Netskope's (NTSK) AI security products remain a compelling opportunity, but RBC Capital Markets is looking for annual recurring revenue growth stabilization, an uptick in net revenue retention and execution around sales representative ramps, the brokerage said Thursday.

While there is some near-term pressure, RBC believes early traction around AI security products and an attractive valuation creates a compelling thematic opportunity, according to the note.

Fiscal Q1 revenue topped expectations by about $3 million, while midpoint revenue guidance rose nearly $8 million as management pointed to increasing sales capacity, momentum around new logo growth, traction around new products, and strong demand, according to the note.

RBC said the ramp of sales representatives and AI pipeline should provide an opportunity for net revenue retention to move closer to mid-teens in the back half of fiscal 2027.

RBC kept an outperform rating on Netskope and lowered the price target to $13 from $14.

Shares of Netskope were down more than 15% in Thursday trading.

Price: 10.46, Change: -1.94, Percent Change: -15.65