And thank you for standing by. Welcome to Netskope Third Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] I'd now like to hand the conference over to Michelle Spolver, Chief Communications and Investor Relations Officer. You may begin.

Good afternoon, and thank you for joining us today. With me on the call are Netskope's CEO and Co-Founder, Sanjay Beri; and CFO, Drew Del Matto. The press release announcing our financial results for the third quarter of fiscal year 2026 was issued earlier today and is posted to our Investor Relations website at investors.netskope.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 fourth quarter and full 2026 fiscal year, growth opportunities and competitive position. 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 the 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 Q3 financial performance.

Thanks, Michelle. Welcome, everyone, and thank you for joining us to discuss Netskope's third quarter fiscal year 2026 results. I'm very pleased to be here on our first public earnings call following our IPO in September. Our founding vision was anchored in redefining security and networking for the modern era of cloud and now redefining it for the modern era of cloud and AI. We see that vision realized every day. Netskope is the secure and fast on-ramp to everything enterprises access from the Internet, including websites, cloud and AI to their own infrastructure, private apps, LLMs and data centers. We are helping thousands of enterprises modernize and operate safely in both cloud and hybrid environments. This is happening in the context of an ever-evolving landscape of sophisticated threats, exploding data volumes and the fast accelerating revolution of AI. With a projected total available market size at $149 billion by 2028, Netskope's opportunity is massive, and we are truly just getting started. Turning to our Q3 metrics. I'm proud to say that we delivered very strong performance across all key metrics. Our team executed exceptionally well, continuing to expand our global footprint, innovate and extend our market-leading fully converged security networking and analytics platform and demonstrate accelerated top line growth while generating incremental leverage from our foundational investments. This strong execution resulted in a 34% year-over-year increase in annual recurring revenue, reaching $754 million and Q3 revenue growth of 33% to $184 million. Prior investments in our Netskope One platform and NewEdge global private cloud network continue to demonstrate significant leverage. We built Netskope to scale, and that is reflected in our ability to generate $11 million in free cash flow in Q3 as well as improved operating margin by 11 percentage points year-over-year and deliver free cash flow margin…

Thank you, Sanjay, and hello, everyone. As Sanjay shared, Netskope delivered a very strong third quarter, highlighted by accelerating growth in both ARR and revenue. Our ongoing investments in innovation and our go-to-market motion are driving tangible results as noted by our 11 percentage point improvement in operating margin. Netskope is built to scale, which positions us very well for continued efficient growth. For those coming up to speed on Netskope, let me point out that we have a SaaS-based business model where we generate nearly all revenue through subscription sales of our cloud-based Netskope One platform of products. Because of this, we view ARR as an important metric in evaluating our current business performance. We generally price our subscriptions per user based on the scale of the customer's organization and the number of products deployed. I will now share the financial highlights for Q3 fiscal 2026. As a reminder, all financial comparisons are on both a year-over-year and a non-GAAP basis, unless stated otherwise. ARR growth accelerated to 34% and totaled $754 million at the end of Q3. Total Q3 revenue grew 33% to $184 million. We also experienced strong revenue growth across the geographies. Revenue in Americas grew 34%, EMEA increased 34% and APJ grew 29%. Our teams executed well, and our investments in our sales organizations are paying off. In terms of customer metrics, the number of customers generating more than $100,000 in ARR in Q3 grew 24% to 1,444. Enterprise and large enterprise segments are our focus and more than 85% of our ARR comes from $100,000-plus ARR customers. Furthermore, the average ARR from this key segment increased 10% year-over-year to more than $450,000 per customer. This is indicative of our success in both expanding our existing installed base and securing significant new enterprise deployments. Our…

[Operator Instructions] Our first question comes from the line of Meta Marshall with Morgan Stanley.

Congrats so much on a great first quarter out of the gate. Sanjay, maybe a question for you. Just as you're seeing kind of increased attach of additional modules, are there any trends in the modules in which you're seeing traction with? And how does that change how you think about product road map?

