Zscaler, Inc. (ZS)·Q4 2025 Earnings Summary

Executive Summary

• Zscaler delivered a strong Q4 FY25: revenue $719.2M (+21% YoY) and non-GAAP EPS $0.89, both above consensus; ARR surpassed $3.015B and non-GAAP operating margin hit a quarterly record at 22% .
• Revenue and EPS beat S&P Global consensus by ~$12.1M and ~$0.09 respectively; Q4 guidance from Q3 was exceeded across top-line and operating profit, with calculated billings growth accelerating to 32% YoY *.
• FY26 guidance introduced: ARR $3.676–$3.698B, revenue $3.265–$3.284B, non-GAAP operating income $728–$736M, EPS $3.64–$3.68; Q1 FY26 revenue guided to $772–$774M and EPS $0.85–$0.86 .
• Strategic catalysts: rapid adoption of AI Security and Zero Trust Everywhere (350+ enterprises), Red Canary integration (expected ~$95M ARR in FY26), and expanding Z-Flex program ($100M+ TCV, +50% QoQ) .

What Went Well and What Went Wrong

• What Went Well

  • “Outstanding Q4” with ARR topping $3B and “highest ever operating margin for a quarter,” reflecting robust demand for Zero Trust and AI security solutions .
  • AI Security momentum: SecOps ARR grew >85% YoY; ZDX Advanced Plus bookings +58% YoY; management expects agentic operations to surpass $400M ARR in FY26 .
  • Zero Trust Everywhere traction: 350+ enterprises; largest-ever branch deal securing ~150k devices across 400+ locations; significant SD-WAN/firewall replacement and 60%+ cost savings cited in marquee wins .

• What Went Wrong

  • Gross margin dipped to 79.3%, below the 80% target, due to a one-time, lower-margin private cloud deployment for a government customer; management expects a rebound to ~80% in Q1 .
  • GAAP profitability remained negative (Q4 GAAP net loss $17.6M), driven by heavy stock-based compensation and growth investments; non-GAAP results offset this in investor framing .
  • Execution risk and macro steadiness noted in forward-looking statements; management will “invest aggressively” which could temper margin optimization pacing for fast-growing new products .

Financial Results

Values retrieved from S&P Global for consensus figures.*

Segment/geography mix:

KPIs:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “We achieved a new milestone of more than $3 billion of Annual Recurring Revenue while achieving our highest ever operating margin for a quarter. We believe Zscaler's Zero Trust and AI security solutions are imperative… driving robust demand.”
• AI Security: “We recently launched Zscaler AI Guard… being tested by a significant number of large customers… expect agentic operations portfolio to surpass $400 million in ARR in fiscal year 26.”
• Zero Trust Everywhere: “Over 350 Zero Trust Everywhere enterprises… largest-ever branch deal… 60%+ cost savings replacing SD-WAN, firewall-based VPNs and OT security.”
• Red Canary integration: “We recognized approximately $83M of ARR at close… assuming low double-digit growth… prudent approach given MDR churn characteristics.”
• Margin outlook: “Gross margin… lower due to a one-time deployment… expect gross margin to move back up to 80% in Q1.”

Q&A Highlights

• Firewall displacement cadence: Branch firewalls first, followed by data center and virtual firewalls; Zero Trust Branch demand requires “no demand generation” per management, reflecting secular shift from SD-WAN/firewalls to Zero Trust .
• Z-Flex strategy: Built on architecture workshops and business value assessments; flexibility in module adoption increases TCV and ARR while maintaining predictable budgets and rate cards .
• Net new ARR trajectory: Guidance implies “high single-digit” organic net new ARR growth for FY26 excluding Red Canary contribution .
• Data Security module expansion: Only ~30% of customers have 3+ modules and ~10% have 4+ modules, highlighting significant upsell runway in DLP, DSPM, classification/encryption, and GenAI security .
• SOC transformation: Combining Data Fabric, UVM, asset exposure, and Red Canary agentic tech to deliver outcome-based SecOps; phased approach to displacing legacy SIEM/log lakes .

Estimates Context

Values retrieved from S&P Global.*

Implication: Repeated beats vs consensus across Q2–Q4 suggest upward estimate revisions likely in revenue/EPS near term; management’s FY26 ARR and revenue guidance, plus Red Canary contribution and agentic operations growth, should support durable top-line trajectories .

Key Takeaways for Investors

• Core momentum intact: Multi-quarter beats on revenue and EPS with accelerating billings and record operating margin signal strong execution and demand for Zero Trust and AI security .
• AI Security is an emerging growth engine: SecOps ARR growth >85% YoY and agentic operations poised >$400M ARR FY26 provide a new leg of growth beyond user access and branch .
• Zero Trust Branch/Cloud displacing legacy: Tangible 60%+ cost savings and rapid adoption position ZS to capture firewall/SD-WAN replacement cycles across retail, manufacturing, and higher-ed .
• Margin normalization: Expect gross margin back to ~80% in Q1 as one-time hardware impact laps; free cash flow discipline remains strong (Q4 FCF margin 24%, FY25 27%) .
• Red Canary integration strengthens SecOps story: ~$95M ARR assumed for FY26 with prudent churn assumptions; outcome-based SOC proposition could catalyze competitive displacement of legacy SIEM/log lakes .
• Commercial motion (Z-Flex) expands TCV/ARR: Flexibility to add modules over multi-year terms is driving larger strategic deals and broader platform adoption .
• Estimate trajectory: With beats and raised execution confidence, street models for FY26 may grind higher on AI/Zero Trust adoption and Red Canary synergies; watch Q1 print vs ~$774M revenue and ~$0.86 EPS guide *.

Additional context and data sources:

• Q4 FY25 8-K press release and detailed GAAP/non-GAAP reconciliations .
• Q4 FY25 earnings call transcripts (prepared remarks and Q&A) .
• Prior quarters’ earnings releases for trend analysis (Q2 FY25, Q3 FY25) .