S-1/A: Netskope IPO Filing: Cloud & AI Security Growth

Netskope, a leader in cloud and AI security, filed an amended S-1 registration statement for its initial public offering, showcasing strong revenue and ARR growth, alongside improved operating margins.

Summary

• Netskope is redefining security and networking for the cloud and AI era with its unified, cloud-native Netskope One platform.
• The platform provides contextual intelligence for data and digital interactions, securing them without sacrificing user experience.
• The total addressable market for its unified solution is projected to reach $138.9 billion by 2028, growing at a 16.8% CAGR from 2024.
• The nascent AI security market is projected to grow to $30.8 billion by 2028, contributing an incremental $9.9 billion to the total addressable market.
• As of July 31, 2025, Netskope had 4,317 customers, a 21% year-over-year increase from 3,571 customers as of July 31, 2024.
• Over 30% of Fortune 100 and approximately 18% of Forbes Global 2000 companies are Netskope customers.
• Annual Recurring Revenue (ARR) increased 33% year-over-year to $707 million as of July 31, 2025, from $531 million as of July 31, 2024.
• Revenue increased 31% year-over-year to $328 million for the six months ended July 31, 2025, compared to $251 million for the same period in 2024.
• Net loss improved to $170 million for the six months ended July 31, 2025, from $207 million for the same period in 2024.
• Dollar-based net retention rate (NRR) increased to 118% as of July 31, 2025, from 113% as of July 31, 2024.
• Dollar-based gross retention rate (GRR) increased to 96% as of July 31, 2025, from 95% as of July 31, 2024.
• Loss from operations improved to $91 million for the six months ended July 31, 2025, from $161 million for the same period in 2024.
• Non-GAAP loss from operations improved to $63 million for the six months ended July 31, 2025, from $123 million for the same period in 2024.
• Operating cash flow margin improved to 3% for the six months ended July 31, 2025, from (42%) for the same period in 2024.
• The company plans to use net proceeds from the IPO for general corporate purposes, including working capital, operating expenses, capital expenditures, and potentially to repay Convertible Notes or acquire complementary businesses.
• The company will have a multi-class common stock structure, concentrating voting control with Class B common stock holders (99.3% of voting power post-IPO).

Sentiment

Score: 8

Explanation: Netskope demonstrates robust growth in revenue and ARR, significant improvements in net loss and operating cash flow, and strong customer retention. Its market leadership in cloud and AI security, coupled with a differentiated technology platform, positions it well for future expansion. However, the company still reports net losses and has substantial convertible debt, which introduces some financial risk. The IPO is a significant step towards financial flexibility and market visibility.

Positives

• Strong revenue growth: 31% year-over-year to $328 million for the six months ended July 31, 2025.
• Significant Annual Recurring Revenue (ARR) growth: 33% year-over-year to $707 million as of July 31, 2025.
• Improved net loss: $170 million for the six months ended July 31, 2025, down from $207 million for the same period in 2024.
• Improved operating loss: $91 million for the six months ended July 31, 2025, down from $161 million for the same period in 2024.
• Improved non-GAAP operating loss: $63 million for the six months ended July 31, 2025, down from $123 million for the same period in 2024.
• Positive operating cash flow margin: 3% for the six months ended July 31, 2025, up from (42%) for the same period in 2024.
• High customer acquisition: 21% year-over-year increase to 4,317 customers as of July 31, 2025.
• Strong customer retention and expansion: Dollar-based net retention rate (NRR) of 118% and dollar-based gross retention rate (GRR) of 96% as of July 31, 2025.
• Increasing adoption of multiple products: 72% of customers use three or more products, 51% use four or more, and 35% use five or more as of July 31, 2025.
• Growing number of large customers: 111 customers with ARR over $1 million (32% YOY increase), representing 37% of total ARR.
• Diversified customer base: No single customer accounts for more than 3% of ARR.
• Strong international presence: 43% of revenue from outside the Americas for the six months ended July 31, 2025, with 37% YOY growth in EMEA and 33% in APJ.
• Deep technology moat with patented AI/ML models (over 160 ML models, 40+ patents) for advanced security.
• NewEdge global private cloud network with over 120 data centers in 75+ regions, offering 99.999% uptime guarantees for inline services.
• LTV:CAC ratio greater than 10x for the three months ended July 31, 2025, indicating efficient customer acquisition.
• Achieved FedRAMP High Authorization, enabling broader public sector reach.
• Operates an open ecosystem with over 100 pre-built integrations via Netskope Cloud Exchange.

