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

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

Summary

• Netskope is redefining security and networking for the cloud and AI era with its unified, cloud-native Netskope One platform, providing contextual intelligence for data and digital interactions.
• The platform leverages patented technologies and proprietary AI models for granular control, data protection, threat prevention, and compliance, operating on the NewEdge global private cloud network with over 120 data centers in 75+ regions.
• The total addressable market for Netskope's unified solution is projected to reach $138.9 billion by 2028, growing at a 16.8% compound annual growth rate (CAGR) from 2024-2028, with an additional $9.9 billion incremental AI security market opportunity by 2028.
• 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, from $251 million for the six months ended July 31, 2024.
• Net loss improved to $170 million for the six months ended July 31, 2025, from $207 million for the six months ended July 31, 2024.
• Operating loss improved to $91 million for the six months ended July 31, 2025, from $161 million for the six months ended July 31, 2024, with non-GAAP operating loss improving to $63 million from $123 million.
• Operating cash flow margin improved to 3% for the six months ended July 31, 2025, from (42%) for the six months ended July 31, 2024.
• The dollar-based net retention rate (NRR) increased to 118% as of July 31, 2025, from 113% as of July 31, 2024, and the dollar-based gross retention rate (GRR) increased to 96% from 95%.
• Netskope had 4,317 customers as of July 31, 2025, a 21% year-over-year increase, including over 30% of the Fortune 100 and approximately 18% of the Forbes Global 2000.
• 111 customers had ARR over $1 million (37% of total ARR) and 1,372 customers had ARR over $100,000 (86% of total ARR) as of July 31, 2025.
• The company plans to offer 47,800,000 shares of Class A common stock in its IPO, with an estimated price range of $17.00 to $19.00 per share, expecting net proceeds of approximately $810.0 million.
• A portion of IPO proceeds, $82.3 million, will satisfy tax withholding and remittance obligations related to RSU settlement.
• The company will have a multi-class stock structure post-IPO, with Class B common stock representing approximately 99.3% of the total voting power.

Sentiment

Score: 7

Explanation: The company demonstrates strong growth in revenue, ARR, and customer base, with improving operating margins and cash flow. Its market leadership in cloud and AI security is well-recognized. However, it continues to incur substantial net losses and carries significant convertible debt, which introduces financial risk. The IPO is a positive step for capital, but profitability remains a future goal.

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: Reduced to $170 million for the six months ended July 31, 2025, from $207 million for the same period in 2024.
• Improved operating loss: Reduced to $91 million for the six months ended July 31, 2025, from $161 million for the same period in 2024.
• Positive operating cash flow: Margin improved to 3% for the six months ended July 31, 2025, from (42%) for the same period in 2024.
• High customer retention rates: Dollar-based net retention rate (NRR) increased to 118% and gross retention rate (GRR) to 96% as of July 31, 2025.
• Growing customer base: 4,317 customers as of July 31, 2025, a 21% year-over-year increase.
• Strong penetration in large enterprises: Over 30% of Fortune 100 and approximately 18% of Forbes Global 2000 are customers.
• Increasing number of high-value customers: 111 customers with ARR over $1 million (37% of total ARR) and 1,372 customers with ARR over $100,000 (86% of total ARR).
• Large and expanding total addressable market: Projected to reach $138.9 billion by 2028, with an additional $30.8 billion for AI security.
• High LTV:CAC ratio: Greater than 10x for the three months ended July 31, 2025, indicating efficient customer acquisition.
• Unified, cloud-native Netskope One platform with patented AI/ML technologies for advanced security and performance.
• Extensive global private cloud network (NewEdge) with over 120 data centers in more than 75 regions, offering 99.999% uptime guarantees.
• Recognized industry leadership in Gartner Magic Quadrant for SSE and SASE Platforms, Forrester Wave for SSE Solutions, and IDC MarketScape for DLP.
• Broad and deep partner ecosystem with industry leaders like Amazon, CrowdStrike, Google, MetTel, Microsoft, Okta, and Telstra.
• Achieved FedRAMP High Authorization, enabling expansion into the U.S. federal government market.

