0001193125-25-316190
SEC filingNetskope's Q3 FY26 revenue grew 33% YoY but net loss widened to $453M due to $410M in IPO-related stock-based compensation, masking underlying operating improvements.
Netskope reported revenue of $184.2 million for the three months ended October 31, 2025, a 33% increase from $138.5 million in the same period last year. Growth was balanced between new customer acquisitions (48% of increment) and expansion within existing customers (52%). Gross profit rose 16% to $106.6 million, but gross margin contracted to 58% from 66%, primarily due to a $27.7 million increase in stock-based compensation expense recognized upon satisfaction of the liquidity condition for certain awards at IPO.
Operating expenses surged to $553.6 million from $145.6 million, driven by $398.2 million of incremental stock-based compensation from IPO-vested RSUs and milestone RSUs. As a result, operating loss widened to ($447.0 million) from ($53.8 million). Net loss was ($453.1 million) compared to ($70.7 million), and diluted EPS was ($1.85) versus ($0.72). On a non-GAAP basis, operating loss improved to ($28.2 million) from ($35.5 million), reflecting underlying operating leverage as revenue growth outpaced non-SBC expense increases.
Cash, cash equivalents, and marketable securities totaled $1.2 billion at October 31, 2025, compared to $246.7 million at January 31, 2025, reflecting the proceeds from the September 2025 IPO. Total assets more than doubled to $1.72 billion. The company holds $401.0 million in 2028 convertible notes and $75.0 million in 2029 convertible notes, both carried at fair value ($780.4 million total). Total liabilities increased to $1.56 billion from $1.34 billion, primarily due to fair value adjustments on the convertible notes. Stockholders' equity swung to $151.0 million from a deficit of ($485.6 million), driven by IPO proceeds and the conversion of preferred stock to common.
Operating cash flow turned positive at $19.9 million for the nine months ended October 31, 2025, versus ($116.8 million) used in the prior year, benefiting from improved working capital and higher deferred revenue. Free cash flow was $8.4 million compared to ($155.2 million) in the prior period. Capital expenditures of $11.6 million (2.3% of revenue) were significantly lower than the $35.8 million in the prior year, as the company leverages its existing NewEdge network. The company's cash position is strong, with no near-term debt maturities and interest on convertible notes payable in kind.
Management attributes revenue growth to strong customer demand for its cloud-native security platform, particularly in the Americas (43% growth) and EMEA (34% growth). The dollar-based net retention rate improved to 118%, indicating successful upsell and cross-sell. The company expects to continue investing in sales and marketing and R&D to capture market share, with a focus on federal government (FedRAMP High authorization) and international expansion. Operating expenses will be impacted by ongoing stock-based compensation, though the IPO-triggered acceleration is a one-time event. No quantitative guidance was provided for future periods.