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Netskope IPO: S1 Breakdown
Quick Stats
ARR: $707M (as of July 2025, +33% YoY)
Think of this as their most recent quarter’s “exit run rate”
TTM Revenue: $616M (as of July 2025, +31% YoY)
This is real revenue they recognized, looking back over the last 12 months.
Customers: 4,300 (+21% YoY)
30% of the Fortune 100 and 18% of the Global 2000
Not just selling to Series B CTOs. Their ICP is a public company CIO.
Big customers
111 customers spending +$1M a year, representing 37% of total ARR and 32% YoY growth
1,372 customers with ARR +$100K, representing 86% of ARR and 29% YoY growth
One customer makes up ~3% of revenue (is it you?)
Adjusted Gross Margin: 72%
Pretty clean for a company with its own infra.
At the same time, indicates that AI incorporation may not be all that high (since it would demolish gross margins)
Isn’t it funny we live in an era where you are simultaneously supposed to have scalable, SaaS like gross margins, but also, like you are more “fundable” if your gross margins totally suck because AI usage is so high?
72%? Not high enough for SaaS. Also, 72%? Not low enough for AI.
Net Loss (H1 FY26): ($170M)
Improving from ($223M) last year. Still losing money, but at least headed in the right direction. Kinda.
Operating Cash Flow: $9M (positive in H1 FY26)
First time they’ve been green. Like anywhere! Could be real. Could be IPO window dressing. Might have just paid AWS ten days late.
Headcount: 2,900+
They’ve more than doubled in two years.
Their revenue per head is not good at ~$210K; about half what you’d want to see when comparing to public peers.
Capital Raised: $1.4B
A long list of late stage / crossover names: Lightspeed, ICONIQ, and Accel.
Last Private Valuation: $7.5B (2021)
The IPO will validate if that number still holds water or not.
What Does NetSkope Do?
Cloud based network security stuff
NetSkope sells cloud-based security software that helps large enterprises protect data, apps, and users across their network — whether those users are in an office, on WiFi, or burning through LTE in a hotel lobby.
They’re kinda like the security guard for the data that passes through your network, no matter what device you are using, or where you are located.
Their core platform, NetSkope One, bundles together a bunch of acronyms security teams care about: SASE (secure access service edge), SSE (security service edge), CASB (cloud access security broker), ZTNA (zero trust network access), SWG (secure web gateway)… you get the idea.
The pitch is that everything’s converged into one platform. Fewer vendors to manage. Fewer bills to pay. And better visibility across endpoints, cloud apps, and SaaS environments.
“I don’t know why you need all these f’ing tools, but can we just buy them from fewer vendors?”
They also operate their own infrastructure — called NewEdge — with 120+ data centers in 75+ regions. That’s a fancy way of saying they don’t piggyback on AWS or GCP when it comes to network delivery. It’s not cheap, but it gives them more control over performance and uptime.
How they even have a gross margin is nuts with this international data center footprint
There’s an AI angle, of course. NetSkope is training its own large language models on anonymized customer data to detect threats faster. So far, that shows up more in the pitch deck than the P&L.
5 Key Themes in this IPO
Perhaps a red flag to publish such a public document with such a blatant typo
1) Strong Land-and-Expand Motion
With 118% net dollar retention and over 85% of ARR coming from $100K+ customers, the upsell engine is clearly working. That’s a great sign for long-term profit margin expansion, even if gross margins are closer to infra than SaaS.
Why it matters: Institutional buyers want to see a mature go-to-market engine paired with a sticky platform, that produces multi product attach. All things equal, they have 18% YoY growth embedded into their business model without having to acquire net new customers.
2) Crowded Field with Public Comparables
NetSkope goes head-to-head with Zscaler, Palo Alto, Fortinet, and increasingly Cisco (remember them?) . Each competitor has scale, brand recognition, and their own platform play. Differentiating on performance and AI will be key.
Why it matters: Investors will immediately compare NetSkope’s valuation, growth, and burn profile to Rubrik (recent IPO), Zscaler (trading at 15x+ revenue), and Palo Alto (multi-product juggernaut). There’s no shortage of high performers to gauge their progress against.