Yes. Great. Great question. If you look at the use cases, and I always come back to use cases, one of the top use cases for us is securing cloud and web access. Securing AI in the past 6 months has been a big one. That has drove and continues to drive our next-gen swing and our premium version of that. In addition, the consolidation for remote users and contractors has really driven our ZTNA offering. And the last one I would say is, especially with generative AI, data protection becomes even more important. People want to use and unleash AI, but they need to protect their data. And our unified data protection products, all the way from the endpoint to our in-line capabilities to our DSPM offering have also seen great growth.

Our next question comes from the line of Brian Essex with JPMorgan.

Drew, Sanjay, congrats on your first public quarter. Drew, I caught your comments on sales productivity. I was wondering if you can unpack that a little bit. I think pre-IPO, you accelerated hiring of quota-bearing reps and about half of those were still unramped. Could you help us maybe give us an update in terms of where you are in that ramping process? What percentage of reps might be now in that mature category? And how aggressively might you be hiring as you kind of like enter the end of the year?

From a rep perspective, we're on track for hiring. When you look at -- you can go to our website, and you will see just a slew of open racks for sales teams. And so we continue to accelerate hiring globally. We're getting some of the best reps you'll find out there. I just came from one of our new hire trainings, a room full of amazing reps, hunters. And so this is really the place to be if any reps are listening, and we want to come to a great place with an over 80% conversion rate on POC, please come here. But -- so we're on track and our ramp time frames are the same, usually around 9 to 12 months.

Our next question comes from the line of Matt Hedberg with RBC.

Great. I'll offer my congrats as well. Sanjay, for you, obviously, agents and agentic technologies on everybody's mind. And it feels like you guys are well positioned to help customers think through their agentic journey. Just kind of curious on how you think of that piece as part of the growth story here?

Yes. Great. It's a great question. I recently did a tour kind of across the world with customers' prospects and agentic AI, agentic workflows, securing enabling AI, top topic. If you look at where we're positioned, we see the traffic of all of our customers. We see their human traffic, their nonhuman traffic. All their AI applications go through us. So they could be using ChatGPT, they could be using AI within a SASE app. An AI agent could be originating that. We see that. And because we understand the language of AI, APIs, we see it at a more granular level than anybody else. We see -- oh, they're using Gemini, a personal instance and they're about to say reformat this health care data. Well, guess what, Netskope can stop that, yet still allow them to use that AI. And so I call that the front door of AI. It's users, AI agents, applications using LLMs and using AI. We see it, we understand it, we can protect that data and then we can put guardrails around it. And so absolutely right in our wheelhouse, and it's a big reason that we're seeing sort of the success across different verticals that we are.

Our next question comes from the line of Shaul Eyal with TD Cowen.

Sanjay, Drew, Michelle, congrats on the first quarter as a public company. Thanks for the data on module growth during the quarter. I think it's a great practice. Also, great job on deals over $100,000. Any color you can share with us on 7-digit transactions during the quarter? And are there any 8-digit deals in the pipeline?

Yes, it's a great question. So I think we highlighted a couple of great wins. We mentioned, for example, a Fortune 50 global pharmaceutical retailer, 50,000 employees using us for AI, cloud, SaaS, generative AI. We talked about another one where a financial institution needed to modernize and they consolidated multiple products from network to gateway to on-prem clients and so on. Those type of multiproduct where you can see now over half of our customers have 4 products, now we have 20. Those kind of multiproduct convergence where you're looking at what I call enterprise customers, right, well over 20,000, 10,000 users. Those have really been great wins for us. And the beautiful thing is the greenfield opportunity is, hey, we have 20 products. The average customer has just over 4. Our pipeline, we're not necessarily talking about specifics on that.

Can I -- I'm going to add one thing. Sanjay highlighted 2 of the larger deals that we're landing. Also remember, we have a lot of white space on the expansion side. So one of the expansion deals that he highlighted also was a very large deal.

