Are there shifts in primary customer use cases, particularly with new product expansion, and can you comment on net new ARR growth and net expansion compared to Q3?

Securing and enabling AI has significantly elevated in priority as a top use case, with customers viewing Netskope as the 'fast path to AI'. Other use cases like cloud/web enablement, remote access, and infrastructure modernization remain strong. The company achieved record net new ARR of $57 million, noting that sales reps hired mid-last year are still ramping to full productivity. “AI 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.'”

Given concerns about seat-based models and layoffs, will Netskope's revenue model shift towards traffic or capacity with new modules, or remain seat-based with added modules?

Netskope's model is designed to monetize traffic regardless of its nature. Users are charged per user, while new AI products are transaction-based (e.g., per prompt and response). This ensures monetization as the agentic economy evolves, with new products already being transaction-based. “If you're going to run agentic traffic right, either it's server-side RAG, client-side RAG, when you have an AI agent, you pay by transaction. And so all of the new products we released today, they're charged by transaction. What's a transaction? It's a prompt and a response, right?”

Why is SASE, specifically Netskope, best positioned to secure massive agentic east-west AI traffic over virtual firewalls, and why is the annual billing transition happening faster than expected?

Netskope's platform monitors all traffic (endpoint, cloud, on-prem, web) and has a sensor on the endpoint for data protection, providing unique, proprietary data. Its architecture is a high-speed, distributed, in-memory API/JSON proxy, which is the language of AI, enabling granular policy enforcement. The billing transition is accelerating due to strong internal execution and focus, leading to better predictability of cash flows. “we're in this unique spot where the world is about do you have unique data, can you generate proprietary data that no one else can see or has, and that's what we do because we are the most performant, largest cloud private network.”

NTSK

Netskope (NTSK) Q4 FY26 earnings call: guidance and Q&A

Earnings call· Jan 2026 (Q4 FY26)· Information Technology· Mar 11, 2026

Source: earnings call transcript

Executive summary

Netskope Q4 FY26 — Record Net New ARR and First Year of Positive Free Cash Flow

Netskope concluded Q4 FY26 with robust performance, driven by record net new ARR and achieving its first year of positive free cash flow, underscoring the strength of its AI-native Netskope One platform and NewEdge private cloud. The company is strategically investing in R&D and sales to capitalize on the AI super cycle, though it anticipates near-term impacts on free cash flow from its accelerated annual billing transition and acknowledges potential macro headwinds.

Highlights

Achieved record net new ARR of $57 million in Q4 FY26.
Ending ARR reached $811 million, representing 31% year-over-year organic growth.
Generated $12 million in positive free cash flow for fiscal year 2026, marking the company's first year of positive FCF.
Operating margin improved by 5 percentage points in Q4 and 18 percentage points for the full fiscal year 2026.
Net retention rate remained strong at 116% with churn and down-sell rates at historic lows.

Concerns

Q1 FY27 revenue guidance implies only a modest sequential increase of a couple of million dollars.
Expected negative free cash flow of $50 million to $60 million in Q1 FY27 due to the annual billing transition.
Full-year FY27 revenue growth guidance of approximately 23% at the midpoint, a deceleration from FY26's 32% growth.
Geopolitical and macroeconomic factors have the potential to impact customer spending plans, leading to prudent guidance.

Guidance & targets

Category	Target	Timeline	Confidence
Revenue	$197 million to $199 million high materiality	Q1 · FY27	High
Operating margin	negative 16% medium materiality	Q1 · FY27	High
Net loss per share	$0.06 to $0.07 medium materiality	Q1 · FY27	High
Free cash flow	negative $50 million to $60 million high materiality	Q1 · FY27	High
Revenue	$870 million to $876 million high materiality	FY27	High
Gross margin	approximately 77% medium materiality	FY27	High
Operating margin	approximately negative 10% medium materiality	FY27	High
Net loss per share	$0.19 medium materiality	FY27	High
Free cash flow margin	2% to 4% high materiality	FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Americas Revenue growth in Q4 FY26.	—	32%	—	—
EMEA Revenue growth in Q4 FY26.	—	36%	—	—
APJ Revenue growth in Q4 FY26.	—	26%	—	—