3) Quietly Decreasing Sales & Marketing as % of Revenue
Looking at the last six month period, Sales and Marketing dropped from 60% of revenue to 45% YoY — without a hit to growth. That’s a sign they’ve found some GTM efficiency, likely due to scale and channel leverage. In absolute terms, Sales and Marketing costs only grew 7% year on year while GAAP revenue grew 31%. Oh, and total S&M dollars spent actually decreased when you compare the most recent 6 month period to that in the prior year.
Why it matters: The path to sustained profitability travels through S&M.
4) People Heavy Model
Their headcount growth is keeping up with, and has historically outpaced, revenue growth. They’ve more than doubled staff over the last two years, as they throw more engineers at the product roadmap (to retrofit their AI story) and field sales reps (to scale their international revenue base). They are very much a security company born in the 2010’s applying the field sales / cloud based / reseller / ENT SaaS playbook.
Why it matters: They will not be breaking any world records when it comes to “doing more with less people”. Their revenue per head is closer to Series C or D levels than that of a public company.
5) Strong International Revenue Mix
41% of revenue comes from outside the U.S., which is unusually high for a security company still sub $1B in scale. And much of this is already routed through their global NewEdge infra — not just hyperscaler data centers.
Why it matters: This suggests NetSkope may actually be ahead of rivals in building a true global GTM. And it justifies infra spend more than initially assumed.
How Does NetSkope Make Money?
NetSkope sells software subscriptions. Contracts are typically multi-year, priced per user, and sold top-down into large enterprises. This is a classic field sales motion, supercharged through the channel — not a PLG tool you swipe a credit card for.
“We generate substantially all of our revenue from the sale of cloud subscriptions to our Netskope One platform.”
“We generally price our subscriptions based on the scale of the customer's organization and products deployed. A substantial majority of our customers purchase subscriptions with a contract term of one to three years.”
“We recognize revenue from our subscriptions ratably over the term of the subscription.”
“Our go-to-market strategy is focused on acquiring new customers and driving increased adoption of our platform from existing customers.”
Revenue breaks down into two buckets:
Subscription revenue — makes up 99% of the total. This includes access to the NetSkope One platform and all the security modules bundled inside it.
Professional services — the remaining 1%, mostly tied to implementation and setup work. Not material, and not margin-friendly. A necessary evil.
“Our business and growth depend in part on the success of our relationships with our partner ecosystem. If we are unable to maintain or develop these relationships, our business, results of operations and financial condition could be materially and adversely affected.”
This means most deals are brokered by partners, not direct AEs (although reps still get paid handsomely to work with partners and usher deals over the finish line). It allows for global scale, and access to juicy multi national CIO budgets, but it distances NetSkope from end-user feedback loops and pricing power.
“Sales through our top five partners and their affiliates, in aggregate, represented 32% of our revenue for fiscal 2024 and 33% of our revenue for fiscal 2025.”
Pricing itself is opaque. NetSkope doesn't publicly share seat-based rates or clear SKU-level packaging. That’s normal in security, where every customer is “special,” and deals go through multiple levels of procurement approvals.
Upsell is a big lever. NetSkope’s products are modular, which means once they land with one or two services, there’s plenty of room to tack on more — like data loss prevention (DLP), zero trust access, or browser isolation.
They also charge more if you want traffic to run through their private NewEdge network — think of it like a fast lane on the highway… that you pay extra for. Speaking of that, my wife lost her Fast Pass this summer and I keep getting toll fines in the mail. Plz let her know if you see her.
NetSkope heavily leans on multi-year contracts, especially in the enterprise tier, with upfront billings. However, they only recognize revenue ratably over time. This leads to a disconnect between billings momentum and GAAP revenue growth — and hides short-term fluctuations in customer expansion or churn.
Show Me What dem Losses Do
“We have a history of losses, anticipate increases in our operating expenses in the near-term, and may not achieve or sustain profitability. If we cannot achieve and sustain profitability, our business, results of operations, and financial condition will be adversely affected”
Let’s talk burn.
NetSkope lost $170M in the first half of FY26. That’s down from $223M the year before, so yeah — progress. But still deep in the red.
The company did manage to eke out $9M in positive operating cash flow. Which is a first. It’s also a little sus this happened right before the IPO. Could be real efficiency gains. Could be some well-timed invoicing. Either way, they’ll need to prove it sticks.
They’ve raised $1.4B in venture capital, with the last round in 2021 valuing them at $7.5B. They’re not exactly cash-starved — still sitting on $261M as of July 31 — but they’re also not NVIDIA levels of flush.