Our next question comes from the line of Brad Zelnick with Deutsche Bank.

Excellent. And I echo my congrats as well. Drew, any help that you can offer in how we should think about ARR and net new ARR seasonality into Q4 and anything we might contemplate maybe even into next year? And I appreciate your comments about all the assumptions in your guidance, but also as a brand-new public company, I mean, you guys are growing in excess of 30% at real scale. I mean, it really stands out, really great. But anything you can do to help calibrate the kind of beats that we might expect going forward would be helpful.

Okay. Well, I think there's a couple of questions there. I think your first question really was on ARR, Brad. So we're not guiding ARR, but I do think it's helpful. We may want to just help you a little bit from a modeling perspective. If you look over really the last year, you could see that ARR was growing about 1 point faster than revenue. So just one way to kind of think about how to think about that. And then also last Q4 was very strong. It's a very strong quarter for us. So what I would consider a high bar. And Q3, also a very strong quarter. We just saw 34 -- ARR accelerating to 34%. In terms of just the guidance, again, newly public company, we are being prudent. And we also -- what Sanjay was just talking about, we have a lot of reps ramping. We continue to hire, and it's very hard to predict the rate at which we'll hire and the rate at which they'll ramp.

Our next question comes from the line of Rob Owens with Piper Sandler.

Hope to focus a little bit just around new customer acquisition and what you guys are seeing, both from a size of new lands and how that's comparing as well as are these greenfield lands or are you seeing replacement of existing technologies in terms of older SASE implementations?

Yes, it's great. Great question. When you look at lands, there's a percentage that is greenfield. You think about the use case, securing AI enabling AI. People don't really have anything for that. Those are greenfield use cases. You think about unifying data protection, that's greenfield. No one has anything really for identifying data in their data lake for [ RAG ], but maybe they have something on endpoint. And so there's a combo, data protection, greenfield and you're replacing endpoint, e-mail, in-line DLP systems. So greenfield, a mix. And then there's pure replacement. Legacy appliances dominate. You have first-generation cloud security providers. We mentioned one who the customer could not get implemented. And so there's also a lot of that where they want to take the next step in securing cloud and web and modernize their VPNs. And so that is replacement. So it is a spectrum, and we do see all of them. As far as just size, I think you had a question on landing. You can calculate kind of our -- from previously, our average ARR and beyond. And obviously, for us, it's always been around over $150,000 or so on, and it's $170,000 now. So it continues to grow and customers continue to land with more products and then they continue to expand with more.

Our next question comes from the line of Ittai Kidron with Oppenheimer.

Congrats, again, guys, on the first great successful quarter out of the gate. I wanted to focus on the Americas, Sanjay and Drew. I mean clearly, that's a region that you've been investing significantly in recently. I think, Drew, if I got this right, I think you mentioned Americas grew 34% year-over-year. Correct me if I'm wrong, but it didn't seem like the growth there was any materially different than the other regions. So I would love to see if you can get some color on your progression in the Americas? And how should we think about the growth pattern in that specific area?

Yes. So you have the right numbers. We mentioned that revenue in the Americas grew 34% in EMEA, same rate and APJ, just under 30%. And so for us, when you think about the Americas, specifically, last year, we obviously focused on taking the next step in our Americas team, right? We brought on some great leaders. We mentioned we brought on great leaders below our main leader and so on. And we've been in a big phase of just recruiting new reps. And as Drew mentioned, the focus is getting those reps ramped, getting them fully productive and so on. And so we see pretty consistent growth across all geographies, and that's great because that's great diversification for us.

Our next question comes from the line of Trevor Walsh with Citizens.

