Zscaler, Inc. (ZS): Results of Operations and Financial Condition
Zscaler, Inc. (ZS) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 Zscaler Announces Strong Fourth Quarter and Fiscal 2026 Financial Results Achieves strong Q4 and FY26 revenue growth of 25% year over year Generates Q4 and FY26 ARR growth of 25% year over year SAN JOSE, California - Sept 3, 2026 - Zscaler, Inc. (Nasdaq: ZS), the lea
How this was made
The 30-second read
Why it matters
The earnings beat and forward guidance suggest continued top‑line momentum, likely prompting buying interest.
Market read
Strong earnings and guidance for a leading cloud‑security firm can lift the cybersecurity sector and support AI‑related tech stocks.
What to watch
Integration risk from Red Canary acquisition and potential AI‑related regulatory scrutiny.
Zscaler reported 25% year-over-year Q4 revenue and ARR growth, reached a record 24% non-GAAP operating margin, and guided fiscal 2027 revenue growth of 16.6% to 17.5%.
Q4 revenue, ARR, net new ARR, non-GAAP operating income, non-GAAP EPS, and operating cash flow increased year over year. The company also expanded non-GAAP operating margin to a record 24%, although Q4 free cash flow declined as property, equipment and other asset purchases increased.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Revenue, Q4 fiscal 2026GAAP | $898.2 million | – | 25% year over year |
| Revenue, fiscal 2026GAAP | $3,353 million | – | 25% year over year |
| Revenue excluding acquisition of Red Canary, fiscal 2026other | $3,209 million | – | 20% |
| ARR, Q4 fiscal 2026other | $3,771 million | – | 25% year over year |
| ARR excluding acquisition of Red Canary, Q4 fiscal 2026other | $3,630 million | – | 20% |
| Net new ARR, Q4 fiscal 2026other | $246 million | – | 24% |
| Net new ARR excluding acquisition of Red Canary, Q4 fiscal 2026other | $246 million | – | 17% |
| Red Canary ARR contribution, Q4 fiscal 2026other | $141 million | – | – |
| GAAP gross profit, Q4 fiscal 2026GAAP | $689,221 | – | – |
| GAAP gross margin, Q4 fiscal 2026GAAP | 77% | – | – |
| Non-GAAP gross profit, Q4 fiscal 2026non-GAAP | $720,785 | – | – |
| Non-GAAP gross margin, Q4 fiscal 2026non-GAAP | 80% | – | – |
| GAAP loss from operations, Q4 fiscal 2026GAAP | $15.5 million, or 2% of revenue | – | – |
| Non-GAAP income from operations, Q4 fiscal 2026non-GAAP | $218.4 million, or a record 24% of revenue | – | – |
| GAAP net loss, Q4 fiscal 2026GAAP | $3.4 million | – | – |
| Non-GAAP net income, Q4 fiscal 2026non-GAAP | $198.2 million | – | – |
| GAAP net loss per share, diluted, Q4 fiscal 2026GAAP | $0.02 | – | – |
| Non-GAAP net income per share, diluted, Q4 fiscal 2026non-GAAP | $1.19 | – | – |
| Cash provided by operations, Q4 fiscal 2026GAAP | $279.3 million, or 31% of revenue | – | – |
| Free cash flow, Q4 fiscal 2026non-GAAP | $60.8 million, or 7% of revenue | – | – |
| Capex and internal use software, Q4 fiscal 2026other | $218.5 million | – | – |
| Deferred revenue, July 31, 2026GAAP | $2,926 million | – | 19% year-over-year |
| GAAP gross profit, fiscal 2026GAAP | $2,574,894 | – | – |
| GAAP gross margin, fiscal 2026GAAP | 77% | – | – |
| Non-GAAP gross profit, fiscal 2026non-GAAP | $2,691,551 | – | – |
| Non-GAAP gross margin, fiscal 2026non-GAAP | 80% | – | – |
| GAAP loss from operations, fiscal 2026GAAP | $133.3 million, or 4% of revenue | – | – |
| Non-GAAP income from operations, fiscal 2026non-GAAP | $767.1 million, or 23% of revenue | – | – |
| GAAP net loss, fiscal 2026GAAP | $63.2 million | – | – |
| Non-GAAP net income, fiscal 2026non-GAAP | $704.2 million | – | – |
| GAAP net loss per share, diluted, fiscal 2026GAAP | $0.39 | – | – |
| Non-GAAP net income per share, diluted, fiscal 2026non-GAAP | $4.21 | – | – |
| Cash provided by operations, fiscal 2026GAAP | $1,130 million, or 34% of revenue | – | – |
| Free cash flow, fiscal 2026non-GAAP | $779.1 million, or 23% of revenue | – | – |
| Sales and marketing expense, Q4 fiscal 2026GAAP | $381,363 | – | – |
| Research and development expense, Q4 fiscal 2026GAAP | $241,483 | – | – |
| General and administrative expense, Q4 fiscal 2026GAAP | $81,867 | – | – |
| Total operating expenses, Q4 fiscal 2026GAAP | $704,713 | – | – |
| Non-GAAP effective tax rate, Q4 fiscal 2026non-GAAP | 21% | – | – |
first quarter of fiscal 2027 and full year fiscal 2027 outlook
- RevenueFirst quarter of fiscal 2027: $935 million to $939 million, approximately 19% year-over-year growth. Full year fiscal 2027: approximately $3.908 billion to $3.938 billion, growth of 16.6% to 17.5%.
