Netskope, Inc. (NTSK) Q3 2026 Earnings Call Transcript
Annual Recurring Revenue (ARR) $754 million, a 34% year-over-year increase. This growth was attributed to strong execution, global footprint expansion, and adoption of the Netskope One platform.
Revenue $184 million for Q3, a 33% year-over-year increase. Revenue growth was driven by strong performance across all geographies and increased adoption of Netskope's products.
Free Cash Flow $11 million in Q3, representing a 6% free cash flow margin. This improvement was due to the scalability of the Netskope One platform and foundational investments.
Operating Margin Improved by 11 percentage points year-over-year to negative 15%. This improvement was driven by better unit economics and efficiency gains from the NewEdge architecture.
Gross Margin 75%, an increase of approximately 5 percentage points from Q3 last year. This was driven by the efficiency of the NewEdge architecture.
Net Retention Rate (NRR) 118%, consistent with Q2. This reflects the value and stickiness of Netskope's solutions and effective upselling of additional products.
Customers Generating $100,000+ ARR 1,444 customers, a 24% year-over-year increase. This growth was driven by enterprise and large enterprise segments, which account for over 85% of ARR.
Average ARR per $100,000+ Customer More than $450,000, a 10% year-over-year increase. This indicates success in expanding the installed base and securing significant new enterprise deployments.
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JPMorgan: AI Disruption Fears Overstated for Software Sector
- Market Rebound Expectations: JPMorgan believes that while the market's outlook on AI disruption in the software sector is overly pessimistic, certain software companies are demonstrating greater resilience, potentially providing rebound opportunities for investors, especially given the current overly bearish sentiment.
- Extreme Price Volatility: Analysts point out that the extreme price action in software stocks has led to unrealistic expectations regarding AI disruption, which may prompt a rotation back into higher-quality companies, thereby improving portfolio performance.
- AI Profitability Gains: Companies in the S&P 500 that have adopted AI have seen net margins expand by approximately 2 to 3 percentage points more than their peers, indicating that AI technology is already delivering productivity gains and reflecting that corporate adoption is enhancing profitability.
- ETF Performance Decline: The State Street SPDR S&P Software & Services ETF (NYSE:XSW) is down 20.58% year-to-date, illustrating the overall pessimistic sentiment towards the software sector, despite some companies potentially benefiting from AI infrastructure demand.
Microsoft and 18 Other Software Firms Poised for Resilience
Market Impact: The software sector has experienced a $2 trillion loss due to concerns over potential disruptions from artificial intelligence technology.
Investment Perspective: Analysts at J.P. Morgan view this downturn as a buying opportunity and have identified several AI-resistant companies, including Microsoft and CrowdStrike.
Microsoft and CrowdStrike Top List of 19 Stocks Resilient to AI Changes
Market Impact: The software sector has experienced a significant decline, losing approximately $2 trillion due to concerns over potential disruptions from artificial intelligence technology.
Investment Perspective: Analysts at J.P. Morgan view this downturn as a potential buying opportunity and have identified a list of companies that are resistant to AI-related disruptions.
Netskope CFO Andrew Del Matto Sells 49,875 Shares for $855,800
- Ownership Change: On January 6, Netskope CFO Andrew Del Matto executed a direct open-market sale of 49,875 shares for a total of $855,800, reflecting a structurally driven transaction due to the conversion of derivative securities, reducing his direct holdings to 41,493 shares while still indicating confidence in the company's future.
- Financial Context: The average sale price was $17.16 per share, while the post-transaction value of his direct holdings at market close was $719,500, suggesting that despite stock price fluctuations, Del Matto maintains significant equity exposure.
- Company Performance: Netskope's most recent quarter saw a 33% year-over-year revenue increase to $184.2 million, with annual recurring revenue climbing 34% to $754 million, demonstrating strong growth momentum in the cloud security market that should attract long-term investor interest.
- Cash Flow Position: At quarter-end, Netskope had approximately $1.2 billion in cash and marketable securities, providing ample financial flexibility to support future growth, and despite a 13% decline in stock price since its IPO, the fundamentals remain robust.
Netskope Surpasses Expectations with 33% Revenue Growth in Q3 2026
- Significant Revenue Growth: Netskope reported $184.17 million in revenue for Q3 2026, marking a 33% year-over-year increase that exceeded expectations by $8.12 million, demonstrating strong demand driven by cloud modernization and AI.
- Earnings Per Share Beat: The company posted an EPS of negative $0.10, surpassing expectations by $0.15, indicating positive signals in profitability recovery and boosting market confidence.
- Annual Recurring Revenue Surge: As of October 31, 2025, Netskope's ARR grew by 34% year-over-year to $754 million, showcasing the company's strong performance in market share and financial health.
- Analysts Optimistic About Future: Meta Marshall from Morgan Stanley reiterated a Buy rating with a $27 price target, anticipating a healthy growth rate of 25% to 30% annually, reflecting strong market confidence in the company's ongoing expansion.
