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ZS
Earnings call · Jul 2026 (Q4 FY26)

Zscaler Q4 FY26 earnings call ZS

Sep 3, 2026 Source

Executive summary

Zscaler Q4 FY26 — Strong ARR Growth and AI Tailwinds

Zscaler concluded FY26 with robust financial performance, driven by strong ARR growth and expanding operating margins, fueled by increasing adoption of its Zero Trust platform. The company is strategically reallocating resources and navigating elevated CapEx, while AI emerges as a significant tailwind, driving demand for its security solutions and expanding its market opportunity. The firm is launching a new AgenticSEcOp solution to address the rapidly evolving AI threat landscape.

Highlights

5

  • Achieved 25% year-over-year ARR growth, reaching $3.8 billion.

  • Non-GAAP operating margin reached a record 24.3% in Q4, up 220 basis points year-over-year.

  • Net new ARR growth (excluding Red Canary) accelerated to 17% in Q4.

  • Closed a record number of $1 million plus new ACV deals, and the number of $10 million plus ARR customers nearly doubled year-over-year.

  • Non-seat-based metered usage solutions delivered approximately 30% of new and upsell ACV, with ARR tied to these offerings growing more than 100% year-over-year.

Concerns

4

  • Workforce restructuring is expected to affect approximately 3% of employees, resulting in charges of approximately $30 million to $33 million.

  • CapEx is expected to remain elevated during fiscal '27 due to higher component pricing, especially memory.

  • Free cash flow margin for FY26 was 23%, down from 27% last year, reflecting timing of cash collections and CapEx expenditures.

  • The Red Canary business experienced elevated churn in FY26, typical of MDR businesses, though the book of business was maintained.

Guidance & targets

CategoryTargetConfidence
Revenue
$935M-$939M
high materiality
High
Gross Margin
Approximately 80%
medium materiality
High
Operating Profit
$215M-$217M
high materiality
High
Net Other Income
Approximately $33M
low materiality
High
Earnings Per Share
$1.15-$1.16
high materiality
High
ARR
$4.396B-$4.426B
high materiality
High
Net New ARR Seasonality
Approximately 37% in H1 FY27
medium materiality
High
Net New ARR Seasonality
15% in Q1 FY27
medium materiality
High
Revenue
$3.908B-$3.938B
high materiality
High
Gross Margin
Approximately 80%
medium materiality
High
Operating Profit
$924M-$932M
high materiality
High
Net Other Income
Approximately $140M-$142M
low materiality
High
Earnings Per Share
$4.86-$4.90
high materiality
High
Free Cash Flow Margin
Approximately 23%-23.5%
high materiality
High
CapEx as % of Revenue
Low teens
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Americas
Accounted for 57% of Q4 revenue and grew approximately 30% year-over-year. For full fiscal '26, accounted for 57% of revenue and grew approximately 31%.
57%30%——
EMEA
Accounted for 27% of Q4 revenue and grew approximately 17% year-over-year. For full fiscal '26, accounted for 28% of revenue and grew approximately 16%.
27%17%——
APJ
Accounted for 16% of Q4 revenue and grew 23% year-over-year. For full fiscal '26, accounted for 15% of revenue and grew approximately 23%.
16%23%——

ZS operating KPIs by quarter

ZS operating KPIs stated on its earnings calls, by fiscal quarter
KPI Apr 2026 Q3 FY26This call Jul 2026 Q4 FY26Change vs prior quarter
Annual recurring revenue (ARR)
$3.5B Our Q3 '26 net new ARR was $166 million, up 24%, bringing total ARR to $3.5 billion, up 25% year-over-year. Source transcript
$3.8B Total net new ARR was $246 million, up 24% bringing total ARR to $3.8 billion, up 25% year-over-year. Source transcript
+8.6%
Annual recurring revenue (ARR) Red Canary
$127M Red Canary exited Q3 with $127 million of ARR. Source transcript
$141M Red Canary exited Q4 with $141 million of ARR. Source transcript
+11%
Customers above an annual spend threshold Over $1 million ARR
748 We closed Q3 with 748 customers generating more than $1 million of ARR and 4,003 customers exceeding $100,000 of ARR, growing 18% and 19% year-over-year, respectively. Source transcript
785 We ended the quarter with 785 customers generating over $1 million in ARR and 4,182 customers generating more than $100,000 in ARR growing 18% and 20% year-over-year, respectively. Source transcript
+4.9%
Customers above an annual spend threshold Over $100,000 ARR
4,003 We closed Q3 with 748 customers generating more than $1 million of ARR and 4,003 customers exceeding $100,000 of ARR, growing 18% and 19% year-over-year, respectively. Source transcript
4,182 We ended the quarter with 785 customers generating over $1 million in ARR and 4,182 customers generating more than $100,000 in ARR growing 18% and 20% year-over-year, respectively. Source transcript
+4.5%
Remaining performance obligation (RPO)
~$6.5B Remaining performance obligation, or RPO, of approximately $6.5 billion grew approximately 30%, including approximately 46% classified as current RPO. Source transcript
~$7.4B Remaining performance obligation, or RPO, of approximately $7.4 billion grew approximately 27% with approximately 45% classified as current RPO. Source transcript
—

