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NTSK
Earnings call · Jul 2026 (Q2 FY27)

Netskope Q2 FY27 earnings call NTSK

Sep 2, 2026 Source

Executive summary

Netskope Q2 FY27 — Strong AI Security Traction and Margin Improvement

Netskope delivered a strong Q2 FY27, driven by robust demand for its platform and early traction in AI security, which is rapidly generating pipeline and customer engagement. The company demonstrated significant operating leverage, improving margins ahead of expectations, while strategically reallocating resources to accelerate AI innovation and maintain its market leadership in cloud and AI security.

Highlights

5

  • ARR grew 27% year-over-year to $899 million.

  • Revenue grew 29% year-over-year to $221 million, ahead of guidance.

  • Operating margin improved 11 percentage points year-over-year to negative 9%, significantly ahead of guidance.

  • Net retention rate (NRR) increased to 114%.

  • AI security pipeline is growing rapidly, with approximately 1/3 already in or entering POC phase.

Concerns

3

  • Net new ARR grew 9% to $54 million, a deceleration from previous quarters.

  • Workforce reduction of approximately 5% due to reallocation of investments towards AI infrastructure.

  • Transition to annual billings is temporarily deferring cash collections.

Guidance & targets

CategoryTargetConfidence
Revenue
$227 million to $229 million
high materiality
High
Operating margin
approximately negative 8%
medium materiality
High
Net loss per share
$0.03 to $0.04
medium materiality
High
Revenue
$888 million to $892 million
high materiality
High
Gross margin
approximately 77%
medium materiality
High
Operating margin
approximately negative 9%
medium materiality
High
Net loss per share
$0.15
medium materiality
High
Free cash flow margin
approximately 2%
medium materiality
High
Capital expenditures as % of revenue
approximately 4% to 5%
medium materiality
High
Net new ARR growth
grow year-over-year
high materiality
High
Annual billings transition
through the transition
medium materiality
High
Free cash flow
$10 million and $20 million
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
EMEA
Revenue growth in EMEA.
—37%——
APJ
Revenue growth in APJ.
—31%——
Americas
Revenue growth in the Americas.
—25%——

NTSK operating KPIs by quarter

NTSK operating KPIs stated on its earnings calls, by fiscal quarter
KPI Jan 2026 Q4 FY26 Apr 2026 Q1 FY27This call Jul 2026 Q2 FY27Change 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 transcript
$845M We ended Q1 with ARR of $845 million, up 29% year-over-year and our net new ARR of $34 million. Source transcript
$899M We ended Q2 with ARR of $899 million, up 27% year-over-year and delivered net new ARR of $54 million. Source 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 transcript
113% Our Q1 net retention rate, or NRR, was 113%. Source 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 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 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 transcript
$1.35B Remaining performance obligations, or RPO, grew 36% year-over-year to $1.35 billion. Source transcript
—

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Remaining performance obligations $1.35 billion Q2 FY27

grew 36% year-over-year

Product announcements

ProductTypeDetails
AI Command Centerlaunch
AI Guardrail solutionlaunch
AI Gatewaylaunch
Agentic Brokerlaunch
Netskope One dataset Command Centerlaunch
AI Fast Path technologylaunch
Post-quantum cryptography algorithmsupdate

Deals & partnerships

Anthropic Industry collaboration

Joined Anthropic's Project Glasswing earlier this year.

OpenAI Industry collaboration

Joined OpenAI's day bake programs earlier this year.

NVIDIA Coalition of industry leaders committed to building open frontier AI tools.

Joined NVIDIA's Open Secure AI Alliance, accelerating commitment to building open AI tools for enterprise customers.

CrowdStrike Integration of real-time data from Netskope into Falcon's next-gen SIM.

Integrates real-time data from Netskope into Falcon's next-gen SIM for critical insights and faster risk correlation.

Anthropic Integration of Netskope DLP and threat scanning with Cloud Enterprise.

Broadened collaboration with Anthropic, integrating industry-recognized DLP and threat scanning with Cloud Enterprise.

Amazon Bedrock Integration of Netskope AI guardrails into agentic workflows for AWS customers.

