Netskope, Inc.

Thank you for standing by, and welcome to NETSCOPE's fourth quarter and four-year fiscal year 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. I would now like to hand the call over to Michelle Schwarber, Chief Communications and Investor Relations Officer.

You may begin. Good afternoon and thank you for joining us today. With me on the call are Netscope CEO and co-founder Sanjay Barry and CFO Drew DelMotto. The press release announcing our financial results for the fourth quarter and full year fiscal 2026 was issued earlier today and is posted to our investor relations website at investors.netscope.com along with a supplemental presentation. Before we begin, let me remind everyone that some of the statements we make on today's call are forward-looking, including statements related to our guidance for the first quarter and full 2027 fiscal year, growth opportunities, competitive position, and the impact of AI adoption. These forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements. Additionally, these statements apply only as of today, and we undertake no obligation to update them in the future. For a detailed description of risks and uncertainties, please refer to our SEC filings as well as our earnings press release. Finally, unless otherwise noted, all financial metrics we discuss on this call, other than revenue, will be on an adjusted non-GAAP basis. We have provided reconciliations of these non-GAAP financial measures against the most directly comparable GAAP financial measures in our earnings press release. Now, let me turn the call over to Sanjay to discuss our business and high-level Q4 financial performance.

Thanks, Michelle. Welcome, everybody, and thank you for joining us to discuss Netscope's fourth quarter and fiscal year 2026 results. We ended the year on a high note with results that exceeded our guidance across all key metrics. Our focus on delivering a market-leading platform for networking, security, and analytics in the modern world of cloud and AI is is resonating well with customers and driving both new and expansion business. Strong global execution resulted in robust fourth quarter results, highlighted by record net new ARR of $57 million and ending ARR of $811 million, representing true organic growth of 31% year over year. Revenue in Q4 grew 32% year over year to $196 million. And revenue for the full fiscal year 2026 also grew 32% to $709 million. We continue to leverage the investments we've made in our Netscope One platform and New Edge Global Private Cloud Network to drive efficient growth, which is reflected in the five percentage point improvement in operating margin in Q4. And in 18%, stitch point improvement for the full fiscal year 2026. We were also very pleased to generate 12 million in free cash flow for fiscal year 2026, marking a notable milestone of Netscope's first ever year of positive free cash flow. We also saw a strong mix of both new logo growth and customer expansion across key verticals and geographies. The average number of products per customer increased to 4.4. Customers are solving key use cases through the adoption of our Netscope One platform of 25 security networking analytics and AI products. This is reflected in our net retention rate of 116% and 22% growth in customers with over $100,000 in ARR year over year. Drew will give more color on our Q4 and full year fiscal 2026 financials in a few minutes. We've had many innovations go to market and operational highlights during the quarter. And one theme that threaded prominently across all of these was AI. NetScope is uniquely positioned as a significant beneficiary of the AI super cycle because we have engineered a unified AI-native fabric that eliminates the legacy trade-off between performance and security. We have organically built the Netscope One platform as the intelligent edge, an inherently adaptive architecture where our native AI fluency and active context are seamlessly integrated into our global infrastructure, defined by its performance, resilience, and dynamic orchestration. I'd like to spend some time today walking through the four pillars of our AI strategic framework. which demonstrate why Netscope is the essential engine powering the scale of the modern AI enterprise. First, Netscope is an AI native platform with sovereignty and privacy by design. From day one, we were engineered as an AI native platform. Our competitive moat is architectural, not a single bolt-on feature. Since our inception, we have leveraged and integrated AI as foundational across our platform. In the early days, we used shallow and deep learning. And today, we further augment these capabilities with generative AI models to deliver maximum impact for our customers. Every implementation follows our core principle of privacy by design. We believe intelligence should never come at the cost of data privacy or sovereignty. And we operate a library of more than 190 proprietary, purpose-built, specialized AI models optimized for security and network performance. This quarter, we continue to enhance those models, and our AI labs released additional models that are used in our new AI security products. Unlike competitors using just generic LLMs, Netscope's intelligence is purpose-built, high-speed, and hyper-accurate. The second key pillar in our AI strategy is enabling and securing AI in real time. While legacy and first-generation SASE vendors perform so-called post-event autopsies with out-of-band scanners, Netsco provides real-time, in-line AI security for corporate and shadow AI. We don't just see that an AI transaction is happening. We understand the data and intent within it. and take real-time granular action. Let me