Interesting to hear about the Microsoft partnership, especially on the purview side and what you're doing around data security. Sanjay, I was wondering if you could just maybe weigh in a little bit on how you're thinking about maybe not just the Microsoft partnership, but more broadly with some of the -- with other large platforms and how you're balancing kind of the co-opetition piece there and as customers move towards consolidation kind of larger platforms, like how you're kind of balancing that module uptick that you're seeing with those -- where you choose to kind of do higher level integration?

Yes. So first of all, I've always believed that in security and networking, there is not one platform. Nobody wants one. I remember sitting in a room of 100 CIOs, and I asked them, where would you want to be on a spectrum of 100 to 1? Nobody wants 100, but nobody wants 1. And so the reality is they want a few, a few core platforms. and we're one of those. We consolidate 20-plus different things. It used to be called data network security, converged into one, right? But there are other platforms. There is your identity platform, your EDR, SecOps. And our philosophy is, look, we fight a common enemy and the industry needs to play well. It needs to integrate. It needs to have an open ecosystem. And so for us, that's what we focus on, right? We have integrations with pretty much every platform, security networking out there, and that includes Microsoft. We integrate with everything Microsoft has from endpoint to identity to SecOps. And so that announcement in that framework was just the next step, integrating with their Copilot, Purview and more. And our philosophy on that integration will continue.

Our next question comes from the line of Gregg Moskowitz with Mizuho.

Okay. Great. Congratulations on the terrific quarter. I don't want to overstate this, but a few investors have become a bit more concerned about a slowdown or a general slowdown in network security growth this year and other aspects of network security, I should say, and whether that could portend some sort of incremental pressure on SASE going forward. Based on the strong Q3, I'm sure you're not seeing any signs of this today, but it would still be helpful, Sanjay, just to get your perspective on this.

Yes. So I always say customers now, they don't want to throw more bad money after bad money. What's bad money in network security. Appliances, things that don't understand natively cloud, AI, things that were built to do web filtering, but not the world that people want now, which is not a [ louver ] block. And so in the broader spectrum of network security, we feed off that. We're good money. And so for us, the reason we see this acceleration in the TAM and the opportunity is people want to spend on things that move them forward in the cloud and AI world. And a lot of network security is not that. And so for us, why we don't concern ourselves with that stat or so on is we're the benefactor of that migration of that spend, right, to the right side of history, which is how do we enable cloud and AI. So SASE, one of the fastest-growing markets in security, I foresee for the next 10 years.

Our next question comes from the line of Eric Heath with KeyBanc.

Congrats on the strong start as well. Sanjay, I do want to come back to the comments on Microsoft. And if you can just expand a little bit more about the uniqueness of this Microsoft partnership relative to others in the industry. And then maybe, Drew, now that it's recently [ GA ], what this could mean to the model, if anything, as we look out into next year?

Yes. So when you look at the Microsoft partnership, we integrate with everything Microsoft has. And what we announced was -- and actually, what they announced was that they had chosen one SSE provider to go to market with. And the first one they decided was Netskope and they announced that at our conference earlier in the year. And that was what we partially announced in this announcement. The second was a lot of our customers came to us and said, "Wait a minute, you already secure all my cloud. You already secure all my web, you secure all my private apps. You understand AI and now you're going to secure that for me. We're using Microsoft Copilot. Well, guess what we can do with Copilot. We can watch everything they do in the Copilot conversations and make sure they're not conversing in the wrong way with sensitive data or make sure that there aren't threats. And so that multipronged partnership across the AI ecosystem of Microsoft, that's what our customers wanted, and that's kind of what we delivered. And so for us, when you look at organizations, mid- to large enterprises across the world, they want this independent layer, all AI, doesn't matter where it comes from. Anthropic, comes from Google, comes from Microsoft. doesn't matter what SASE app I use. It doesn't matter what website I go to. They want this independent layer that understands it and put guardrails on it. And so naturally, we're not going to go partner with 100,000 systems and app providers. We don't require the partnership. But the big ones, we both see great go-to-market and technical value of doing it. And Microsoft is obviously perhaps one of the biggest.