Negatives

• History of net losses: $344.9 million in fiscal 2024 and $354.5 million in fiscal 2025, with an accumulated deficit of $2.1 billion as of July 31, 2025.
• Anticipates increases in operating expenses in the near-term due to IPO costs and continued investment in sales, marketing, and R&D.
• Expects to recognize significant stock-based compensation expense related to outstanding RSUs post-IPO (approximately $315.8 million if IPO completed by July 31, 2025).
• Revenue growth rate is expected to decline in the future due to increased competition and market maturation.
• Reliance on a limited number of global vendors and suppliers for critical equipment and software, posing supply chain disruption risks.
• Exposure to fluctuations in currency exchange rates, which could negatively affect operating results.
• Exposure to credit and liquidity risk of customers, particularly in weakened economic conditions.
• Substantial indebtedness from Convertible Notes: $518.9 million in aggregate principal and accrued interest as of July 31, 2025, requiring significant cash for servicing.
• Multi-class common stock structure concentrates voting control with Class B holders (approximately 99.3% post-IPO), limiting the influence of Class A common stockholders.
• Sales cycle is long and unpredictable, especially for large enterprises and government entities, requiring considerable time and expense without guaranteed sales.

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 in revenue.
• Failure to acquire new customers, retain existing customers, or expand sales to existing customers would adversely affect revenues and operating results.
• The market for security, networking, and analytics may not grow as anticipated, or customer adoption of cloud-based solutions may not achieve widespread acceptance.
• Dependence on the success of relationships with channel partners; inability to maintain or develop these relationships could materially and adversely affect the business.
• Operating results may fluctuate significantly from period to period, 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 and increased sales to existing customers.
• The sales cycle is long and unpredictable, requiring considerable time and expense without assurance of a sale.
• International operations expose the company to significant risks, including political, economic, and social uncertainty, international conflicts, and currency fluctuations.
• Reliance on a limited number of global vendors and suppliers for certain equipment, software, and services could lead to disruptions, delays, or increased expenses.
• Adverse economic conditions or reduced spending on security, networking, or analytics may adversely impact revenue and profitability.
• Failure to maintain high-quality customer support could lead to customer dissatisfaction and harm business, results of operations, and financial condition.
• Success depends on the experience and expertise of senior management and key employees; inability to hire, retain, train, and motivate personnel could harm prospects.
• Limited experience with pricing models; changes in subscription or pricing models could adversely affect business.
• Failure to meet service level commitments under customer contracts could result in service credits, refunds, and reputational damage.
• Future growth depends on sales to government entities, which are subject to specific challenges and risks, including budget cycles and compliance requirements.
• Future acquisitions, strategic investments, partnerships, or alliances could be difficult to identify and integrate, divert management attention, dilute stockholder value, and adversely affect results.
• Risks associated with operations in India and Taiwan, including increasing wage costs and intense competition for skilled professionals.
• If estimates or judgments relating to critical accounting policies prove incorrect, or financial reporting standards change, operating results could be adversely affected.
• Reliance on third parties for essential financial and operational services; a failure or disruption could materially and adversely affect business management.
• Tracking business and operational metrics is subject to inherent measurement challenges; inaccuracies may harm reputation and stock price.
• Estimated market opportunity and forecasts of market growth may prove inaccurate, and there is no assurance the business will grow at similar rates.
• Exposure to the credit and liquidity risk of customers, and to credit exposure in weakened markets, could result in material losses.
• If internal networks, systems, or data are breached, or perceived to have been breached, the platform may be seen as insecure, reputation damaged, and financial results negatively impacted.
• The actual or perceived failure of the platform and products to block malware or prevent a security breach or incident could harm reputation and adversely impact business.
• Inability to satisfy data protection, security, privacy, and other governmentand industry-specific requirements or regulations could harm business.
• Servicing substantial indebtedness from Convertible Notes may require significant cash, and the ability to raise necessary funds may be limited.
• The multi-class structure of common stock will concentrate voting control with Class B holders, limiting the ability of Class A holders to influence corporate matters.
• Cannot predict the effect the multi-class structure may have on the trading price of Class A common stock, potentially leading to exclusion from certain indices.
• There is currently no public trading market for Class A common stock, and an active trading market may not develop or be sustained following the IPO.
• If industry or financial analysts do not publish research or issue inaccurate or unfavorable research, or change recommendations adversely, stock price and trading volume could decline.
• Sales of substantial amounts of Class A common stock in the public markets, or the perception that they might occur, could reduce the price and dilute voting power.
• Need for additional capital; no certainty that additional financing will be available on favorable terms, or at all.
• Purchasers in the IPO will experience immediate and substantial dilution in the net tangible book value of their shares.
• Reduced disclosure requirements as an 'emerging growth company' may make Class A common stock less attractive to investors.
• Management team has limited experience managing a public company, potentially straining resources and distracting management.
• Business could be impacted by actions from activist shareholders or others.
• Business is subject to risks of natural catastrophic events (e.g., earthquakes, floods, fires) and man-made problems (e.g., power disruptions, cyber viruses, acts of war).