- Gross marginNon-GAAP gross margin of approximately 80% for the first quarter of fiscal 2027 and full year fiscal 2027.
- Tax rate21%
- NoteFirst quarter of fiscal 2027 non-GAAP income from operations of $215 million to $217 million, approximately 25% to 26% year-over-year growth, representing a 23% operating margin.
- NoteFirst quarter of fiscal 2027 non-GAAP net income per share of approximately $1.15 to $1.16, assuming approximately 170 million fully diluted shares outstanding.
- NoteFull year fiscal 2027 ARR of $4.396 billion to $4.426 billion, growth of approximately 16.6% to 17.4%.
- NoteFull year fiscal 2027 non-GAAP income from operations of $924 million to $932 million, growth of approximately 21%.
- NoteFull year fiscal 2027 non-GAAP net income per share of $4.86 to $4.90, assuming approximately 173 million fully diluted shares outstanding.
- NoteFull year fiscal 2027 free cash flow margin of approximately 23.0 to 23.5%.
What drove it
- Revenue and ARR each grew 25% year over year in Q4 fiscal 2026.
- Management cited strong contributions from non-seat-based solutions, continued Z-Flex momentum, record large-deal activity, and improving sales productivity.
- Management cited increased platform adoption across Zero Trust SASE, Agentic SecOps, Data Security, and Security for AI.
- The acquisition of Red Canary contributed ARR of $141 million in Q4 fiscal 2026.
- Non-GAAP operating margin was 24% in Q4 fiscal 2026, compared to 22% in Q4 fiscal 2025.
Concerns
- GAAP loss from operations was $15.5 million in Q4 fiscal 2026 and $133.3 million in fiscal 2026.
- GAAP net loss was $3.4 million in Q4 fiscal 2026 and $63.2 million in fiscal 2026.
- Q4 free cash flow was $60.8 million, or 7% of revenue, compared to $171.9 million, or 24% of revenue, in Q4 fiscal 2025.
- Cash and cash equivalents declined to $928,354 as of July 31, 2026 from $2,389,023 as of July 31, 2025.
- Fiscal 2027 revenue growth guidance of 16.6% to 17.5% is below the 25% revenue growth reported for fiscal 2026.
- The company adopted a long-term projected non-GAAP tax rate of 21%, reduced from the previous rate of 23% applied to all prior periods.
What to watch
- Progress against first-quarter fiscal 2027 revenue guidance of $935 million to $939 million and full-year fiscal 2027 revenue guidance of approximately $3.908 billion to $3.938 billion.
- ARR performance against full-year fiscal 2027 guidance of $4.396 billion to $4.426 billion.
- Whether non-GAAP gross margin remains approximately 80% and whether the company delivers the guided 23% first-quarter non-GAAP operating margin.
- Free cash flow margin relative to full-year fiscal 2027 guidance of approximately 23.0 to 23.5%.
- The contribution of non-seat-based solutions, Z-Flex, large-deal activity, and Red Canary to growth.
- The level of purchases of property, equipment and other assets following $199,837 in Q4 fiscal 2026.
Balance sheet and cash flow
- Cash and cash equivalents were $928,354 as of July 31, 2026, compared to $2,389,023 as of July 31, 2025.
- Short-term investments were $2,545,797 as of July 31, 2026, compared to $1,183,386 as of July 31, 2025.
- Convertible senior notes were $1,696,355 as of July 31, 2026, compared to $1,700,727 as of July 31, 2025.
- Total assets were $7,866,714 as of July 31, 2026, compared to $6,419,888 as of July 31, 2025.
- Total liabilities were $5,268,453 as of July 31, 2026, compared to $4,620,615 as of July 31, 2025.
- Total stockholders’ equity was $2,598,261 as of July 31, 2026, compared to $1,799,273 as of July 31, 2025.
- Purchases of property, equipment and other assets were $199,837 in Q4 fiscal 2026 and $277,304 in fiscal 2026, compared to $60,046 and $164,252, respectively, in the prior-year periods.
- Capitalized internal-use software was $18,684 in Q4 fiscal 2026 and $73,207 in fiscal 2026, compared to $18,637 and $81,508, respectively, in the prior-year periods.
- Payments for business acquisitions, net of cash acquired, were $148,026 in Q4 fiscal 2026 and $918,074 in fiscal 2026.