Yes, Eric. And then just on the second quarter -- the second question, excuse me. The way to think about it, it's just part of the overall modernization trend that's accounted for in the $149 billion TAM that we share. So obviously, we'll account for that when we do guide at the end of next quarter or next quarter's earnings call.

Our next question comes from the line of Shrenik Kothari with Baird.

Congrats on the strong start, Sanjay, Drew and team. I had a question on NewEdge, right? You have clearly invested in infrastructure full compute with the NewEdge POPs. And as LLMs, AI agents interact in real time, I would imagine latency, inline enforcement matter more and more. Do you see the edge itself as a big differentiator in customer conversation decisions and especially where potentially hyperscaler footprints are thin? And just how do you see your investment strategy going forward?

Yes. So the short answer is yes. NewEdge is a huge differentiator. I can't tell you how many conversations I go in, and the infrastructure operations person says, "Wait a minute, you're faster. I mean I can just see it. No matter where I am in the world, I use NewEdge, my end users see that their experience is faster." You think about that and you think about AI and you think about that, hey, over time, over half the transactions on the Internet won't be from humans. They'll be from AI agents. And that AI agent network, that highway, that's NewEdge. Because when you think about us, we're about 10 milliseconds from anybody in the world. And when you come to us, you don't go over the Internet to get to where are you going? You're going to Gemini, are you going to Anthropic, right? We're one of the most peered connected networks in the world. And so for us, just like AI is an accelerator for security, it is an accelerator for the advantage we have in our infrastructure and optimizing the end user or end agent experience.

Our next question comes from the line of Gray Powell with BTIG.

Yes, congratulations on the first quarter out of the box. It's great to see. So I just want to focus back in on some of the headline numbers. The acceleration in net new ARR really stood out this quarter and it's been impressive all year. And I know there's a number of factors that are driving that between sales and marketing investments and new products. Would it be possible to just sort of talk about what exactly is driving the improvement or maybe rank order what's driving that improvement? And then just how should we think about the sustainability of this improved productivity that you're seeing?

So from a net new perspective, we're a mix, right? We're hunters. So we're landing new logos, as you saw many, and we're expanding within our existing accounts, which you can see the growth of how many customers have 4 products, 6 and so on, right? This steadily increasing our NRR of 118. And so that net new ARR, it's a mix of both, net new logo and the prolific kind of upsell opportunity we have because the average customer is 4-plus and we have 20-plus modules. And so that's a mix. Now on the go-to-market side, as you know, one of our big focuses last year was making sure worldwide we had all the sales leaders that can take us for many, many, many years to the next stage. And we brought those on. And then we brought on reps and we started ramping them and so on. And so we feel good about our go-to-market execution worldwide. You can see that in the growth, for example, in the Americas. And so that's also another driver. The summary for you is if you think about Netskope, we win over 80% of the time if we get a spot at the table, we get a POC. So the Nirvana and the whole focus of our company is just broaden our awareness, right? And one of the reasons we went public broaden our awareness, right? When you write articles, that broadens our awareness. And so for us, a lot of that driver will also just be, hey, we're getting more at bats. We know that if we get in at bat, we have an amazing batting average. And so a lot of that also is just the go-to-market expansion, the awareness expansion that will come over time as well.

Yes. Great question, Greg. But if you go back over the last 18 months, 2 years, we put the leadership team in place. They've done a phenomenal job of building the go-to-market engine. And now it's really all about hiring reps. And we talked about that, the hiring there and the ramp time and that impact. And what you're seeing now as we invest more reps, 34% ARR growth, 44% net new ARR growth in the quarter. So we're seeing the results that we expected to see, and they're executing very well.

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Michelle for closing remarks.

Great. Thank you, Towanda. And with that, we conclude our third quarter fiscal 2026 earnings call. Thank you for joining us all today, and we look forward to engaging with you in the weeks and months ahead.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.