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Remaining Performance Obligation (RPO) $7.4B Q4 FY26 end

grew approximately 27%

Approximately 45% classified as current RPO.

Product announcements

ProductTypeDetails
Zero Trust Exchange for agents and endpoint AI securitylaunch
AgenticSEcOp solutionlaunch

Deals & partnerships

Fortune 500 transportation customer 7-figure upsell ZFlex win for Security for AI portfolio

Deployed Security for AI portfolio to secure their full AI life cycle, including discovery, management of AI assets, real-time prompt and response inspection, and continuous red-teaming assessments. Selected Zscaler over two major platform competitors.

Fortune 500 semiconductor manufacturer 7-figure ZFlex upsell for company-wide cloud copilot rollout

Expanded adoption of the Zscaler platform to secure a company-wide rollout of cloud copilot. Determined Zscaler Security for AI was the only solution capable of securing AI adoption, including endpoints, secure agent-to-agent communication, and model usage in private and public environments.

Large global asset management firm 7-figure ZFlex upsell for Data Security Posture Management

Selected Zscaler's Data Security Posture Management solution over a privately held ESPM vendor to address gaps related to sensor data discovery across its multi-cloud environment and data governance.

Global 2000 financial services customer 7-figure ZFlex upsell for Zscaler Private Access (ZPA)

Upgraded to Zscaler Private Access to AI-powered app segmentation for 120,000 users.

Fortune 500 life sciences company 7-figure new logo ZFlex win for Zero Trust and Security for AI platform

Deploying Zero Trust and Security for AI platform across 75,000 users, displacing a legacy fiber-based SaaS platform. Chose Zscaler for its ability to deliver unified visibility and control across enterprise security and Gen AI.

Global 2000 health care equipment manufacturer 7-figure new logo win for Zero Trust branch solution

Deploying Zero Trust branch solution across critical production sites to secure its OT environment, displacing an existing long-term legacy vendor. This simplifies branch deployments and minimizes lateral movement.

Fortune 500 aerospace customer 7-figure upsell for Zero Trust cloud deployment

Expanded Zero Trust cloud deployment between its on-prem and public cloud environments to securely migrate workloads during a divestiture.

Google Cloud Managed service offering for Zero Trust Cloud

Extended Zero Trust Cloud solution by offering a managed service through Google Cloud, which can be configured in under 10 minutes, reducing deployment time and operational costs. Expands on existing offering for AWS and enables multi-cloud flexibility.

Carasoft Expanded partnership for commercial and SMB segments

Expanded partnership to further penetrate the commercial and SMB segments in the U.S. through a 100% channel-led motion.

Risks & headwinds

Elevated CapEx due to component pricing FY27

CapEx expected to remain elevated during fiscal '27

Mitigation:Monitoring costs and providing regular updates; opportunistically accelerated certain purchases in Q4 FY26 where data center equipment was available.

Workforce restructuring charges

Approximately $30M-$33M in restructuring charges

Mitigation:Strategic reallocation of resources to support AI and growth initiatives, affecting approximately 3% of employees.

Elevated churn in Red Canary business FY26, expected to continue for renewal accounts

Elevated churn in Red Canary's business in '26

Mitigation:Focused on integrating Red Canary technology into AgenticSEcOp solution; maintained book of business despite churn; contemplated in FY27 guidance.

