10-Q · May 26, 2026
Zscaler reported Q3 fiscal 2026 results with revenue of $850.5 million, a 25% increase from the prior year period, and a non-GAAP EPS of $1.08, exceeding analyst expectations. The company also upgraded its guidance for…
Earnings analysis · 10-K
ZS earnings analysis
Filed September 3, 2026 · Our reading of the company's report
The latest report
Zscaler delivered strong fiscal 2026 growth, with revenue up 25%, ARR up to $3.771 billion and free cash flow of $779.1 million, supported by customer expansion and a broadening AI-oriented product platform. The…
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Zscaler delivered strong fiscal 2026 growth, with revenue up 25%, ARR up to $3.771 billion and free cash flow of $779.1 million, supported by customer expansion and a broadening AI-oriented product platform. The trajectory is tempered by flat 77% gross margin, a negative 4% GAAP operating margin, persistent net losses and $821.9 million of stock-based compensation. Heavy acquisition spending, rising channel concentration, the planned 3% workforce reduction and the $1.725 billion 2028 notes add execution and capital-allocation risks.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $-0.39
- Segment
- Single reportable segment: cloud security platform; fiscal 2026 revenue was $3,352.5 million.
What stood out
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Scaled zero-trust platform with data advantage
Zscaler positions its Zero Trust Exchange as a cloud-native, unified security platform connecting users, devices, workloads and AI agents based on identity and business policy rather than network location. The platform operates across more than 200 public data centers and processes over 750 billion transactions per day, which management says creates a structural threat-intelligence and AI-training advantage.
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Strong multi-year revenue expansion
Revenue increased 25% to $3,352.5 million in fiscal 2026 from $2,673.1 million in fiscal 2025 and $2,167.8 million in fiscal 2024. Existing-customer expansion contributed $474.6 million of the fiscal 2026 increase, while new customers contributed $204.8 million; the customer base grew 16% to approximately 11,000.
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ARR and contracted revenue visibility improved
Annual recurring revenue increased to $3,771 million as of July 31, 2026 from $3,015 million a year earlier. Remaining performance obligations were $7,365.4 million, with management expecting to recognize 45% over the next 12 months and 90% over the next three years.
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AI-focused product and M&A roadmap
The company expanded its roadmap into Security for AI, Data Security and Agentic Security Operations, while acquisitions added capabilities in managed detection and response, AI security and browser security. Zscaler had approximately 11,000 customers, including over 40% of the Forbes Global 2000 and over 50% of the Fortune 500.
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Cash generation grew despite margin dilution
Free cash flow increased to $779.1 million in fiscal 2026 from $726.7 million in fiscal 2025 and $585.0 million in fiscal 2024, although free-cash-flow margin declined to 23% from 27% in both prior years. Operating cash flow was $1,129.7 million, supported in part by a $379.9 million increase in deferred revenue from advance billings.
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Direct sales mix improved
The company continued to broaden its geographic and channel reach: U.S. revenue rose to $1,791.8 million, or 53% of total revenue, while international revenue was 47%. Direct-customer revenue increased to 15% of revenue from 12% in fiscal 2025 and 9% in fiscal 2024, although channel partners still represented 85%.
What to watch
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Large acquisition program raises integration risk
Zscaler spent $918.1 million on business acquisitions in fiscal 2026, while goodwill increased from $417.7 million to $1,218.1 million and acquired intangible assets rose to $214.4 million from $47.3 million. The Symmetry and SquareX purchase-price allocations remained preliminary, creating execution, integration and valuation risk.
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Post-year-end workforce restructuring
After year-end, on September 1, 2026, the company committed to reducing worldwide headcount by approximately 3% and expects non-recurring charges of approximately $30.0 million to $33.0 million, mostly in the first half of fiscal 2027. The restructuring is intended to reallocate resources toward AI and growth, but may affect employee morale, execution and near-term profitability.
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Increasing dependence on major channel partners
Sales through the top five channel partners and their affiliates represented 31% of fiscal 2026 revenue, up from 28% in fiscal 2025 and 25% in fiscal 2024. Because partner agreements are generally non-exclusive and may be canceled with 90 days' notice, a partner decision to promote competitors or reduce support could materially affect growth.
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Persistent GAAP losses and high stock compensation
The company remains loss-making under GAAP, with a fiscal 2026 net loss of $63.2 million, diluted net loss per share of $0.39 and an accumulated deficit of $1,252.7 million. GAAP operating margin was negative 4%, despite non-GAAP operating margin of 23%, and stock-based compensation expense was $821.9 million.
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Material 2028 convertible debt obligation
Zscaler had $1,725.0 million of 0.0% convertible notes outstanding that mature on July 15, 2028, and management currently intends to settle the principal in cash. Although cash, cash equivalents and short-term investments totaled $3,474.2 million at July 31, 2026, repayment or refinancing could reduce funds available for expansion and acquisitions.
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AI regulation and vulnerability burden
AI-related risk has become more complex: the filing states that AI-enabled vulnerability tools are surfacing a substantially greater volume of vulnerabilities, while evolving rules such as the EU AI Act may require changes to data governance, risk assessments and transparency. International revenue represented 47% of fiscal 2026 revenue, increasing exposure to differing privacy, AI, data-residency and trade requirements.
Management's outlook
The 10-K provides qualitative commentary that operating expenses and research and development investment will continue to increase, but does not provide numeric annual revenue or EPS guidance. Quantitative outlook was provided separately in the Q4 earnings materials.
Earlier filings 4
10-Q · February 26, 2026
Zscaler reported quarterly revenue of $815.8M (three months ended January 31, 2026), up $167.9M or +25.9% year-over-year and up ~$27.7M or +3.5% sequentially, with gross margin roughly stable at 76.6%. The company…
10-Q · November 25, 2025
Zscaler reported revenue of $788.1M for the quarter (up $160.2M or +25.5% year-over-year) with gross profit of $603.4M (gross margin 76.6%). The company remained GAAP loss-making with net loss of $11.6M (EPS $(0.07)),…
10-Q · December 6, 2023
Zscaler reported revenue of $496,703,000 for the three months ended October 31, 2023, up from $355,548,000 a year earlier, with gross profit of $385,309,000 and gross margin of ~77.6%. Operating loss narrowed to…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.