NTSK operating KPIs by quarter

NTSK operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Jan 2026 Q4 FY26	Apr 2026 Q1 FY27	Jul 2026 Q2 FY27	Change vs prior quarter
Annual recurring revenue (ARR)	$811M 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. Source: earnings call transcript	$845M We ended Q1 with ARR of $845 million, up 29% year-over-year and our net new ARR of $34 million. Source: earnings call transcript	$899M We ended Q2 with ARR of $899 million, up 27% year-over-year and delivered net new ARR of $54 million. Source: earnings call transcript	+6.4%
Net revenue retention rate	116% This is reflected in our net retention rate of 116% and 22% growth in customers with over $100,000 in ARR year-over-year. Source: earnings call transcript	113% Our Q1 net retention rate, or NRR, was 113%. Source: earnings call transcript	—	-3 pt
Customers above an annual spend threshold	1,531 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. Source: earnings call transcript	1,600 The number of customers generating more than $100,000 in ARR in Q1 grew 23% year-over-year to 1,600. Source: earnings call transcript	—	+4.5%
Remaining performance obligation (RPO)	—	$1.2B+ Remaining performance obligations, or RPO, grew 33% year-over-year to over $1.2 billion. Source: earnings call transcript	$1.35B Remaining performance obligations, or RPO, grew 36% year-over-year to $1.35 billion. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Ending ARR $811 million Q4 FY26

up 31% YoY

Represents true organic growth.

Net new ARR $57 million Q4 FY26

Record net new ARR for the quarter.

Net new ARR $193 million FY26

up 35% vs FY25

Product announcements

Product	Type	Timeline
Netskope One Agentic Broker	launch	Q4 FY26
Netskope One AI Guardrails	launch	Q4 FY26
Netskope AI Gateway	launch	Q4 FY26
ZTNA AI agent	launch	Q4 FY26
Netskope One Data Lineage	launch	Q4 FY26
DNS as a Service	launch	Q4 FY26

Deals & partnerships

Largest GSI in the world Major enterprise deal in the energy sector

Partnered on a major enterprise deal supporting digital transformation and zero trust for approximately 80,000 employees.

Largest GSI in the world Engagement with a large government defense customer

Recent engagement with a large government defense customer in Asia Pacific.

Largest GSI in the world Engagement with a major healthcare customer

Recent engagement with a major healthcare customer in North America. This partner holds over 150 certifications on the Netskope platform.

Amazon Web Services (AWS) Achieved Security Competency status for AI security

This competency assures AWS customers that Netskope has met technical and quality standards for securing AI workloads across AI security use cases.

Risks & headwinds

Geopolitical and macroeconomic factors Last couple of weeks, ongoing

Prudence reflected in guidance

Mitigation:Guidance built with these factors in mind; very small percentage of business in affected areas.

Sales rep ramp-up period H1 FY27, with full ramp expected in H2 FY27

Takes about 12 months for reps to ramp to full productivity; many reps still ramping from mid-last year hires.

Mitigation:Continuing to invest in enabling reps and hiring more teams to build the rep funnel for future growth.

Annual billing transition impact on free cash flow Q1 FY27, H1 FY27

Expected negative free cash flow of $50 million to $60 million in Q1 FY27; estimated 6 percentage points reduction in FY27 FCF margin.

Mitigation:Laser focus on efficiencies; transition occurring faster than expected; expect improvement in Q2 and return to positive FCF in H2 FY27.

Gradual gross margin improvement FY27

Progress from mid-70s to 80% target will be more gradual and may not follow the linear step function seen in recent quarters.