Sales leadership transition H1 FY27

Two sales leaders departed last quarter (geo and vertical)

Mitigation:Internal promotion for vertical leader, new leader accepted for GEO position; transition expected to play out in H1 FY27 and reflected in guidance.

Rapidly evolving AI threat landscape Ongoing

Over 90% of organizations had AI applications, models, and servers exposed to the Internet; more than 1/3 had known exploitable vulnerabilities; fully autonomous AI attacks observed (e.g., Hugging Face incident)

Mitigation:Zscaler's Zero Trust platform makes applications invisible, minimizes breach impact, and provides data security and security for AI solutions; launching AgenticSEcOp solution for machine-speed threat response.

What to watch in Q1 FY27

AgenticSEcOp solution uptake

H1 FY27, specifically Q1 FY27
Current In early access, launching September 9th
Target Initial customer adoption and contribution

Why it matters

This new solution is expected to disrupt traditional SOC and contribute to future growth, especially in H2 FY27 and FY28, validating Zscaler's AI-first strategy.

In the first half of the year, it's going to take some time to take off, but it should start contributing in second half and then fiscal '28.

Q&A highlights

How are sales churn and productivity impacting the higher growth rate for next year, and has sales churn stabilized?

Q4 marked the highest sales productivity quarter ever, and FY26 was the highest annual productivity in four years. Sales leadership transitions are expected to play out in the first half of FY27 and are reflected in guidance. The company is well-positioned with a strong sales team and product portfolio.

“Q4 marked the highest productivity quarter that we've ever seen and fiscal '26 was the highest annual sales productivity in 4 years. So I think we're really positioned and set up well going into fiscal '27.”

asked by Saket Kalia · answered by Kevin Rubin

2 min read 5 chapters

Detailed narrative

AI as a Major Tailwind

AI is identified as the largest tailwind in Zscaler's history, driving significant demand for its Zero Trust Everywhere and Security for AI solutions. The proliferation of new AI models has created an unprecedented cybersecurity threat landscape, with over 90% of organizations having exposed AI applications and more than one-third possessing known exploitable vulnerabilities. Zscaler's platform is uniquely positioned to address these risks by making applications, AI models, and data invisible, minimizing the impact of potential breaches, and enabling the safe deployment of AI agents and models at scale.

Security for AI Momentum

Security for AI bookings increased over 50% sequentially in Q4, building on a strong Q3, with the company observing strong proactive inbound interest and no budget constraints. New solutions, including Zero Trust Exchange for agents and endpoint AI security, are currently in early access and are expected to scale in the second half of fiscal 2027. Notably, 70% of Security for AI deals closed in Q4 included Zscaler's data security solution, highlighting the integrated nature of these offerings.

AgenticSEcOp Solution Launch

Zscaler is set to launch its new AgenticSEcOp solution on September 9th, aiming to disrupt traditional Security Operations Center (SOC) approaches. This AI-first solution integrates Zscaler's proprietary telemetry (processing over 750 billion transactions daily) with Red Canary's managed detection and response (MDR) expertise. It is designed to enable security teams to prioritize real threats, leverage specialized AI agents for detection, investigation, and response at machine speed, and facilitate closed-loop remediation in real-time, reducing response times from weeks to minutes.

Zero Trust Everywhere Adoption

The company reported significant momentum in the adoption of its Zero Trust Everywhere platform, exiting Q4 with over 950 Zero Trust enterprises, a substantial increase from over 700 in Q3 and over 350 at the end of fiscal 2025. This growth is driven by strong performance in Zero Trust Branch and Zero Trust Cloud solutions, securing non-user environments like OT environments in manufacturing plants and enabling secure workload migration in multi-cloud settings.

Sales Productivity and Go-to-Market Strategy

Zscaler achieved its highest quarterly sales productivity ever in Q4 and the highest annual productivity since 2022, reflecting successful transformation to an account-centric sales motion. The company is expanding its go-to-market efforts by adding dedicated new logo sales executives, particularly in the mid-market and lower enterprise segments, and strengthening channel partnerships, such as with Carasoft. The ZFlex program continues to drive meaningful upsells, shorten sales cycles, and provide greater forward visibility, with over $1.7 billion in TCV generated in FY26.

AI-generated summary of the company's earnings call. Not investment advice.