- Net cash used in investing activities was $370,953 in Q4 fiscal 2026 and $2,652,732 in fiscal 2026.
- Net cash provided by financing activities was $37,910 in Q4 fiscal 2026 and $62,409 in fiscal 2026.
Analysis
Zscaler closed fiscal 2026 with $898.2 million of Q4 revenue, up 25% year over year, while ARR reached $3,771 million and net new ARR was $246 million. ARR growth was also 25%, with Red Canary contributing $141 million of ARR. Excluding Red Canary, Q4 ARR grew 20% to $3,630 million and net new ARR grew 17%. For the full year, revenue rose 25% to $3,353 million, or 20% to $3,209 million excluding Red Canary.
Profitability improved on a non-GAAP basis. Q4 non-GAAP gross margin increased to 80% from 79%, and non-GAAP operating income rose to $218.4 million from $158.9 million as non-GAAP operating margin reached a record 24% from 22%. Full-year non-GAAP operating margin increased to 23% from 22%. GAAP results remained losses, with Q4 GAAP loss from operations of $15.5 million and GAAP net loss of $3.4 million. Stock-based compensation expense and related payroll taxes totaled $215,208 in Q4 and $841,648 for fiscal 2026.
Cash generation was positive but Q4 free cash flow declined. Q4 cash provided by operations rose to $279.3 million from $250.6 million, while free cash flow fell to $60.8 million from $171.9 million. The release attributed the change to capex and internal use software of $218.5 million versus $78.7 million in the prior-year quarter. For the full year, cash provided by operations was $1,130 million and free cash flow was $779.1 million. Cash and cash equivalents were $928,354 at July 31, 2026, alongside $2,545,797 of short-term investments and $1,696,355 of convertible senior notes.
The fiscal 2027 outlook calls for first-quarter revenue of $935 million to $939 million and full-year revenue of approximately $3.908 billion to $3.938 billion. The company expects full-year ARR of $4.396 billion to $4.426 billion, non-GAAP gross margin of approximately 80%, non-GAAP operating income of $924 million to $932 million, and free cash flow margin of approximately 23.0 to 23.5%. Management identified non-seat-based solutions, Z-Flex, record large-deal activity, and improving sales productivity as current growth contributors. The principal reported change for investors to track is the transition from 25% fiscal 2026 revenue growth to guided fiscal 2027 revenue growth of 16.6% to 17.5%, alongside preservation of the expanded non-GAAP margin profile.
Management, verbatim
AI represents one of the most significant opportunities in Zscaler's history. By connecting users, workloads, branches, and now agents directly to the applications they need without placing them on the network, we are uniquely equipped to help companies both combat the threats created by agentic AI and securely deploy AI agents and models.
Jay Chaudhry, CEO, Chairman and Founder of Zscaler
Our continued innovation across Zero Trust SASE, Agentic SecOps, Data Security, and Security for AI is driving increased platform adoption and creating new avenues for growth, as reflected in our strong Q4 results. As AI becomes foundational to how organizations operate, we are well positioned to extend our leadership as the cybersecurity platform for the AI era.
Jay Chaudhry, CEO, Chairman and Founder of Zscaler
We delivered a strong fourth quarter, with revenue and ARR both growing 25% year over year, net new ARR growing 24%, and non-GAAP operating margin reaching a record 24%.
Kevin Rubin, chief financial officer of Zscaler
Not in the filing
stated, not guessed- Previous-release outlook was not provided, so comparison of actual results with prior guidance is unavailable.
- No operating segments or segment revenue were reported.
- No prior-quarter comparisons were reported for the key operating metrics.
- No share repurchases or dividends were reported.
- No GAAP guidance was provided for revenue-related profitability measures, operating income, or EPS because the company stated that reconciliations of non-GAAP income from operations and non-GAAP net income per share guidance are not available without unreasonable effort.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Zscaler's 8‑K filing provides the first public disclosure of its FY2026 results and FY2027 outlook.
Ticker impact
Zscaler reported Q4 FY2026 revenue up 25% YoY to $898.2M and provided FY2027 guidance with 16-17% revenue growth.
Potential upside of 5‑8% over the next week as investors price in higher growth and margins.
Revenue and ARR growth beat expectations, non‑GAAP margin hit a record 24%, and guidance remains robust, indicating continued momentum.
Market effects
Positive signal for the cloud‑security and broader cybersecurity sector.
U.S. tech stocks may see modest gains; European and Asian peers could follow.
Reinforces demand for AI‑enabled security solutions worldwide.
Counterpoint
If revenue growth slows in FY2027 or margin targets are missed, the stock could face a correction.
Key entities
- ExecutiveJay Chaudhry
CEO and Chairman of Zscaler, highlighted AI opportunities.
- ExecutiveKevin Rubin
CFO, detailed financial performance and guidance.