Mitigation:Expected margin gains to come through top line growth and continued optimization.

What to watch in Q1 FY27

Q1 FY27 Revenue Growth

Q1 FY27

Current Q4 FY26 revenue growth 32%

Target ~26% at midpoint ($197M-$199M)

Why it matters

Revenue growth deceleration is a key concern, especially given macro headwinds and sales rep ramp, impacting overall business trajectory.

For Q1, fiscal 2027, we expect revenue in the range of $197 million to $199 million, representing growth of approximately 26% at the midpoint

Find out whether NTSK delivers this. Inve re-checks your case every morning.

Q&A highlights

Where is the market in terms of securing AI, are Netskope's announcements ahead of demand, and what are the factors behind the modest sequential Q1 revenue guidance?

Most organizations are in the infancy of AI security, with 90% of usage being shadow AI. Netskope aims to anticipate needs and deliver best-of-breed solutions. Q1 guidance is prudent due to being a first-year public company, ongoing sales rep ramping (12-month cycle), and recent geopolitical/macro headwinds.

“most organizations are in the infancy. They're in the first inning. 90% of their usage of AI is shadow AI, meaning they actually didn't bring it in. Their end users did.”

asked by Brian Essex · answered by Sanjay Beri

2 min read 6 chapters

Detailed narrative

AI Strategic Framework and Innovation

Netskope outlined a four-pillar AI strategy focusing on an AI-native platform with privacy by design, real-time in-line AI security, differentiated performance via its NewEdge AI infrastructure, and a platform built for the agentic economy. The company emphasized its unique architectural moat, leveraging proprietary AI models and active context to secure AI transactions in real-time, unlike legacy solutions.

New products like Netskope One Agentic Broker and AI Guardrails were announced to enable and secure AI adoption with granular control.

Netskope AI Index Launch

The company launched the Netskope AI Index, an interactive view of real-time AI usage across the world. This index utilizes Netskope's proprietary data from trillions of transactions to provide granular insights into AI adoption by country, industry, and company size. This initiative positions Netskope as a definitive authority on enterprise AI data usage and trends, showcasing its unique visibility into the AI economy.

Broader Product Innovation

Beyond AI, Netskope continued to innovate across its Netskope One platform. Key introductions included Netskope One Data Lineage, enabling security teams to track sensitive data movement across their organization. The company also enhanced secure connections for unmanaged or BYOD devices with expanded enterprise browser support and deeper integration with remote browser isolation.

Additionally, DNS as a Service was launched to provide secure access and content filtering for often overlooked use cases like guest WiFi.

Platform Unification and Customer Adoption

Netskope highlighted its organically built Netskope One platform, which offers 25 security, networking, analytics, and AI solutions from a single code base, engine, console, and network. This unified approach drives efficiency and a seamless customer experience, contrasting with disjointed M&A-driven solutions.

Customer wins across various verticals and geographies demonstrated the platform's ability to enable AI adoption, modernize infrastructure, consolidate vendors, and replace legacy security products, with 56% of customers using 4+ products and 27% using 6+ products.

Go-to-Market Strength and Partnerships

The go-to-market team delivered strong performance, with sales reps ramping and key leadership positions filled, including for the U.S. public sector. Netskope is actively hiring talented reps from competitors. Strategic partnerships are also expanding, exemplified by a major enterprise deal with the world's largest GSI in the energy sector and achieving AWS Security Competency status for AI security, extending Netskope's global reach and operational support.

Strategic Investments and Billing Transition

Netskope is making upfront investments in AI tooling for R&D to enhance engineer productivity and product velocity, expecting R&D percentage of revenue to decrease over time. The company is also accelerating its transition to annual billing on multiyear contracts, which is happening faster than expected and is intended to improve cash flow predictability.

This transition is projected to cause negative free cash flow in Q1 FY27 but is expected to improve and turn positive in the second half of the year.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.