Announced an integration with Amazon Bedrock Agent Corp, bringing Netskope AI guardrails into agentic workflows for AWS customers.

Managed Service Providers (MSPs) Program to streamline delivery of managed services based on Netskope Solutions.

Launched the Netskope Catalyst managed service provider program to streamline the delivery of managed services based on Netskope Solutions, targeting growth in the mid-market.

Risks & headwinds

Workforce reduction Q2 FY27

approximately 5%

Mitigation:Reallocation of spend towards AI infrastructure and tokens in R&D and G&A, driving AI nativeness company-wide.

Temporary deferral of cash collections until mid-next fiscal year (FY28)

Contracted future billings grew 75%

Mitigation:Transitioning customers to annual billings, which provides strong forward visibility into cash flows and customer commitments.

Rogue agent risk current and emerging

AI agents escaping isolated environments, exploiting vulnerabilities, escalating privileges, moving laterally and stealing credentials

Mitigation:Netskope's AI security suite (Agentic Broker, AI Guardrails, AI Gateway, AI Command Center) provides visibility, control, protection, and performance for AI agents.

What to watch in Q3 FY27

AI Security Pipeline Conversion

back half of the year, especially towards Q4
Current approximately 1/3 in POC
Target increased conversion to closed deals

Why it matters

AI security is a massive greenfield opportunity, and its conversion will drive future ARR growth.

But we really see a lot of that in the back half, especially towards Q4.

Q&A highlights

Inquired about building blocks for ARR acceleration given the sequential deceleration, and how to quantify AI's contribution and Netskope's positioning.

Sanjay highlighted the strong AI security pipeline, expected to close in H2 (especially Q4), and the ramping of sales reps (50% currently ramping), particularly in EMEA and APJ, as key drivers for future growth. He emphasized Netskope's platform, NewEdge network, and granular control as differentiators for AI security, noting that 1/3 of the AI pipeline is in POC, following a typical 6-12 month sales cycle.

“One of the key things for us, as we mentioned, is we see that AI security pipeline and some of that closed in Q2. But we really see a lot of that in the back half, especially towards Q4.”

asked by Simran Biswal · answered by Sanjay Beri

2 min read 5 chapters

Detailed narrative

AI Security as a Strategic Imperative

Netskope highlights AI security as a critical and growing priority for enterprises, driven by the exponential increase in transactions and data, and the emergence of autonomous AI agents. The company positions its Netskope One platform and NewEdge private cloud network as uniquely capable of providing the necessary visibility, control, protection, and performance for safe AI adoption, addressing a $170 billion greenfield opportunity within its $336 billion total addressable market.

Early Traction and Pipeline in AI Security

The company is seeing strong customer engagement and rapid pipeline generation for its recently announced AI security suite, with approximately one-third of the AI security pipeline already in or entering the proof-of-concept (POC) stage. Early wins demonstrate how Netskope enables customers to safely use AI, rather than block it, by providing guardrails, gateway security, and agentic broker capabilities.

Platform Expansion and Customer Adoption

Netskope's platform selling motion continues to drive momentum, with 59% of customers now using four or more Netskope One products, up from 51% a year ago. The number of customers spending over $100,000 in ARR grew 23% year-over-year, indicating strong expansion within the existing customer base and the value of the integrated platform.

Innovation in Quantum-Resilient Cryptography

Netskope has engineered and natively integrated NIST-approved post-quantum cryptography algorithms across its SASE platform in over 120 data centers globally. This proactive measure aims to future-proof customer communications against quantum computing threats, meet regulatory mandates, and enhance the security posture for sensitive SaaS and AI services worldwide.

Strategic Partnerships and Ecosystem Integration

Netskope continues to expand its collaborations, joining NVIDIA's Open Secure AI Alliance and CrowdStrike's Project QuotWorks, and deepening integrations with Anthropic and Amazon Bedrock. These partnerships underscore Netskope's commitment to openness and interoperability within the broader AI and security ecosystem, enhancing its offerings and market reach.

AI-generated summary of the company's earnings call. Not investment advice.