explain. Most solutions simply see a connection. Netskope understands the deep interaction. Because our proxy is natively AI fluent, we possess the active context to determine dynamically in real time the specific AI app instances, activities, data, and more. We also determine the semantic intent of prompts and responses in real time and enforce in-line policy. Our Netscope One agentic broker, one of a number of new AI products we announced earlier today, also seamlessly applies this to all MCP transactions, whether sanctioned or unsanctioned. This is why, at Netscope, we aren't just observing and enabling the AI revolution. We are the engine generating the high-fidelity data that secures it. In today's world, the most valuable asset isn't just the AI model. It's the unique real-time data and transaction telemetry that understands the intent and lineage behind every interaction. NetScope One generates a vast and proprietary set of AI-fluent metadata and data for trillions and trillions of transactions a month that traditional security tools simply cannot see or generate. Decoding the complex language of AI agents, generative AI apps, AI tools, and cloud JSON in mid-flight. But while the power of our unique data is a competitive moat, our purpose is singular. The dynamic protection of our customers and their non-humans and humans. We leverage this unprecedented visibility. to protect our customers, ensuring that they can innovate at the speed of AI without ever compromising the integrity or sovereignty of their most sensitive information. We apply in-line decisiveness, or put in another way, we make granular no-go or no-go decisions in flight. This allows us to stop sensitive data from entering prompts and block poisoned AI responses or injection attacks before they ever reach a customer's environment. protecting users, apps, and autonomous agents alike. And our Netscope One AI guardrails, also announced today, takes this to the next level. These deep contextual controls are necessary for enterprises to move from prohibiting AI to enabling AI with confidence. We don't just see more. We protect better, turning our unique data into the ultimate foundation of trust for the agentic era. Our third AI strategy pillar centers around providing differentiated and unmatched performance and resilience through our new edge AI infrastructure. AI transactions are uniquely sensitive to latency. Legacy networks create a latency tax that breaks AI performance. Conversely, our new edge infrastructure, the world's largest high-performance private security cloud, is the AI fast path. It is the most resilient high-speed highway for AI transactions globally, including AI applications and agents hosted in public, private, and neoclouds. It is also an agile edge. Our infrastructure is defined by performance, resilience, and dynamic orchestration. We process complex security at the edge, closest to the agent app or user, reducing lag for secure real-time inference. while allowing the network to dynamically adapt to the high-velocity traffic patterns of the AI era. And lastly, our fourth AI strategy pillar is a platform built organically and natively for the agentic economy with an AI fluent proxy and for autonomous operations. The perimeter has shifted from being filled with people to entities, Netscope uniquely addresses this with a platform that specifically speaks the language of AI. As we mentioned, our architecture and native AI speaking proxy innately understands APIs and JSON. This AI native visibility enables hyper granular zero trust control over AI transactions that other vendors simply cannot see. Through our just announced Netscope AI gateway, we extend this enforcement anywhere, public cloud, private data center, or the edge. We also just released our first autonomous Netscope AI agents, which have already been met with exceptional customer feedback. One of the areas our agents will address will be automating operations. These classes of agents from Netscope automate complex network and security tasks, drastically reducing the human-in-the-loop requirements for global enterprises. Our recently released ZPNA AI agent has been received very well in this area. And finally, we offer universal governance. By marrying our market-leading data protection with our newly introduced Netscope AI guardrails, we secure and moderate for acceptable use all communications, either via model context protocol, MCP, via our agentic broker, prompts, or shadow AI for humans and non-humans alike. Because of these unique and highly differentiated four pillars of our AI strategic framework, many of the world's most sophisticated enterprises choose to secure, accelerate, and analyze their AI transactions through Netskope. As a result, Netskope has become one of the most definitive sources of enterprise AI data uses and trends in the world. We were pleased to announce today the Netskope AI Index, which consists of a first-of-its-kind interactive view of real-time AI usage across the world. Data covering virtually every country, industry vertical, and company size, providing a granular view of AI adoption. And attributable intelligence that positions Nescope as the authority that customers and the public can cite when describing the real-world trajectory of the AI economy. We have also kept our foot on the gas innovating across our Netscope One platform of security networking and analytics products in other related areas. Let me share a few recent examples. On the data security front, we strengthened our competitive edge with the introduction of Netscope One Data Lineage. Data Lineage enables security teams to track and visualize the movement of sensitive data across their entire