Which brings us to the IPO. The CEO said the quiet part out loud: they’re not going public for capital. They’re going public for awareness.
“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.
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...”
Translation: we need the NASDAQ logo to win more big enterprise deals. Hard to knock the logic. Their closest comp to IPO recently, Rubrik, went public earlier this year and saw its stock rip ~175% post-IPO. That probably didn’t go unnoticed.
Market Dynamics and Stuff
NetSkope plays in the SASE (Secure Access Service Edge) and SSE (Security Service Edge) markets — categories that were born in Gartner decks and now have real budgets behind them.
Did you say sassy or sase
Their main rivals are publicly traded heavyweights:
Zscaler – the OG cloud security proxy, strong in SWG and ZTNA
Palo Alto Networks – bundling everything and selling it to your boss’s boss
Fortinet – more hardware-heavy, but increasingly pushing SASE via its own infra
Cisco – trying to buy its way into relevance with a Secure Access bundle
NetSkope’s pitch is that they’re more “platform-y” than the point solution crowd, with broader coverage across web, cloud, SaaS, and private apps — all running on their own infra (NewEdge). That infra angle is a real differentiator, but it’s also expensive.
Unlike Zscaler, which leans on public cloud for delivery, NetSkope owns the whole stack. More control, but more CapEx.
They also throw some elbows around AI — talking up their homegrown models that analyze billions of events daily. But let’s be honest, it’s early days. Right now, “AI” is more of a slide title than a revenue driver.
The overall market tailwinds are strong. Security budgets are still growing, even when everything else is under scrutiny. And as companies shift from firewalls in closets to policies in the cloud, the SASE category is expected to cross $25B+ in TAM over the next few years.
But the flip side of a hot market is noise. Every legacy vendor is now claiming to offer SASE. NetSkope will need to differentiate on performance, depth, and simplicity — three things that don’t always play nice together.
(Side note: You won’t see CrowdStrike or Datadog in the CIO bake-offs here. They’re adjacent, not competitive. CrowdStrike protects endpoints. Datadog monitors performance. NetSkope’s in the access and data protection lane.)
Financials
Revenue was $538M in 2025 (33% YoY), and $616M on a TTM basis as of July (31% YoY).
At the same time, losses narrowed, with much of the lift coming from S&M efficiencies. And G&A didn’t increase nearly as much as you’d think it would in an IPO year (I’d expect a lot of that to show up “below the line” post event, though).
NDR is at a high from the last two years, as are gross margin and free cash flow.
However, as we mentioned, their revenue per head lags all public market peers. You’d expect them to be close to ~$400K per person, but are about half that, at ~$200K
New Metric Alert: Incremental Gross Margin
NetSkope introduces a made-up but directionally useful metric (kinda): Incremental Gross Margin… calculated as the YoY increase in gross profit divided by the YoY increase in revenue. Same logic applies for the non-GAAP version, which excludes SBC and amortization.
It’s meant to answer: “For each extra dollar we brought in, how much fell to gross profit?” Think of it as a velocity check on scalability — but just remember it’s still a derived stat, not a GAAP mandate. TBH, it feels like something you’d put in if you were very much not profitable. I don’t know what to do with my hands this metric.
Valuation and Cap Table
NetSkope last raised money in 2021 at a $7.5B valuation, back when money was free and AI had retired from the the 76ers eight years prior. They’ve pulled in $1.4B total from a deep bench of crossover names: ICONIQ, Lightspeed, Accel, Sequoia, and SoftBank.
The S‑1 didn’t list a target IPO price yet, but it’s fair to assume they’re aiming to clear that $7.5B mark — even if just barely. Anything below would be a down round in public.
They still had $261M in cash on the books as of July 31. So while some extra padding would be nice, this IPO isn’t about plugging a hole. They’ll probably try to raise in the $500M range. It’s about giving those early investors a path to liquidity, and giving the sales team a new slide for the next QBR with [Big Bank XYZ] on it.
Speaking of that, big banks Morgan Stanley and JP Morgan are leading the offering.
Wondering how much software they had to buy to win the lead left spots…
Other banks on the ticket: BMO, TD Cowen, Citizens, Mizuho, Wells. No slouches — but also no signal this will be a blockbuster float.