Cementos Pacasmayo, Rezolve AI, Emerald Holding, and Other Major Stocks Rising on Monday
U.S. Stock Market Performance: U.S. stocks declined, with the Dow Jones index dropping over 100 points on Tuesday.
Cementos Pacasmayo Surge: Shares of Cementos Pacasmayo SAA rose 47.4% to $10.30 after Holcim agreed to purchase a majority stake in its parent company.
Notable Stock Gains: Several companies saw significant stock increases, including Rezolve AI PLC (23.7%), Emerald Holding Inc (17%), and Tilray Brands Inc (15%).
Strategic Moves and Buybacks: Sezzle Inc announced a $100 million stock buyback, while Emerald Holding is reviewing strategic options following acquisition inquiries.
JPMorgan: AI Disruption Fears Overstated for Software Sector
- Market Rebound Expectations: JPMorgan believes that while the market's outlook on AI disruption in the software sector is overly pessimistic, certain software companies are demonstrating greater resilience, potentially providing rebound opportunities for investors, especially given the current overly bearish sentiment.
- Extreme Price Volatility: Analysts point out that the extreme price action in software stocks has led to unrealistic expectations regarding AI disruption, which may prompt a rotation back into higher-quality companies, thereby improving portfolio performance.
- AI Profitability Gains: Companies in the S&P 500 that have adopted AI have seen net margins expand by approximately 2 to 3 percentage points more than their peers, indicating that AI technology is already delivering productivity gains and reflecting that corporate adoption is enhancing profitability.
- ETF Performance Decline: The State Street SPDR S&P Software & Services ETF (NYSE:XSW) is down 20.58% year-to-date, illustrating the overall pessimistic sentiment towards the software sector, despite some companies potentially benefiting from AI infrastructure demand.
Microsoft and 18 Other Software Firms Poised for Resilience
Market Impact: The software sector has experienced a $2 trillion loss due to concerns over potential disruptions from artificial intelligence technology.
Investment Perspective: Analysts at J.P. Morgan view this downturn as a buying opportunity and have identified several AI-resistant companies, including Microsoft and CrowdStrike.
Microsoft and CrowdStrike Top List of 19 Stocks Resilient to AI Changes
Market Impact: The software sector has experienced a significant decline, losing approximately $2 trillion due to concerns over potential disruptions from artificial intelligence technology.
Investment Perspective: Analysts at J.P. Morgan view this downturn as a potential buying opportunity and have identified a list of companies that are resistant to AI-related disruptions.
Netskope CFO Andrew Del Matto Sells 49,875 Shares for $855,800
- Ownership Change: On January 6, Netskope CFO Andrew Del Matto executed a direct open-market sale of 49,875 shares for a total of $855,800, reflecting a structurally driven transaction due to the conversion of derivative securities, reducing his direct holdings to 41,493 shares while still indicating confidence in the company's future.
- Financial Context: The average sale price was $17.16 per share, while the post-transaction value of his direct holdings at market close was $719,500, suggesting that despite stock price fluctuations, Del Matto maintains significant equity exposure.
- Company Performance: Netskope's most recent quarter saw a 33% year-over-year revenue increase to $184.2 million, with annual recurring revenue climbing 34% to $754 million, demonstrating strong growth momentum in the cloud security market that should attract long-term investor interest.
- Cash Flow Position: At quarter-end, Netskope had approximately $1.2 billion in cash and marketable securities, providing ample financial flexibility to support future growth, and despite a 13% decline in stock price since its IPO, the fundamentals remain robust.
Netskope Surpasses Expectations with 33% Revenue Growth in Q3 2026
- Significant Revenue Growth: Netskope reported $184.17 million in revenue for Q3 2026, marking a 33% year-over-year increase that exceeded expectations by $8.12 million, demonstrating strong demand driven by cloud modernization and AI.
- Earnings Per Share Beat: The company posted an EPS of negative $0.10, surpassing expectations by $0.15, indicating positive signals in profitability recovery and boosting market confidence.
- Annual Recurring Revenue Surge: As of October 31, 2025, Netskope's ARR grew by 34% year-over-year to $754 million, showcasing the company's strong performance in market share and financial health.
- Analysts Optimistic About Future: Meta Marshall from Morgan Stanley reiterated a Buy rating with a $27 price target, anticipating a healthy growth rate of 25% to 30% annually, reflecting strong market confidence in the company's ongoing expansion.
Cementos Pacasmayo, Rezolve AI, Emerald Holding, and Other Major Stocks Rising on Monday
U.S. Stock Market Performance: U.S. stocks declined, with the Dow Jones index dropping over 100 points on Tuesday.
Cementos Pacasmayo Surge: Shares of Cementos Pacasmayo SAA rose 47.4% to $10.30 after Holcim agreed to purchase a majority stake in its parent company.
Notable Stock Gains: Several companies saw significant stock increases, including Rezolve AI PLC (23.7%), Emerald Holding Inc (17%), and Tilray Brands Inc (15%).
Strategic Moves and Buybacks: Sezzle Inc announced a $100 million stock buyback, while Emerald Holding is reviewing strategic options following acquisition inquiries.
