Zscaler, Inc.

What they do

Zscaler operates one reportable segment, generating revenue primarily from subscriptions to its multi-tenant cloud security platform plus related support; professional services are immaterial. The platform connects users, devices, workloads and AI agents to applications, AI models and data based on identity and business policy rather than network location, applying zero trust principles across transactions. It runs on a cloud architecture distributed across over 200 public data centers and thousands of private edge sites, serving users in over 185 countries. Pricing is calculated on a per-user and metered-usage basis, with subscription and support revenue recognized ratably over contracts generally lasting one to three years.

Revenue drivers

• Subscription and support (core platform) — Virtually all revenue comes from ratably recognized subscriptions to the Zero Trust Exchange plus related support; professional services are described as immaterial.
• Seat-based versus non-seat-based solutions — Management said fiscal Q4 growth was broadening beyond users, with a strong contribution from non-seat-based solutions, though no dollar split by solution was disclosed.
• Z-Flex and large-deal activity — The company cited continued Z-Flex momentum and record large-deal activity as contributors in the fourth quarter; no segment-level figures for these were provided.
• Red Canary acquisition — ARR of $3,771 million in fiscal Q4 included $141 million from the Red Canary acquisition; excluding it, ARR grew 20% to $3,630 million and revenue grew 20% to $3,209 million for the year.

Recent performance

Fiscal Q4 2026 revenue rose 25% year over year to $898.2 million, and full-year fiscal 2026 revenue rose 25% to $3,353 million. ARR grew 25% to $3,771 million, with $246 million of net new ARR in the quarter; excluding the Red Canary acquisition, ARR grew 20% and net new ARR grew 17%. GAAP loss from operations was $15.5 million (2% of revenue) in the quarter and $133.3 million (4% of revenue) for the year; non-GAAP operating margin reached a record 24% in the quarter. GAAP net loss was $3.4 million for the quarter and $63.2 million for the year, while non-GAAP net income was $198.2 million and $704.2 million respectively. Operating cash flow was $1,130 million for the year (34% of revenue); free cash flow was $779.1 million, with Q4 free cash flow of $60.8 million after capital expenditures and internal-use software of $218.5 million.

Strategy

Zscaler positions itself as a zero trust platform for the AI era, both defending against AI-enabled threats and enabling customers to deploy AI agents and models safely. Management highlights innovation across Zero Trust SASE, Agentic SecOps, Data Security and Security for AI as driving platform adoption and new growth avenues. The company continues to invest in its sales and marketing organization to expand its market opportunity and in research and development to enhance platform functionality. It also pursues acquisitions, including Red Canary, which added $141 million of ARR, and expects to continue incurring net losses as it invests. Red Canary's ARR contribution is disclosed, but the company does not break out revenue by product line.

Risks

• History of annual net losses — Zscaler has incurred net losses in all annual periods since inception and management expects to continue incurring net losses for the foreseeable future.
• Customer scrutiny of large deals — Management said customers continue to scrutinize and elongate approval processes, particularly for larger deals, requiring multiple approvals for large expenditures.
• Intense competition — The company cites intense and increasing competition and the risk of losing market share to competitors.
• Platform failure or service interruption — An actual or perceived failure of the cloud platform to block malware or prevent a security breach, or any interruption in service delivery, could harm its reputation and business.

Outlook

Management framed the AI transition as one of the most significant opportunities in Zscaler's history and said the company is well positioned to extend its leadership as the cybersecurity platform for the AI era. The CFO cited strong Q4 revenue and ARR growth, record large-deal activity and improving sales productivity entering fiscal 2027. Beginning in fiscal 2026 the company adopted a long-term projected non-GAAP tax rate of 21%, reduced from 23%, aligning with the enactment of the One Big Beautiful Bill Act. Specific fiscal 2027 revenue or earnings guidance was not included in the provided excerpts.