0001193125-26-255732
SEC filingNetskope grew revenue 28% YoY to $201.6M, but net loss widened to $116.5M as stock-based compensation surged post-IPO.
For the three months ended April 30, 2026 (Q1 FY27), Netskope reported revenue of $201.6 million, a 28% increase from $157.7 million in the prior-year period. Subscription revenue accounted for 99% of total revenue, consistent with the year-ago quarter. Gross profit rose 35% to $148.3 million, and gross margin improved to 74% from 69%, driven by revenue growth outpacing the 11% increase in cost of revenue. The cost of revenue increase was fueled by higher employee-related compensation (including $3.5 million in stock-based compensation) and colocation/network transit costs, partially offset by lower amortization of intangible assets.
Operating expenses surged to $257.0 million from $154.9 million, a 66% increase. Sales and marketing expense rose 52% to $105.7 million, research and development expenses increased 56% to $105.7 million, and general and administrative expenses jumped 159% to $45.6 million. The primary driver was a $66 million increase in stock-based compensation expense across all functions, largely due to the satisfaction of liquidity-based vesting conditions upon the September 2025 IPO. Loss from operations deepened to $108.7 million from $45.4 million.
Below the operating line, the loss on changes in fair value of convertible notes decreased by $21.2 million to $12.2 million, reflecting stock price declines and higher risk-free interest rates partially offsetting accrued interest. Other income, net, increased to $7.5 million from $2.0 million, primarily due to higher interest income. The net loss for the quarter was $116.5 million compared to $79.2 million a year ago. Diluted EPS was ($0.29) versus ($0.76), benefiting from a significantly increased weighted-average share count of 400.5 million (up from 104.7 million) due to the IPO.
As of April 30, 2026, Netskope had $1.1 billion in cash, cash equivalents, and marketable securities (down from $1.2 billion at January 31, 2026). Total assets were $1.69 billion, slightly down from $1.77 billion. Accounts receivable decreased to $136.1 million from $158.3 million, reflecting improved collections. Deferred revenue fell to $652.8 million from $675.9 million, with the current portion at $520.6 million. The company's convertible notes had a carrying value of $713.3 million (principal of $476 million plus accrued PIK interest). Total liabilities were $1.52 billion, and stockholders' equity decreased to $175.5 million from $194.5 million, due to the net loss and share repurchases for tax withholding.
Operating cash flow was negative $53.9 million in Q1 FY27, compared to positive $25.6 million in Q1 FY26. The decline was driven by lower customer collections from the shift to annual billing from upfront multi-year contracts, higher compensation payments, and a decrease in deferred revenue from lower upfront billings. Investing activities used $177.2 million, primarily for marketable securities purchases, while financing activities provided $3.5 million from equity issuances, partially offset by tax withholding payments. Free cash flow was negative $57.2 million, versus positive $17.5 million a year ago.
Management highlighted that revenue growth was balanced between new customer acquisition (48%) and expansion within existing customers (52%). They expect to continue investing in sales, marketing, and R&D to drive growth, and anticipate that operating expenses will increase in dollar terms but decline as a percentage of revenue over the long term. The company's dollar-based net retention rate was 113% as of April 30, 2026, down from 117% a year ago. No formal forward guidance was provided.
Key risks discussed include the company's history of losses, competitive intensity, macroeconomic uncertainties, cybersecurity threats, and the substantial convertible note obligations. The company believes its existing cash and marketable securities are sufficient for at least the next 12 months.
Netskope operates as a single reportable segment. Revenue by geography: Americas $112.1 million (56%), EMEA $52.4 million (26%), APJ $37.0 million (18%). Indirect channels (channel partners and MSPs) generated $194.9 million (97% of revenue). Remaining performance obligations were $1.2 billion, with 54% expected to be recognized over the next 12 months. Stock-based compensation totaled $76.5 million, including $67.7 million from restricted stock units and $4.4 million from the employee stock purchase plan. The company also capitalized $0.5 million in software development costs. Convertible notes fair value changes resulted in a $12.2 million loss in the income statement and a $19.9 million unrealized gain in other comprehensive income. No goodwill impairment or intangible asset impairments were recorded.