Zscaler (ZS) Earnings Date & Reports

Key Takeaways

• Fourth-quarter fiscal 2026 revenue rose 25% year over year to $898.2 million, exceeding the consensus estimate of roughly $877 million.
• Adjusted (non-GAAP) earnings per share came in at $1.19, beating the analyst consensus of $1.09.
• Annual recurring revenue (ARR) climbed 25% to $3.77 billion, with net new ARR of $246 million during the quarter.
• Non-GAAP operating margin reached a record 24.3%, while the GAAP net loss narrowed sharply to $3.4 million.
• Security for AI bookings jumped more than 50% sequentially, reinforcing the company's position in the emerging AI-security market.
• Fiscal 2027 guidance implies growth of roughly 17%, a notable slowdown from fiscal 2026's 25% expansion.

Earnings Context and Why It Matters

Zscaler (ZS), the San Jose, California-based cloud security company built around its Zero Trust Exchange platform, has become a barometer for how businesses are shifting security spending toward cloud-native and AI-driven defenses. This fourth-quarter fiscal 2026 report, covering the three months ended July 31, 2026, carries extra weight because it arrives after a period of investor caution: a cautious outlook three months earlier triggered a sharp single-day sell-off. Investors are closely watching whether Zscaler can sustain enterprise momentum while navigating a transition toward AI agents and non-seat-based products, making this report a key test of both demand trends and management credibility heading into a new fiscal year.

Reported Results

Zscaler delivered a beat on both the top and bottom lines. Revenue reached $898.2 million, up 25% year over year from $719.2 million, ahead of the consensus estimate of about $877 million. Adjusted (non-GAAP) earnings per share (EPS) came in at $1.19, exceeding the $1.09 Wall Street expectation. On a GAAP basis — the standard accounting method required under generally accepted accounting principles — the company narrowed its net loss to $3.4 million, or $0.02 per share, down from a loss of $17.6 million, or $0.11 per share, a year earlier.

Annual recurring revenue (ARR), a closely watched subscription metric for software companies, grew 25% to $3.77 billion, with net new ARR of $246 million. Non-GAAP operating margin hit a record 24.3%, up 220 basis points year over year. For the full fiscal year, revenue increased 25% to $3.35 billion, and the company generated $779 million in free cash flow. Notably, Security for AI bookings rose more than 50% sequentially, and remaining performance obligations — contracted revenue not yet recognized — reached roughly $7.4 billion, up about 27%.

Guidance offered a more measured tone. For fiscal 2027, management projected revenue of $3.908 billion to $3.938 billion and ARR of $4.396 billion to $4.426 billion, implying roughly 17% growth — below the 25% pace just reported — while the company also announced a restructuring of about 3% of its workforce to redirect resources toward AI initiatives.

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Market Reaction and Investor Sentiment

Initial reaction was positive, with shares rising roughly 3.5% to 4% in after-hours trading following the release. However, the move was tempered by lingering concerns. While the headline beat was strong, investors focused on a sharp decline in the quarterly free cash flow margin, which fell to about 7% from 24% a year earlier, driven by a jump in capital expenditures and capitalized internal software spending tied to AI infrastructure. Management also acknowledged sales-team turnover in certain regions and verticals during the quarter, a factor reflected in the more conservative fiscal 2027 outlook. The result was a mixed sentiment: enthusiasm about AI-driven demand and record profitability balanced against questions about near-term growth durability and spending discipline.

Forward Outlook and Key Factors to Monitor

The clearest signal from this report is that AI is becoming Zscaler's dominant growth narrative. Management framed AI as its largest-ever tailwind, pointing to stronger enterprise urgency as autonomous AI agents create new security risks. Investors should watch whether Security for AI bookings continue their rapid sequential growth and whether the company's newer products, including Zero Trust Exchange for Agents and Endpoint AI Security, scale as expected in the second half of fiscal 2027.

At the same time, the fiscal 2027 guidance of roughly 17% growth marks a meaningful deceleration from 25%. The key question is whether that outlook proves conservative or reflects genuine headwinds. Sales-team turnover and the integration of the Red Canary acquisition will be important variables to track, as will the pace of large-contract activity, given the record number of deals exceeding $1 million in annual contract value.

Finally, keep an eye on margins and cash flow. The spike in capital spending to support AI infrastructure pressured free cash flow in the quarter, and management has signaled that fiscal 2027 capital expenditures could rise further. Whether Zscaler can protect its record operating margins while investing for AI will be central to how investors assess the stock in the quarters ahead.

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