Netskope plunges 19% after Q1 revenue miss and soft outlook

Netskope reported Q1 revenue of $201.6 million, missing estimates, and issued full-year guidance below analyst expectations.

"We started fiscal year 2027 with strong ARR growth of 29% year-over-year, a testament to the critical role Netskope plays in securing the modern enterprise," Chief Executive Officer Sanjay Beri said.

The cybersecurity company posted a non-GAAP net loss of $0.06 per share, beating the $0.07 loss analysts projected. Annual recurring revenue reached $845 million, up 29% from a year earlier. Non-GAAP gross margin expanded to 77% from 74%.

Shares fell 19.4% in pre-market trading as investors focused on the deceleration. The full-year revenue forecast of $879 million to $883 million implies 24% to 25% growth, slowing from the 28% reported in Q1 and trailing the $891.9 million consensus.

For the quarter ended April 30, GAAP loss from operations widened to $108.7 million from $45.4 million a year earlier, driven by a surge in stock-based compensation to $76 million from $10 million. Free cash flow swung to negative $57.2 million from positive $17.5 million.

For the second quarter, Netskope forecast revenue of $213 million to $215 million, below the $216.1 million consensus. The company expects a non-GAAP operating margin of negative 14% to 15%.

Netskope ended the quarter with $1.1 billion in cash and marketable securities. The results also weighed on the broader cybersecurity sector, with peers such as Zscaler and Palo Alto Networks facing selling pressure in sympathy.

The guidance implies a growth deceleration that may test investor patience with the company's spending on AI security products. The market will watch for signs of margin improvement when Netskope reports Q2 results in late August.

This article is for informational purposes only and does not constitute investment advice.