We’ll know more once they set a range. But given the current appetite for enterprise security stories, and the fact that NetSkope isn’t bleeding cash like it used to, there’s a decent shot they price this thing in the $12B to $15B range.
That said, a flat round in public is still a win in this market. Especially if it buys you brand equity and a path to liquidity.
And that said that said, look at Figma. You can price at whatever you want. But who knows any more.
If NetSkope prices at $7B or lower, participants in the 2021 round (ICONIQ Growth, Lightspeed, Accel, Sequoia, Social Capital, Base, (takes deep breath) Sapphire, and Geodesic may be facing:
Flat returns after 3–4 years of illiquidity
Potentially negative IRRs once you factor in time value and dilution
Equity & Lock-Up
Netskope is sitting on a mountain of unrecognized equity comp. If the IPO had priced on July 31, they would have booked a $315.8 million hit from RSUs tied to the IPO trigger, a flood of stock-based comp expense that’s going to weigh heavily on optics in the first few quarters post-offering.
They’ve also adopted a new 2025 Equity Incentive Plan with an evergreen clause, which means the pool can expand annually without shareholder approval — a quiet lever for future dilution. Add in a newly approved ESPP, and you’ve got plenty of runway for additional equity grants.
As for lock-up, insiders and major holders are locked for 180 days, standard terms, with flexibility for early release at the underwriters’ discretion — especially if trading conditions hit certain thresholds.
3 Potential Red Flags
1) PIK Debt Could Dilute Common if IPO Misses the Mark
NetSkope is carrying $476M in convertible senior PIK toggle notes, split across two tranches:
$401M @ 3.75% due 2028
$75M @ 3.00% due 2029
The “PIK” structure means they can opt to pay interest in more debt rather than cash, compounding the liability. These notes convert into Class B shares, setting up future dilution risk, especially if the IPO underwhelms and the conversion math gets messy.
Without clarity on conversion terms, the dilution risk remains uncertain, which is exactly the kind of ambiguity institutional investors will want spelled out during diligence. For example, will it convert at a (making it up) “20% discount if valuation doesn’t clear $10B?”
2) $316M SBC Bomb Set to Hit Post-IPO
As we mentioned, NetSkope is carrying a massive stock comp overhang tied to RSUs that vest once the IPO goes live. If the offering had closed on July 31, 2025, they would have recognized $315.8M in stock-based comp in that quarter alone.
That’s not just dilution — it’s a P&L crater. This will spike opex and distort any short-term profitability optics right out of the gate.
3) LTV:CAC: Big Number, Little Detail
NetSkope throws out a 10x LTV:CAC — which would put them in the SaaS hall of fame — but feels overly optimistic.
Plus, they remove all stock based comp charges from the metrics, one of the key levers for their sales team (their CRO received nearly $10M in equity grants last year.) Any costs they use have adjustments thrown in.
TL;DR:
Netskope is a high-growth edge-security platform with global scale, solid retention, and strong customer penetration. But expectations have to be managed: PIK debt, comp spikes, opaque economics, and infrastructure costs muddy the profitability outlook. The IPO will test whether they’ve built the muscle to scale efficiently, or just continue to add people to add revenue.
None of this is investment advice. It’s all for entertainment (for those who enjoy digging into how a company could credibly have a 10x LTV to CAC. Please do your own homework. If ChatGPT “can make errors”, ChatCJG can absolutely make errors at 10PM on a Saturday night. Also there is Yasso on my keyboard I have to go clean now.
The overall median still hovers below 5.0x, which is lower than we’ve historically seen. GTM (MarTech & SalesTech) is getting slammed in particular, with the median falling to just 3.4x forward revenues.
The top ten median still trades above 17x, more than 3x the overall cohort.
Within the top ten, we are seeing companies become increasingly efficient in terms of revenue per employee. This metric is one to keep an eye on.
Top 10 Medians:
EV / NTM Revenue = 17.5x (UP 0.1x w/w)
CAC Payback = 24 months (flat w/w)
Rule of 40 = 51% (UP 1% w/w)
Revenue per Employee = $687k (UP $224K w/w)
Figures for each index are measured at the Median
Median and Top 10 Median are measured across the entire data set, where n = 144
Population Sizes:
Security & Identity = 17
Data Infrastructure & Dev Tools = 13
Cloud Platforms & Infra = 15
Horizontal SaaS & Back office = 19
GTM (MarTech & SalesTech) = 19
Marketplaces & Consumer Platforms = 18
FinTech & Payments = 25
Vertical SaaS = 18
Revenue Multiples
Revenue multiples are a shortcut to compare valuations across the technology landscape, where companies may not yet be profitable. The most standard timeframe for revenue multiple comparison is on a “Next Twelve Months” (NTM Revenue) basis.