Negatives

• History of net losses: $(344.9) million in fiscal 2024, $(354.5) million in fiscal 2025, and $(169.5) million for the six months ended July 31, 2025.
• Accumulated deficit of $2.1 billion as of July 31, 2025.
• Anticipate increases in operating expenses in the near-term, particularly due to significant stock-based compensation expense related to RSUs vesting upon IPO.
• Sales and marketing expenses decreased by $4.2 million, or 3%, in the six months ended July 31, 2025, compared to the same period in 2024, partially due to decreased stock-based compensation, but amortization of capitalized sales commissions increased.
• Loss on changes in fair value of convertible notes increased by $32.3 million (72%) in the six months ended July 31, 2025, primarily due to higher common stock fair value and increased IPO probability assumption.
• The multi-class stock structure concentrates voting control (99.3% with Class B holders), limiting influence for Class A common stockholders.
• Servicing substantial indebtedness ($518.9 million principal and accrued interest as of July 31, 2025) may require significant cash flow.
• Limited experience with pricing models; changes could adversely affect financial results.
• Reliance on a limited number of global vendors and suppliers for equipment, software, and services, exposing the company to supply chain disruptions and increased costs.
• Exposure to credit and liquidity risk of customers, especially in weakened markets.
• International operations expose the company to political, economic, social uncertainty, and currency fluctuations.
• Use of AI and ML may present business, compliance, and reputational challenges.

Risks

• Inability to achieve or sustain profitability due to a history of losses and anticipated increases in operating expenses.
• Recent rapid growth rates may not be indicative of future growth, potentially leading to slower growth or declines.
• Future revenues and operating results will be harmed if unable to acquire new customers, renew existing arrangements, or expand sales to existing customers.
• If the market for security, networking, and analytics does not grow, business growth and results of operations may be adversely affected.
• Dependence on the success of relationships with the partner ecosystem; inability to maintain or develop these relationships could materially and adversely affect the business.
• Operating results may fluctuate significantly, making future results difficult to predict and potentially causing them to fall below expectations.
• Failure to effectively develop and expand sales and marketing capabilities could hinder new customer acquisition or increased sales to existing customers.
• Long and unpredictable sales cycle, requiring considerable time and expense without guaranteed sales.
• International operations expose the company to significant risks, including political/economic uncertainty, localization costs, enforcement difficulties, regulatory changes, and currency fluctuations.
• Reliance on a limited number of global vendors and suppliers for equipment, software, and services, risking disruptions, increased expenses, or delays.
• Adverse economic conditions or reduced security, networking, or analytics spending may adversely impact revenue and profitability.
• Failure to maintain high-quality customer support could adversely affect business, especially with reliance on channel partners.
• Success depends on the experience and expertise of senior management and key employees, particularly the CEO; inability to hire, retain, train, and motivate personnel could harm the business.
• Limited experience with pricing models; changes could adversely affect business, financial condition, and results of operations.
• Failure to meet service level commitments could lead to credits for future service and harm the business.
• Future growth depends on sales to government entities, which are subject to challenges and risks (e.g., budget cycles, compliance, audits).
• Future acquisitions, strategic investments, partnerships, or alliances could be difficult to identify and integrate, divert management attention, disrupt business, dilute stockholder value, and adversely affect results.
• Inability to effectively manage risks and challenges related to operations in India and Taiwan (e.g., increasing wage costs, competition for talent, economic conditions).
• Incorrect estimates or judgments relating to critical accounting policies, or changes in financial reporting standards, could adversely affect operating results.
• Reliance on third parties for essential financial and operational services; failure or disruption could adversely affect business management.
• Business and operational metrics are subject to inherent measurement challenges; inaccuracies could harm reputation and stock price.
• Estimated market opportunity and growth forecasts may prove inaccurate.
• Exposure to fluctuations in currency exchange rates could negatively affect results.
• Exposure to credit and liquidity risk of customers, potentially resulting in material losses.
• Failure to obtain, maintain, protect, defend, or adequately enforce intellectual property or proprietary rights could impair competitive position and incur costly litigation.
• Use of AI and ML, and their integration, may not be successful and could present business, compliance, and reputational challenges.
• Internal networks, systems, or data breaches (or perceived breaches) could damage reputation and negatively impact financial results.
• Actual or perceived failure of the platform and products to block malware or prevent security breaches could harm reputation.
• Inability to satisfy data protection, security, privacy, and other governmentand industry-specific requirements or regulations could harm the business.
• Servicing substantial indebtedness may require significant cash, and the company may not have sufficient cash flow or ability to raise funds.
• Multi-class common stock structure concentrates voting control with Class B holders, limiting influence for Class A holders.
• Inability to predict the effect of the multi-class structure on Class A common stock trading price.
• No public trading market for Class A common stock currently exists; an active market may not develop or be sustained.
• If industry or financial analysts do not publish research or issue inaccurate/unfavorable research, stock price and trading volume could decline.
• Sales of substantial amounts of Class A common stock in public markets, or the perception thereof, could reduce price and dilute voting power.
• Need for additional capital; no certainty that financing will be available on favorable terms.
• Immediate and substantial dilution in net tangible book value for IPO purchasers.
• Reduced disclosure requirements as an "emerging growth company" may make Class A common stock less attractive to investors.
• Management will have broad discretion over IPO proceeds.
• No intention to pay dividends in the foreseeable future.
• Delaware law and provisions in amended certificate of incorporation and bylaws could make a merger, tender offer, or proxy contest difficult.
• Exclusive forum provisions in bylaws could limit stockholders' ability to obtain a favorable judicial forum.
• Potential issuance of preferred stock whose terms could adversely affect voting power or value of Class A common stock.
• Involvement in litigation could materially and adversely affect the company.
• Business subject to risks of natural catastrophic events and man-made problems (e.g., power disruptions, cyber viruses, acts of war).

