Third Bridge Library: Netskope

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INTERVIEW: Netskope – SASE Market Opportunity & Competition With Cybersecurity Platforms 

Agenda 

• Netskope's overall operating environment and performance update, touching on SSE (security service edge), SWG (secure web gateway) and ZTNA (zero trust network access) solutions
• Sales and customer demand trends in 2025 for SASE (secure access service edge) cybersecurity solutions 
• Netskope's value proposition and differentiation, including update on competitive dynamics with Zscaler (NASDAQ: ZS), Palo Alto Networks (NASDAQ: PANW), Fortinet (NASDAQ: FTNT) and Cato Networks  
• Secular market trends towards platform consolidation and Netskope's ability to compete as a best-of-breed provider
• Industry trends and outlook

Key Insights 

1. Netskope's growth rate is estimated at 30-35% and is expected to accelerate to 35-40% over the next 12 months, following a prior period of temporary underperformance. Secular demand trends and advantageous competitive positioning in select market segments are key growth drivers
2. Netskope's SSE portfolio contributes to 95% of total revenue. By segments, split is 50% SWG, 25% cloud access security broker and 25% ZTNA
3. Customers in the 1,000-10,000 user segment represent an average contract value opportunity of USD 450,000 and are driving 80% of new revenue. This is Netskope's primary growth opportunity and represents 45% of total revenue today  
4. In a direct evaluation, Netskope wins 75% of the time in 1,000-10,000 user segment and 40% of the time in 10,000-plus user segment  
5. Specialist believes Netskope represents a clear acquisition target and is likely to be acquired before an IPO takes place 

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INTERVIEW: SASE Sector Update – Purchasing Trends & Competitive Implications for Cybersecurity Platforms 

Agenda 

• Evolving market surrounding network security and SASE (secure access service edge) solutions
• Customer demand trends and purchasing patterns for SASE solutions in 2025
• Secular trends towards cybersecurity platformisation and implications for pricing pressure and market share 
• Current state of competitive dynamics among major players, including Palo Alto Networks (NASDAQ: PANW), Zscaler (NASDAQ: ZS), Fortinet (NASDAQ: FTNT) and Netskope
• Industry trends and outlook

Key Insights 

1. SASE market growth of 29% is expected to be stable or slightly decelerate in 2025 as pandemic tailwinds subside
2. Forbes Global 2000 segment ASP is increasing closer to USD 50-60 per user via premium platform expansions. 30-50% of the Forbes Global 2000 have yet to adopt SASE architecture and less than 50% have adopted premium solutions. Contracts are moving to 2-5-year terms with 20-25% pricing uplifts driven by expanded functionality
3. Zscaler’s upmarket market positioning is eroding with subsiding WFH tailwinds, driving churn and ASP erosion. Upmarket win rate vs Palo Alto is c40%
4. High-ASP DLP-led deals are driving Netskope's growth. However, DLP competitive moat is eroding. Win rates against Palo Alto for large deals are estimated at 30-35% in EMEA but <10% in the US
5. Downmarket ASP is eroding and vendor switching is increasing, with an average 5-10% renewal uplift. Cato Networks is well-positioned

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INTERVIEW: Netskope – Competitive Dynamics, Market Positioning & Growth Outlook

Agenda 

• Netskope's overall operating environment and market positioning for SASE (secure access service edge), SSE (security service edge) and zero trust products
• Competitive dynamics across major vendors, including Zscaler (NASDAQ: ZS), Palo Alto Networks (NASDAQ: PANW) and Fortinet (NASDAQ: FTNT)
• Product differentiation and market share growth relative to market leaders such as Zscaler
• 2024 update on sales trends and growth outlook
• Industry trends and outlook

Key Insights 

1. Overall SASE and SSE market is growing at c25% and specialist expects Netskope revenue growth of c50-60% in 2024
2. Market growth is expected to accelerate as market moves past early adopters. Adopting SASE architecture is challenging and Netskope’s best-in-class ease of use is key market differentiator
3. In a head-to-head bake-off, Netskope wins against Zscaler c70% of time across market segments, aided by superior data protection solutions and better ease of use. Netskope however only shows up in c20% of Zscaler deals
4. Revenue contribution by customer segment is c50-55% enterprise, 25-30% mid-market, 10% SMB and 10% federal
5. Specialist expects an IPO by end of 2024 is likely as company maintains high growth, >USD 100m ARR in multiple product lines, 120-125% net revenue retention and >90% gross retention. Maintaining R&D and data centre spending while reducing costs is a key priority

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INTERVIEW: Zscaler – Enterprise Sales Trends, Market Headwinds & SASE Competition 

Agenda 

• Zscaler's (NASDAQ: ZS) overall operating environment and performance update
• Customer demand trends and growth drivers in 2025
• Enterprise customer sales, pricing dynamics and purchasing trends across new logo and installed base opportunities
• Update on Zscaler's value proposition and SASE (secure access service edge) competitive differentiation vs Palo Alto Networks (NASDAQ: PANW), Fortinet (NASDAQ: FTNT) and others
• Industry trends and outlook

Key Insights 

1. Specialist asserts Zscaler product capabilities are falling behind the market, with competitors such as Netskope and Palo Alto Networks eroding the company’s previous leadership position
2. In a net-new logo bake off against Netskope, Netskope's win rate is estimated at 75% today. Existing Zscaler customers evaluating Netskope as an alternative churn to Netskope c25% of the time
3. Deferred revenue growth of 27% in Q1 FY25 is expected to increase through full-year FY25 as Zscaler drives renewal uplifts and product expansions, however specialist cites concerns around material revenue upside of emerging products portfolio. Emerging products reported in Q4 FY24 as contributing to 22% of all new and upsell business is met with scepticism
4. Zscaler's enterprise customer retention rate is likely stable today due to significant product stickiness, however specialist cites concerns around Zscaler's enduring value proposition and believes a large event such as a security breach could initiate significant churn

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