NTM is a generous cut, as it gives a company “credit” for a full “rolling” future year. It also puts all companies on equal footing, regardless of their fiscal year end and quarterly seasonality.
However, not all technology sectors or monetization strategies receive the same “credit” on their forward revenue, which operators should be aware of when they create comp sets for their own companies. That is why I break them out as separate “indexes”.
Reasons may include:
Recurring mix of revenue
Stickiness of revenue
Average contract size
Cost of revenue delivery
Criticality of solution
Total Addressable Market potential
From a macro perspective, multiples trend higher in low interest environments, and vice versa.
Multiples shown are calculated by taking the Enterprise Value / NTM revenue.
Enterprise Value is calculated as: Market Capitalization + Total Debt - Cash
Market Cap fluctuates with share price day to day, while Total Debt and Cash are taken from the most recent quarterly financial statements available. That’s why we share this report each week - to keep up with changes in the stock market, and to update for quarterly earnings reports when they drop.
Historically, a 10x NTM Revenue multiple has been viewed as a “premium” valuation reserved for the best of the best companies.
Efficiency
Companies that can do more with less tend to earn higher valuations.
Three of the most common and consistently publicly available metrics to measure efficiency include:
CAC Payback Period: How many months does it take to recoup the cost of acquiring a customer?
CAC Payback Period is measured as Sales and Marketing costs divided by Revenue Additions, and adjusted by Gross Margin.
Here’s how I do it:
Sales and Marketing costs are measured on a TTM basis, but lagged by one quarter (so you skip a quarter, then sum the trailing four quarters of costs). This timeframe smooths for seasonality and recognizes the lead time required to generate pipeline.
Revenue is measured as the year-on-year change in the most recent quarter’s sales (so for Q2 of 2024 you’d subtract out Q2 of 2023’s revenue to get the increase), and then multiplied by four to arrive at an annualized revenue increase (e.g., ARR Additions).
Gross margin is taken as a % from the most recent quarter (e.g., 82%) to represent the current cost to serve a customer
Revenue per Employee: On a per head basis, how much in sales does the company generate each year? The rule of thumb is public companies should be doing north of $450k per employee at scale. This is simple division. And I believe it cuts through all the noise - there’s nowhere to hide.
Revenue per Employee is calculated as: (TTM Revenue / Total Current Employees)
Rule of 40: How does a company balance topline growth with bottom line efficiency? It’s the sum of the company’s revenue growth rate and EBITDA Margin. Netting the two should get you above 40 to pass the test.
Rule of 40 is calculated as: TTM Revenue Growth % + TTM Adjusted EBITDA Margin %
A few other notes on efficiency metrics:
Net Dollar Retention is another great measure of efficiency, but many companies have stopped quoting it as an exact number, choosing instead to disclose if it’s above or below a threshold once a year. It’s also uncommon for some types of companies, like marketplaces, to report it at all.
Most public companies don’t report net new ARR, and not all revenue is “recurring”, so I’m doing my best to approximate using changes in reported GAAP revenue. I admit this is a “stricter” view, as it is measuring change in net revenue.
OPEX
Decreasing your OPEX relative to revenue demonstrates Operating Leverage, and leaves more dollars to drop to the bottom line, as companies strive to achieve +25% profitability at scale.
The most common buckets companies put their operating costs into are:
Cost of Goods Sold: Customer Support employees, infrastructure to host your business in the cloud, API tolls, and banking fees if you are a FinTech.
Sales & Marketing: Sales and Marketing employees, advertising spend, demand gen spend, events, conferences, tools.
Research & Development: Product and Engineering employees, development expenses, tools.
General & Administrative: Finance, HR, and IT employees… and everything else. Or as I like to call myself “Strategic Backoffice Overhead.”
All of these are taken on a Gaap basis and therefore INCLUDE stock based comp, a non cash expense.
Please check out our data partner, Koyfin. It’s dope.
Wishing you a clean ass cap table,
CJ
