Netskope shares surged after the cybersecurity company delivered a stronger-than-expected fiscal second quarter, raised its full-year revenue outlook and showed another sizable improvement in adjusted profitability as enterprise demand for cloud and artificial intelligence security continued to grow.
The stock initially climbed roughly 15% in extended trading Wednesday following the report. Netskope had closed the regular session at $13.75, down 2.1%, before jumping above $15 after the results were released. The rally carried into Thursday’s premarket session, although much of the initial gain faded during regular trading, with shares around $14.20 to $14.30 later Thursday, still roughly 3% to 4% above Wednesday’s close.
For the quarter ended July 31, Netskope reported an adjusted loss of $0.03 per share, substantially narrower than the roughly $0.07 loss Wall Street had expected. Revenue reached $220.5 million, up 29% from $170.8 million a year earlier and above analysts’ consensus estimate of approximately $214.2 million.
The result also comfortably cleared Netskope’s own forecast. Management had previously guided for second-quarter revenue of $213 million to $215 million, meaning actual sales came in $5.5 million above the high end of its range. Annual recurring revenue, an important measure of the company’s subscription business, increased 27% from a year earlier to $899 million.
The combination of faster revenue growth and a shrinking adjusted operating loss helped explain the market’s initial reaction.
Netskope’s non-GAAP operating margin improved to negative 9%, compared with negative 20% a year earlier. The company had expected a second-quarter adjusted operating margin between negative 14% and negative 15%, so profitability came in well ahead of management’s prior target. Non-GAAP gross margin also rose to 77% from 75%.
There remains a sizable difference between Netskope’s adjusted performance and its results under generally accepted accounting principles.
The company recorded a GAAP net loss of $110.8 million, or $0.27 per share, compared with a $90.3 million loss a year earlier. Its GAAP operating loss widened to $89.8 million from $46 million.
A major contributor to that gap was stock-based compensation. Netskope recorded approximately $63 million of stock-based compensation during the quarter, compared with about $7.6 million a year earlier, according to its SEC filing. The company also recognized $3.5 million in restructuring costs after approving a plan in June to reduce its global workforce by approximately 5% as part of what it described as a shift toward an AI-native business.
That distinction matters when evaluating Netskope’s progress toward profitability. Adjusted margins are improving quickly, but the company has not yet reached GAAP profitability and continues to consume cash.
Operating cash usage was $16.5 million during the quarter, little changed from $16.9 million a year earlier. The operating cash-flow margin improved to negative 7% from negative 10%.
Free cash flow, however, moved in the opposite direction. Netskope burned $29.8 million of free cash flow during the quarter, compared with $19.7 million a year earlier, while its free-cash-flow margin declined to negative 14% from negative 12%.
The company has substantial liquidity while it works toward positive cash generation, ending July with approximately $1.1 billion in cash, cash equivalents and marketable securities.
Netskope Raises Full-Year Revenue Forecast Again
Management’s new outlook provided another reason investors initially bid up the shares.
For the fiscal third quarter, Netskope expects revenue between $227 million and $229 million, an adjusted operating margin of approximately negative 8%, and an adjusted loss between $0.03 and $0.04 per share.
For the full fiscal year, management now expects revenue of $888 million to $892 million. That compares with the $879 million to $883 million range Netskope gave after its first-quarter results, representing an increase of roughly $9 million at the midpoint.
The company also expects a full-year non-GAAP operating margin of approximately negative 9%, an adjusted loss of $0.15 per share and a free-cash-flow margin of approximately 2%.
The positive full-year free-cash-flow target is particularly important because it would require Netskope to reverse the negative cash generation reported during the first half of the year. Investors will therefore have another measurable benchmark for determining whether improving adjusted margins are translating into stronger underlying cash economics.
AI Security Is Becoming a Bigger Part of the Netskope Story
Chief Executive Sanjay Beri said the quarter was supported by customer demand across security, networking, analytics and AI, while pointing to “early traction with our AI Security solutions.”
Netskope sells cloud-based security and networking technology through its Netskope One platform, placing the company in a competitive cybersecurity market alongside companies including Palo Alto Networks, CrowdStrike and Zscaler.
AI has created two potential sources of demand for cybersecurity providers. Businesses are deploying generative and agentic AI applications that can introduce new pathways for sensitive corporate information to leave controlled environments, while attackers are also using AI to increase the speed and sophistication of cyber threats.
Netskope has been building products around that shift. The company recently introduced its DataSec Command Center for monitoring and protecting sensitive information across AI, cloud, email, endpoints and other environments. It has also expanded NewEdge AI Fast Path, technology designed to improve network performance when users and AI agents access large AI models and services.
The company’s SEC filing provides additional evidence that enterprise customers are continuing to commit spending to the platform. Netskope ended July with approximately $1.4 billion of remaining performance obligations, representing contracted revenue that has not yet been recognized. Management expects about 53% of that amount to convert into revenue during the following 12 months.
There is one metric investors may want to keep an eye on. Netskope’s dollar-based net retention rate was 114% at the end of July, meaning existing customers continued to spend more with the company than a year earlier, but the rate was down from 118% in the prior-year period. Continued moderation could indicate slower expansion among existing customers, while stabilization or renewed acceleration would strengthen the case that AI and broader platform adoption are driving larger customer commitments.
Netskope’s earnings therefore showed improvement in several of the areas investors have been watching most closely: revenue remained near 30% growth, recurring revenue continued expanding, adjusted margins improved faster than management had forecast, and the company raised its full-year sales outlook.
The remaining question is how quickly that growth can translate into sustainable profitability and cash generation.
The stock itself reflects some of that uncertainty. Netskope went public in September 2025 at $19 per share, and even after the earnings rally, the stock remained below its IPO price and far below its 52-week high of $27.99. The fact that shares opened Thursday around $15.50 before giving back much of the post-earnings surge also suggests investors are still weighing the company’s improving operating performance against continued GAAP losses, stock-based compensation and negative quarterly free cash flow.
The next tests will come from third-quarter revenue growth, another expected improvement in adjusted operating margin and whether Netskope can deliver the positive full-year free-cash-flow margin it is forecasting. Continued growth in annual recurring revenue and customer expansion will also help show whether early demand for its AI security products is developing into a meaningful long-term growth driver.