Why Netskope Stock Is Plunging Today
Key Points
Despite the market's reaction, Netskope grew sales by 33% and remaining performance obligations by 41%.
Better yet, the company's net retention rate improved to a healthy 118%.
Netskope is a leader in its niche and has a bright future, but trades at a lofty valuation.
- 10 stocks we like better than Netskope ›
Shares of leading cloud cybersecurity upstart Netskope (NASDAQ: NTSK) are down 12% as of noon ET on Friday after the stock delivered its first-ever earnings report on Thursday.
The company surpassed Wall Street's expectations for the third quarter, growing sales by 33% and remaining performance obligations by 41%. However, with the stock priced for perfection at 14 times sales before today's drop, the market sent Netskope's shares downward after its guidance underwhelmed.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
From a Foolish perspective, I don't think there was anything wrong with Netskope's earnings, and the company's future looks promising.
Netskope: Combining security, networking, and analytics in an AI world
Netskope was formed in 2012 and is founder-led by Sanjay Beri. It recently went public in September of this year and is vying to carve out its own niche in the essential cybersecurity industry.
Despite its somewhat nascent operations, Netskope was named a:
- leader in Gartner's Magic Quadrant for SASE (Secure Access Service Edge) Platforms for the last two years
- leader in the Magic Quadrant for SSE (Security Service Edge) for the last four years
- leader in Forrester's Wave SASE solutions
- major player in International Data Corporation's MarketScape for Worldwide DLP (Data Loss Prevention) Vendor Assessment
These leadership rankings place Netskope inline with some heavy hitters, such as Fortinet, Palo Alto Networks, and Zscaler, despite being a new entrant to a market worth roughly $150 billion.
Image source: Getty Images.
As an increasingly popular cybersecurity solution among data-heavy, enterprise customers, Netskope now counts more than 30 Fortune 100 companies as customers.
Best yet, not only is Netskope adding new enterprise customers as it dives deeper into an AI-powered world (which the company helps protect), but it has also grown its net retention rate from 113% to 118% over the last year.
This highlights the company's strong ability to upsell and cross-sell more products to its existing customer base.
While I'm intrigued by Netskope's growth potential, I prefer to give new IPO's a few quarters' worth of time to see what their financials and stock-based compensation look like.
Should you invest $1,000 in Netskope right now?
Before you buy stock in Netskope, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Netskope wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $507,421!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,109,138!*
Now, it’s worth noting Stock Advisor’s total average return is 972% — a market-crushing outperformance compared to 195% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
See the 10 stocks »
*Stock Advisor returns as of December 8, 2025
Josh Kohn-Lindquist has positions in Fortinet. The Motley Fool has positions in and recommends Fortinet and Zscaler. The Motley Fool recommends Gartner and Palo Alto Networks. The Motley Fool has a disclosure policy.
Recommended Articles