Future Outlook

The company anticipates continued rapid growth, driven by expanding its salesforce and channel partners domestically and internationally, and further developing its technology architecture and platform. It expects operating expenses to increase in the near term due to IPO-related stock-based compensation but decrease as a percentage of revenue over the long term due to improved operational efficiencies and technological advancements. Non-GAAP gross margin, operating margin, and free cash flow margin are expected to improve over the long term. The company will continue to invest in research and development and evaluate strategic M&A to enhance platform capabilities.

Management Comments

• Sanjay Beri (Co-Founder and CEO): "I saw the future unfolding before my eyes: a digital cloud-driven world exploding with possibilities, yet teetering on the brink of chaos an unsecured, wild west environment defined by escalating complexity, limited visibility, a lack of control, and mounting challenges in delivering a consistent, high-quality secure digital experience at scale."
• Sanjay Beri (Co-Founder and CEO): "Netskope One isn't just a platform; it's the key to unlocking the full potential of the cloud, AI, and ultimately organizations."
• Sanjay Beri (Co-Founder and CEO): "We are not just building a platform; we are building the foundation for the next era of secure high performance business."
• Sanjay Beri (Co-Founder and CEO): "I have always believed in the phrase 'innovate or die'; it's a core principle at Netskope."
• Sanjay Beri (Co-Founder and CEO): "Becoming a public company is not the destination, but rather another significant milestone on our journey one that we hope will amplify awareness of our groundbreaking Netskope One platform."
• Sanjay Beri (Co-Founder and CEO): "Our high win rate (our 'batting average' as I like to call it) speaks volumes about the platform's strength. Going public, in our view, is about getting us more 'at bats,' and expanding our awareness, reach, and hence positive impact."
• Sanjay Beri (Co-Founder and CEO): "We are still in the early innings of a market we've re-imagined and helped define. This is just the beginning, and we are incredibly energized to lead this space for decades to come."
• Shirin Khimji (Global Head of Zero Trust, ASICS Technology Ltd): "Netskope is committed to continuous improvement and innovation in the security landscape. They enabled us to operationalize Adaptive Trust at scale, securely connecting users to data with precision, performance, and policy control, anywhere, anytime, on any device."
• CIO, global services company: "We consider Netskope one of our most important strategic partners for security and networking. The Netskope One platform has allowed us to consolidate technology platforms, reduce costs, protect data from constant threats, and enable modern, hybrid work with safe access to cloud, web, Al, and private applications."
• Paul Eccleston (Chief Business Innovation Officer, Exclusive Networks): "The Netskope One platform offers superior protection and performance. As we have built a global business, we remain deliberate about the technology providers we partner with as we expand. Netskope is a strategic vendor for Exclusive and in high demand with customers wanting to make a successful, secure transition to a cloud-first technology environment."

Industry Context

The filing highlights a "transformative tectonic shift" in the digital world driven by cloud and AI, rendering traditional security and networking solutions "broken." Netskope positions its unified, cloud-native platform, Netskope One, as the solution to this evolving landscape, which is characterized by dispersed users, non-human entities, and a complex mesh of data exchanges. The company addresses a large and growing total addressable market, projected to reach $138.9 billion by 2028, with an incremental $9.9 billion from AI security. This indicates a strong alignment with current industry trends towards cloud adoption, AI integration, and the need for converged security and networking (SASE/SSE) to manage increasing cyber threats and data privacy regulations. Competitors like Broadcom, Cisco, Fortinet, Palo Alto Networks, and Zscaler are also active in this intensely competitive and rapidly changing market. Netskope emphasizes its differentiated architecture and AI-driven capabilities as key competitive strengths.

