity stock Netskope (NASDAQ: NTSK) tumbled to close down 19.1% Thursday despite beating on sales and earnings in its fiscal Q1 2027 earnings report last night.
Analysts forecast Netskope to lose $0.07 per share, adjusted for one-time items, on $198.2 million in revenue. Netskope did lose money for the quarter, but only $0.06 per share, and sales came in at $201.6 million.
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Netskope Q1 earnings
Sales grew 28% year over year, and if all continues to go as it's going, the company is on track to report annual recurring revenue growth of 29%. Not all of Netskope's news was good, however.
There's the quarterly loss for one thing. And for another, the loss was larger when earnings are calculated under generally accepted accounting principles rather than pro forma. Netskope's lost $0.29 per share, GAAP -- nearly five times the pro forma loss.
Worst of all, one year ago, while still losing money, Netskope was at least generating positive free cash flow. Now it isn't. Netskope burned $57.2 million in Q1.
What's next for Netskope stock
The good news is that as the year progresses, Netskope hopes to turn things around somewhat. Q2 sales are expected to grow about 6% sequentially to $214 million (although Netskope will continue to lose money). By the end of fiscal 2027, management hopes to book $881 million or so in revenue, still lose money, but on the bright side, return to generating positive free cash flow, and close out the year with roughly $26 million in cash profit.
Will that be enough to support the stock's $4 billion market capitalization, though, even with revenue growing in the double digits? Considering how the stock price suffered today, most investors seem to think the answer is: No.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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