Netskope, a cybersecurity company that helps businesses secure their cloud and web traffic, is starting to see its artificial-intelligence bets pay off in the financials. In a note to clients, Morgan Stanley highlighted the company's fiscal second-quarter results, which showed revenue climbing 29% year over year and a key subscription metric returning to growth.
The numbers suggest that Netskope's AI security products are moving from the experimental stage into real-world deployments, a shift that analysts say could underpin the company's momentum for quarters to come.
What the numbers show
Morgan Stanley, a global investment bank, pointed to several bright spots in Netskope's fiscal Q2 report. Revenue reached $221 million, up 29% from the same period a year earlier. That beat expectations, according to the bank.
Perhaps more telling was the improvement in net new annual recurring revenue (ARR)—the subscription dollars added during the quarter. That figure returned to 9% year-over-year growth, reaching $54 million. ARR is a closely watched metric for software companies because it reflects the health of new business and expansions.
The bank also noted that remaining performance obligations (RPO)—contracted revenue that hasn't yet been recognized—rose 36%. That's a forward-looking sign that customers are signing larger or longer deals. In addition, net retention improved to 114%, meaning existing customers are spending 14% more than they did a year ago, a sign of customer stickiness.
AI security: from pilots to production
Netskope's AI security push is central to the story. The company has been developing tools that use artificial intelligence to detect and respond to threats across cloud applications and data. For a while, those products were largely in proof-of-concept trials with customers. Now, Morgan Stanley says, the pipeline is moving toward broader rollout.
That transition matters because it converts early interest into actual revenue. When a customer moves from a pilot to a full deployment, they typically commit to larger subscription contracts, which boosts ARR and RPO.
The trend is part of a wider shift in cybersecurity. For years, there was a fear that AI would make traditional security tools obsolete—if AI can write code and find vulnerabilities, why would you need a human-led security team? But the opposite is proving true. AI is creating new attack surfaces and new types of threats, which is driving demand for security products that can keep up. As AI was supposed to kill cybersecurity stocks, but it's doing the opposite, companies like Netskope are benefiting from the arms race between attackers and defenders.
What it means for investors
For everyday investors, Netskope's results offer a window into the health of the cybersecurity sector and the broader adoption of AI in enterprise technology. The company is privately held, so you can't buy its stock directly. But its performance is a bellwether for the industry, and it could influence the valuations of publicly traded rivals like Zscaler, Palo Alto Networks, and CrowdStrike.
The improvement in net retention and RPO suggests that customers are not just signing up—they're expanding their use of Netskope's platform. That's a quality signal for a software business, because it means growth is coming from existing relationships, not just new logos.
Morgan Stanley's note also fits a broader pattern at the bank, which has been bullish on AI-related names. For instance, the bank recently lifted its Nvidia revenue view and raised its price target on Broadcom, citing AI growth. Netskope's results add another data point that AI spending is translating into real business momentum.
Still, investors should keep some perspective. A single quarter doesn't make a trend, and Netskope faces stiff competition from larger, well-funded rivals. The company's ability to sustain this growth will depend on whether its AI security tools can differentiate themselves in a crowded market.
The bottom line
Netskope's fiscal Q2 results are a positive sign for the company and for the cybersecurity sector as a whole. The move from AI pilots to full rollouts is showing up in the numbers, with revenue up 29% and net new ARR back to growth. For investors, it's a reminder that AI is not just a buzzword—it's starting to drive real revenue for companies that can execute.
As always, it's wise to watch how these trends develop over the coming quarters. If Netskope's momentum continues, it could signal broader strength in the cybersecurity market—and potentially set the stage for a future public listing.
