Netskope, Inc. Class A Common Stock

Q2 revenue was $220.5 million, up 29% year over year, while ARR grew 27% to $899 million and net new ARR was $54 million. Gross margin was 77%, up about 2 percentage points year over year, and operating margin improved to negative 9% from a year ago, an 11-point improvement. Net loss per share was $0.03 using 405 million weighted average shares, and negative free cash flow was $29.8 million; cash, cash equivalents, and marketable securities ended at $1.1 billion. For Q3, management guided to revenue of $227 million to $229 million, operating margin of about negative 8%, and net loss per share of $0.03 to $0.04. For FY27, they raised revenue guidance to $888 million to $892 million, expected gross margin of about 77%, operating margin of about negative 9%, net loss per share of $0.15, and positive free cash flow margin of about 2%.

Sanjay Beri framed the quarter as validation of Netskope’s platform in the AI era, arguing that security, networking, and AI are converging and that Netskope’s New Edge network plus Netskope 1 give it a differentiated position. He spent much of the call highlighting AI security use cases, saying customers want to “say yes to AI” without sacrificing control, and pointed to strong early engagement, pipeline generation, and POCs. His tone was confident and expansive, with repeated emphasis on large TAM, product breadth, partnerships, and the company’s ability to serve cloud and AI transformation.

Andrew Del Matto focused on the financial outperformance and operating leverage. He cited ARR of $899 million, revenue of $220.5 million, gross margin of 77%, operating margin of negative 9%, and negative free cash flow of $29.8 million, while noting strong regional revenue growth, RPO growth of 36% to $1.35 billion, and cash of $1.1 billion. He also said the company expects Q3 free cash flow of $10 million to $20 million, full-year capex of 4% to 5% of revenue tied to New Edge investments, and that the annual billing transition is moving faster than expected.

Analysts focused on how to think about ARR acceleration, the AI security pipeline, pricing, CapEx, NRR, and the salesforce ramp. Management said AI security deals are expected to close more in the back half of the year, with about 50% of reps still ramping and more fully ramped capacity coming first in EMEA and APJ, then North America. On AI, Sanjay said the most resonant products are Agentic Broker, Guardrails, and AI Command Center, while on pricing he said transaction-based pricing fits agent traffic and outcome-based pricing fits some AgentScope products. On CapEx, Andrew said the 4% to 5% of revenue range is consistent with prior expectations and reflects continued infrastructure investment rather than a major change in strategy.