organization through various levels of origin, usage, and access, including visibility into when that data propagates or evolves. We also introduced new capabilities and integrations to improve secure connections to enterprise applications from unmanaged or BYOD devices. Enterprise browser support was expanded to a new range of iOS and Android mobile devices, while deeper integration with a remote browser isolation and private access solutions provides a range of highly secure deployment models to enable users to connect to private apps through web browsers on their unmanaged devices. And on the networking and infrastructure side, we delivered our DNS as a service that enables customers to point their DNS traffic to net scope for resolution, which can then use our DNS content filtering and security to provide secure access for often overlooked and unprotected use cases like guest Wi-Fi access. Our continued innovation expands our robust Netscope One unified platform of 25 security networking analytics and AI solutions, providing more opportunity to land and expand with customers. We are an organically built, truly integrated, modern platform for the AI and cloud era. I want to emphasize this point about platforms in the context of what we repeatedly hear from customers. They are telling us that while they desire truly unified platforms over a slew of point solutions, they also are not seeking a single platform for all their security and networking needs. The unification they desire in a platform is what Netscope uniquely delivers. We built our AI-native Netscope One organically, not through M&A, which results in a disjointed, cobbled-together solution and often frustration for customers. Our 25 products share one common code base, one engine, one console, and one network, providing both better efficiency and a seamless customer experience. And our new edge private cloud runs Netscope's full stack of products at high speed at all of our more than 120 locations. To illustrate how our customers are adopting our Netscope on-platform, let me pivot to our go-to-market accomplishments. during Q4. We saw significant customer wins across verticals and geographies, with customers turning to the Netscope One platform to enable AI adoption, modernize their security and infrastructure, consolidate vendors and replace legacy and first-generation cloud security products. I'll touch on some key wins and expansions across common use cases. First, customers are choosing the Netscope One platform for modernization, to facilitate secure access from humans and non-human identities to their AI ecosystem, including generative AI apps and LLMs, cloud apps, web apps, and private apps. One notable win was a large global manufacturer who sought better data visibility and control and the ability to safely allow the use of AI in cloud. They chose six Netscope products to secure generative AI and cloud access, protect their data, and improve their network performance. We also landed a top regional health system in the U.S., who initiated a modernization selection process to replace its legacy security and network infrastructure after previously suffering a severe and costly breach. We shined in this competitive bake-off, and the customer purchased 11 products within our Netscope One platform. including our next-generation SWIG with AI controls, ZK-NX Advanced DLP, which includes proprietary AI models from our AI Labs team, borderless WAN, cloud firewall, enterprise browser, and other products to replace legacy firewall networking products. Customers also continue to turn to Netscope for our superior unified data protection. For example, one of the largest hotel companies in the world with operations in nearly 150 countries, with a notable unified data expansion win during the quarter. This client needed continuous real-time visibility into the full breadth of its data security posture. They also needed to confidently manage and protect sensitive data across cloud, on-premises, and hybrid environments, including AI and cloud data stored. They purchased Netscope's DSPM solution and are now using 14 products in the Netscope One platform across its organization. Many customers also deploy our suite of Netscope One products to modernize their infrastructure, including replacing legacy VPNs with our zero-trust architecture, branch firewalls with our borderless SD LANs, and migrating their networks to our high-performance private cloud, especially as they adopt more AI and cloud, where performance becomes even more critical. For example, we landed a Canadian gaming company that needed to modernize their network for AI and cloud, provide secure remote access to their global workforce, and meet governmental regulatory requirements. This customer replaced legacy hardware products at more than 5,000 locations with Netskope's borderless SD-WAN and ZTNA Next secure access solutions and purchased our next-gen secure web gateway with added AI protections for secure generative AI usage. In another wind, A European government chose us to modernize its legacy on-prem security infrastructure and drive data sovereignty. They wanted to consolidate multiple point solutions into a single centrally managed platform to protect sensitive data while meeting strict government regulatory requirements. The organization purchased our comprehensive Netscope SSE platform covering security for AI, web, cloud, and data. Finally, Our global, fast, and resilient new edge private cloud network makes us particularly well-suited to deliver globally distributed and highly regulated customers the data sovereignty and regulatory compliance that they require. For example, we landed two of the largest banks in Africa