Zscaler Earnings Beat; Guidance Points To Slower Growth
Zscaler earnings showed strong revenue and record non-GAAP margins, and FY2027 guidance signals slower growth, refocusing positioning toward margin gains.
KEY TAKEAWAYS
- Zscaler reported Q4 revenue up 25.0% to $898 million and ARR of $3.8 billion.
- Non-GAAP operating income reached a record 24.0% of revenue and non-GAAP EPS was $1.19.
- FY2027 guidance implies mid-teens revenue growth while targeting higher non-GAAP operating income and FCF margin near 23.0%.
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Zscaler, Inc. (Nasdaq: ZS) reported fiscal fourth-quarter and full-year 2026 results on Sept. 3, 2026, showing strong revenue and annual recurring revenue (ARR) growth alongside a record non-GAAP operating margin. Management issued fiscal 2027 guidance that signals slower top-line expansion but continued margin gains.
Quarterly Results and Metrics
The company said in a press release that fourth-quarter revenue rose 25.0% year over year to $898 million. ARR reached $3.77 billion as of July 31, 2026, with net new ARR of $246 million in the quarter. The Red Canary acquisition contributed $141 million of ARR; excluding that, ARR grew 20.0% to $3.63 billion and net new ARR increased 17.0%.
Profitability expanded with non-GAAP operating income reaching a record 24.0% of revenue, or $218 million, while GAAP loss from operations narrowed to 2.0% of revenue, or $16 million. Non-GAAP net income was $198 million, and non-GAAP earnings per share were $1.19, marking a double beat versus consensus on revenue and EPS.
Operating cash flow was $279 million, or 31.0% of revenue. Free cash flow declined to $61 million, or 7.0% of revenue, from $172 million (24.0%) a year earlier due to increased capital expenditures and internal software investments. The company ended the period with about $928 million in cash and cash equivalents. Deferred revenue grew 19.0% year over year to $2.93 billion.
For fiscal 2026, revenue rose 25.0% to about $3.35 billion. Non-GAAP operating income totaled $767 million, with non-GAAP EPS of $4.21. Full-year free cash flow was $779 million, a 23.0% margin. Non-GAAP net income was $704 million, compared with a GAAP net loss of $63 million.
Fiscal 2027 Guidance and Context
Zscaler’s fiscal 2027 guidance includes revenue between $3.91 billion and $3.94 billion, ARR of about $4.40 billion to $4.43 billion, non-GAAP operating income of $924 million to $932 million, non-GAAP EPS of $4.86 to $4.90, and a free cash flow margin near 23.0% to 23.5%. These figures imply a slowdown in top-line growth from roughly 25% in fiscal 2026 to mid-teens percentages as the company laps the Red Canary acquisition.
Management attributed demand to rising artificial intelligence (AI) risk and broader platform adoption, with improved sales productivity supporting margin expansion. The results follow strong quarters from cybersecurity peers, reflecting a supportive sector environment.
The company plans to discuss the near-term outlook on a conference call scheduled for 4:30 p.m. ET. This forum will provide further detail on balancing moderating revenue growth with continued margin gains.