Future Outlook

Netskope expects its operating expenses to increase in the near-term due to IPO-related costs and continued strategic investments in expanding its sales force, marketing efforts, and technology architecture. While revenue growth is anticipated to continue, the growth rate is expected to decline in the future as the business matures. The company is committed to long-term growth through innovation and strategic acquisitions. Netskope anticipates continued improvement in operating cash flow over the long term but does not intend to pay cash dividends in the foreseeable future, retaining all available funds for business operations and growth.

Management Comments

• Sanjay Beri (Co-Founder and CEO): "We are redefining security and networking for the era of cloud and AI."
• 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): "There's a battle raging and constantly escalating in the digital world... We built Netskope to fight back, to empower businesses to fully embrace technology without compromise, and to ensure that everyone, everywhere, can have a fast, seamless, and secure digital experience."
• 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."
• 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 will continue to prioritize long-term success over short-term gains."
• 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."

Industry Context

The digital landscape is undergoing a transformative shift, moving from static web pages to dynamic, data-rich ecosystems powered by cloud and AI, utilizing APIs and JSON. This evolution is driving unprecedented data generation and consumption, creating new attack vectors for sophisticated cyber adversaries who leverage cloud and AI technologies. Traditional, appliance-based security and networking solutions are proving inadequate, forcing organizations to compromise between performance and security, leading to increased data breach exposure, stifled productivity, and regulatory risks. Netskope's unified, cloud-native platform is positioned to address these challenges by providing advanced security and networking capabilities at scale, aligning with the industry's need for converged solutions and proactive defense against evolving threats like ransomware and deepfakes. The regulatory environment for AI and data privacy is also rapidly evolving, adding complexity for organizations.

Comparison to Industry Standards

• Recognized as a Leader in Gartner Magic Quadrant for Security Service Edge (SSE) every year since its inception in 2022 through 2025, positioning furthest in completeness of vision and among the top two in ability to execute in the 2023, 2024, and 2025 reports.
• Ranked highest in the 2025 Gartner Critical Capabilities for SSE report in three of the six use cases evaluated (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.
• Recognized as 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 the four use cases evaluated (Foundational SASE Platform, Zero Trust SASE Platform, and 'Coffee Shop' Networking), achieving the highest aggregate score overall.
• Recognized as a Leader in The Forrester Wave: Security Service Edge (SSE) Solutions for Q1 2024, scoring the highest in the current offering category of all vendors evaluated.
• Recognized as a Leader in the 2025 IDC MarketScape for Worldwide DLP Vendor Assessment.
• NewEdge network provides 99.999% uptime guarantees for all inline services, indicating a high standard of reliability and performance compared to industry benchmarks.
• Netskope Cloud Exchange champions an open ecosystem by offering seamless integration with hundreds of cloud services, IT platforms, and third-party applications, promoting flexibility and best-of-breed solutions.

Management Changes

Corporate Governance

Legal Proceedings

• In 2022, Netskope filed a declaratory judgment in the Northern District of California in response to communications from Fortinet alleging patent infringement; this proceeding is ongoing.
• The company is not currently a party to or aware of any other pending or threatened legal proceedings that are believed to have a material adverse effect on its business, financial condition, or results of operations.