in two separate deals. One was a unified data protection deal that we successfully baked off against a primary competitor. The other was a network modernization deal where we replaced the same competitor. with Netskope's market leading SSE solutions and higher performing new edge private cloud. Our local data centers in Africa were a driver for the wins as we are able to deliver superior performance and data sovereignty to these customers. The geographic and vertical diversity of these customer wins and use cases is a testament to our clear technical differentiation and disciplined execution across all regions. Our new customer wins were all competitive bake-offs against primary competitors where the capabilities of the Netscope platform proved itself in extensive POVs. We continue to land with multiple products and have seen strong growth in multi-product adoption across our customer base. As of the end of Q4, 56% of our customers were using four or more Netscope One products, and 27% were using six or more products. I'm pleased with the strong performance of our go-to-market team across the globe. Our newly hired sales reps are ramping and our tenured reps are delivering strong productivity. We put great leaders in place and recently filled some of our remaining key sales leadership positions, including the appointment of Joe Welsh to lead our U.S. public sector vertical, an area where we are underpenetrated but have strong opportunities. Joe is a seasoned veteran with decades of public sector experience in this space. We are also continuing to hire highly talented reps in all geographies, many of who are joining us from key competitors across our space. I just returned from our annual sales kickoff, and I can tell you that our team's excitement, energy, and conviction is truly palpable. Our momentum is only building. As part of our comprehensive go-to-market strategy, we also continue to strengthen our relationships with system integrators and strategic partners. During Q4, we partnered with the largest GSI in the world on a major enterprise deal in the energy sector, supporting digital transformation and zero trust for approximately 80,000 employees. Other recent engagements include a large government defense customer in Asia Pacific and a major healthcare customer in North America. This key partner holds over 150 certifications on the Netscope platform, and their support extends our global operations. This is just one example of how we are partnering well on a large-scale, partner-driven enterprise transformations globally. On the technology partner side, Netskope also recently achieved the Amazon Web Services Security Competency status for AI security. This competency assures AWS customers that Netskope has met technical and quality standards to deliver best-in-class solutions for securing AI workloads across AI security use cases. In closing, I want to reiterate that we are in the early innings of an AI super cycle that is exposing a fundamental flaw in legacy and first generation SASE architecture. Legacy security acts as a latency tax on AI performance, forcing enterprises to choose between safety and speed. We believe the next decade will be defined by a structural shift towards an intelligent edge architecture built specifically for an autonomous agentic economy. Netskope is uniquely positioned for this era for three reasons. First, we have an architecture for the future. While legacy vendors proxy the past, Netskope is the distinctly AI native proxy with innate fluency to secure the languages of the future, APIs, JSON, and emerging protocols like MCP. Two, we also scale without friction. We have eliminated the security tax. Our AI FastPath infrastructure has unique capabilities to perform complex real-time security at the speed of AI inference. And three, finally, we are an intelligence moat. Our advantage is rooted in active context and the real-time AI-fluent proprietary data we generate. While others count traffic, we understand intent. Our proprietary data from trillions of real-time transactions validated by the Netscope AI Index, makes us the indispensable source of truth for the AI economy. Sitting squarely at the intersection of cloud, AI, networking, and security, Netscope has a massive market opportunity, which is projected to grow to at least $149 billion by 2028. We've just begun to scratch the surface and look forward to what's to come. The plumbing of the AI era is being laid today. And it will take many years to fully realize. By unifying high-speed performance with deep semantic intelligence, Netscope isn't just selling a platform. We are providing the essential adaptive fabric for the modern AI enterprise for the next decade plus. This is a structural, durable moat designed to stand the test of time. Fiscal 2026 was an incredible year of growth and expansion for Nesco, and our IPO in September was just the beginning of our public company journey. We see an incredible path ahead as we attack the AI security and networking opportunity with exciting new products, continue to bring more customers onto our platform, expand business with existing ones, drive further innovation, ramp our sales team, and drive awareness globally. I'm proud of what we have accomplished, particularly our first full year of positive free cash flow generation and industry-leading ARR growth at scale. I look forward to seeing many of you at RSA in a few weeks where we'll demonstrate and share more about our AI strategy and new products and engage in other ways in the months ahead. With that, let me now turn it over to Drew to provide financial details on the fourth quarter and our outlook for the first quarter and fiscal year 2027. Drew?