Netskope, Inc. Class A Common Stock Q4 FY2026 earnings call

Sanjay Beri discussed that Netskope ended the year on a high note with results exceeding guidance across key metrics. Focus on market-leading platform for networking, security, and analytics for cloud and AI is resonating. Innovations include AI strategic framework with four pillars: AI-native platform with sovereignty and privacy by design, enabling and securing AI in real time, differentiated performance and resilience through NewEdge AI infrastructure, and platform built for agentic economy. Go-to-market accomplishments included significant customer wins across verticals and geographies, with strong multiproduct adoption. Andrew Del Matto provided financial details, noting growth in ARR, revenue, and customer metrics, and discussed operating expenses, gross margin, and free cash flow.

Fourth quarter revenue grew 32% year over year to $196 million. Full fiscal year 2026 revenue grew 32% to $709 million. ARR ended at $811 million, with record net new ARR of $57 million in Q4, representing 31% year-over-year organic growth. Gross margin was 76% in Q4, up approximately five percentage points from Q4 last year. Operating margin improved five percentage points year over year to negative 10% in Q4. Free cash flow for fiscal year 2026 was $12 million, marking the first year of positive free cash flow. Number of customers generating over $100,000 in ARR grew 22% year over year to 1,531 in Q4. Average number of products per customer increased to 4.4. Net retention rate was 116% in Q4.

For Q1 fiscal 2027, expected revenue range is $197 million to $199 million, operating margin approximately negative 16%, net loss per share $0.06 to $0.07. Free cash flow expected to be negative $50 million to $60 million in Q1. For full year fiscal 2027, expected revenue range is $870 million to $876 million, gross margin approximately 77%, operating margin approximately negative 10% gradually improving, net loss per share $0.19, free cash flow margin 2% to 4%. Billing transition estimated to reduce free cash flow margin by approximately six percentage points.

Forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially. Macro and geopolitical factors have the potential to impact customer spending plans. Timing of cash collections can vary quarter to quarter.

Q: Brian Essex from JPMorgan asked about where enterprises are in the maturation cycle with securing AI and context of sequential revenue guide.

A: Sanjay Beri said most organizations are in infancy of AI, focus is to skate to where the puck is going. Andrew Del Matto said Q1 guidance is due to reps ramping, geopolitical and macro headwinds.

Q: Meta Marshall from Morgan Stanley asked about changes in use cases and net new ARR growth.

A: Sanjay Beri said use case of securing and enabling AI has moved up, net new ARR was highest ever with strong customer growth of over $100,000 in ARR and upsell.

Q: Robbie Owens from Piper Sandler asked about revenue model.

A: Sanjay Beri said revenue model includes user-based for network traffic and transaction-based for agentic traffic with new products.

Q: Gray Powell from BTIG asked about pipeline and buying centers in deals.

A: Andrew Del Matto said hunt across all relevant leaders, SD-WAN is part of the fast story.

Q: Matthew Hedberg from RBC asked about NRR variation.

A: Andrew Del Matto said NRR varies by deal composition, but retention remains strong.

Q: Brad Zelnick from Deutsche Bank asked about why Netskope is best positioned for agentic traffic and shift to annual billings.

A: Sanjay Beri said Netskope has unique data and granular policy enforcement. Andrew Del Matto said billings transition provides predictability and is due to strong execution.

Q: Jonathan Ho from William Blair asked about investment opportunities and timeframe for growth.

A: Sanjay Beri said investing in AI tooling for R&D efficiency and ramping sales reps, with benefit seen in second half.

Q: Richard Poland from Wells Fargo asked about macro headwinds impact.

A: Andrew Del Matto said it's a prudent consideration with small percentage of business in affected areas.

Q: Shrenik Kothari from Baird asked about AI Fastpath pipeline.

A: Sanjay Beri said AI Fastpath is about performance, resilience, and security, with large infrastructure advantage.

Q: Eric Heath from KeyBanc asked about competitive set and ARR guidance.

A: Sanjay Beri said competitive set varies, win rate holds. Andrew Del Matto said ARR modeling can be around point above or below revenue growth.

Q: Shaul Eyal from TD Cowen asked about ASP patterns in light of rising memory prices.

A: Sanjay Beri said memory prices don't significantly impact as it's software-based and infrastructure-driven.

Q: Trevor Walsh from Citizens asked about legacy architectures and leading indicators.

A: Sanjay Beri said legacy architectures get exposed in performance and understanding new language of Internet with AI.

Q: Michael Romanelli from Mizuho asked about sales capacity and pipeline.

A: Sanjay Beri said sales reps ramp over 12 months, with more ramped in second half.