Comparison to Industry Standards

• Recognized as a leader in Gartner Magic Quadrant for Security Service Edge (SSE) every year from 2022 through 2025, positioning furthest in completeness of vision and among the top two in ability to execute in 2023, 2024, and 2025 reports.
• Ranked highest in the 2025 Gartner Critical Capabilities for SSE report in three of six use cases: Essential SSE, Private Application Access, and SaaS Enablement, and the only Magic Quadrant for SSE Leader to rank in the top two for all six use cases.
• A Leader in Gartner Magic Quadrant for SASE Platforms in 2024 and 2025, positioning furthest in completeness of vision and among the top two in ability to execute in the 2025 report.
• Ranked highest in the 2025 Gartner Critical Capabilities for SASE Platforms report in three of four use cases: Foundational SASE Platform, Zero Trust SASE Platform, and "Coffee Shop" Networking, achieving the highest aggregate score overall.
• A Leader in The Forrester Wave: Security Service Edge (SSE) Solutions for Q1 2024, scoring highest in the current offering category of all vendors evaluated.
• A leader in the 2025 IDC MarketScape for Worldwide DLP Vendor Assessment.
• The company's NewEdge network provides 99.999% uptime guarantees for all inline services, a high benchmark for availability.
• The company's LTV:CAC ratio was greater than 10x for the three months ended July 31, 2025, and greater than 8x for the last four fiscal quarters, indicating strong unit economics compared to industry averages for high-growth SaaS companies.

Management Changes

Corporate Governance

Legal Proceedings

• In 2022, Netskope filed for declaratory judgment in the Northern District of California in response to communications by Fortinet alleging patent infringement; this proceeding remains ongoing.

Related Party Transactions

• Amended and Restated Investors' Rights Agreement (dated July 7, 2021, amended Oct 2, 2024) with entities affiliated with Lightspeed Venture Partners, Accel, and ICONIQ, granting demand and piggyback registration rights.
• Right of First Refusal and Co-Sale Agreement (dated July 7, 2021) with entities affiliated with Lightspeed Venture Partners, Accel, ICONIQ, and Sanjay Beri (including an affiliated trust), which terminates upon IPO completion.
• Amended and Restated Voting Agreement (dated July 7, 2021) with entities affiliated with Lightspeed Venture Partners, Accel, ICONIQ, and Sanjay Beri (including an affiliated trust), which terminates upon IPO completion.
• Sanjay Beri (CEO) is expected to enter into a voting agreement with one of the non-executive co-founders for an additional 1.6% of the voting power of outstanding capital stock following the completion of this offering.
• SCGE Fund, L.P. (Sequoia Capital Global Equities) has the right to purchase from the company up to 15% of the aggregate number of shares offered in the initial public offering (excluding over-allotment option shares) in a separate and concurrent private placement.
• Indemnification agreements have been entered into or will be entered into with each of the directors and executive officers.

Stakeholder Impact

• Shareholders: Potential for dilution from the IPO and future equity issuances. Class A holders will have limited voting influence due to the multi-class structure, while existing shareholders (Class B holders) retain significant control.
• Employees: Equity awards (RSUs, options) are a significant part of compensation, with vesting tied to the IPO. The company has established a severance plan and a clawback policy.
• Customers: Expected to benefit from enhanced security, performance, and operational simplicity through the Netskope One platform. Continued investment in innovation and global network expansion aims to improve service and address evolving threats.
• Suppliers/Creditors: The company's outstanding Convertible Notes represent a substantial indebtedness. The company's financial health and ability to service this debt are relevant to creditors.
• Regulatory Bodies: The company is subject to various U.S. and international regulations (SEC, data privacy, anti-corruption, export controls) and is taking steps to ensure compliance, which may involve ongoing costs and scrutiny.

Next Steps

• Complete the initial public offering (IPO) of Class A common stock.
• List Class A common stock on the Nasdaq Global Select Market under the symbol "NTSK."
• Continue to invest in expanding the salesforce and channel partners domestically and internationally.
• Further develop technology architecture and platform through research and development.
• Evaluate strategic acquisitions and investments in businesses and technologies.
• Satisfy anticipated tax withholding and remittance obligations related to RSU settlement.
• Potentially repay outstanding indebtedness under Convertible Notes.

Key Dates

Recommendation

Netskope is entering the public market with impressive growth metrics, including a 33% year-over-year ARR increase and a positive shift in operating cash flow margin. Its strong market leadership, validated by top-tier industry analyst rankings in critical and expanding segments like SSE, SASE, and AI security, indicates a robust competitive advantage and significant future opportunity. The company's deep technology moat, global infrastructure, and efficient customer acquisition (LTV:CAC > 10x) suggest sustainable long-term value creation. While current losses exist, the improving financial trajectory and strategic investments position Netskope as a compelling investment in a high-growth cybersecurity market.

Keywords

Cloud Security, AI Security, Cybersecurity, SASE, SSE, Zero Trust, Data Loss Prevention, DLP, ZTNA, Network Security, Netskope One, IPO, SaaS Security, Cloud-Native, Enterprise Security