Related Party Transactions

• Amended and Restated Investors' Rights Agreement (July 7, 2021, amended October 2, 2024) with entities affiliated with Lightspeed Venture Partners, Accel, ICONIQ, and Sanjay Beri (including an affiliated trust).
• Right of First Refusal and Co-Sale Agreement (July 7, 2021) with entities affiliated with Lightspeed Venture Partners, Accel, ICONIQ, and Sanjay Beri (including an affiliated trust), which will terminate upon the completion of the IPO.
• Amended and Restated Voting Agreement (July 7, 2021) with entities affiliated with Lightspeed Venture Partners, Accel, ICONIQ, and Sanjay Beri (including an affiliated trust), which will terminate upon the completion of the IPO.
• Sanjay Beri (Chief Executive Officer and Chairman) is expected to enter into a voting agreement with one of the non-executive co-founders for 1.6% of the voting power of outstanding capital stock following the completion of the IPO.
• Indemnification agreements have been or will be entered into with each director and executive officer.
• SCGE Fund, L.P. (Sequoia Capital Global Equities) has the right to purchase up to 15% of the shares of Class A common stock being sold in this offering (excluding over-allotment option).

Stakeholder Impact

• **Shareholders**: New Class A common stockholders will experience immediate and substantial dilution in net tangible book value. The multi-class stock structure concentrates voting control with Class B holders, limiting the influence of Class A holders on corporate matters. The stock price may be volatile due to market factors and potential future sales of restricted shares.
• **Employees**: Equity incentive plans (2025 Equity Incentive Plan, 2025 Employee Stock Purchase Plan) are designed to attract, retain, and reward personnel. Executive officers are eligible for severance benefits under the Executive Change in Control and Severance Plan. Significant stock-based compensation expense is expected post-IPO, which could impact employee motivation and retention.
• **Customers**: Benefit from Netskope's advanced, unified cloud and AI security platform, which aims to accelerate digital interactions, reduce risks, and simplify operations. High customer retention rates (NRR 118%, GRR 96%) indicate strong customer satisfaction and value proposition.
• **Suppliers/Vendors**: The company's reliance on a limited number of global vendors for critical equipment and software introduces supply chain risks, which could impact the company's ability to expand or maintain its infrastructure.
• **Creditors**: Holders of Convertible Notes face risks related to the company's ability to service its substantial indebtedness, which may require significant cash flow or additional financing. The terms of the Convertible Notes include covenants that limit the company's ability to incur additional debt and may restrict future operations.

Next Steps

• Complete the initial public offering of Class A common stock on the Nasdaq Global Select Market under the symbol 'NTSK'.
• Continue investing in research and development to drive rapid innovation and strengthen technology leadership.
• Expand salesforce and channel partners both domestically and internationally, particularly in the U.S. federal government market leveraging FedRAMP High Authorization.
• Evaluate strategic acquisitions and investments in complementary businesses, products, services, technologies, or other assets.
• Comply with public company reporting requirements under the Securities Exchange Act of 1934 and Sarbanes-Oxley Act.
• Address new and evolving laws and regulations related to AI and ML, such as the EU Artificial Intelligence Act.
• Implement the formal compensation policy for Outside Directors and the executive compensation clawback policy.
• File a registration statement on Form S-8 to register shares under equity compensation plans.

Key Dates

Recommendation

Netskope demonstrates strong growth in a critical and expanding market (cloud and AI security), with impressive customer acquisition and retention metrics. The company's technology leadership, global network, and strategic partnerships are significant competitive strengths. However, it has a history of substantial net losses and anticipates increased operating expenses in the near term, including significant stock-based compensation related to the IPO. The multi-class stock structure also concentrates voting power, which may be a concern for some investors. While the long-term market opportunity is attractive, the company is still in a growth phase with ongoing losses and significant debt obligations. A 'Hold' recommendation reflects the strong growth potential balanced against the current unprofitability and inherent risks of a rapidly evolving, competitive market. Investors should monitor the path to profitability and effective management of increased public company costs.

Keywords

Cloud Security, AI Security, Cybersecurity, Network Security, SASE, SSE, DLP, Zero Trust, IPO, Netskope One, NewEdge Network, Cloud-Native, Data Protection, Threat Protection, Corporate Governance, SEC Filing, Financial Performance, Growth Strategy, Software-as-a-Service