Zscaler Stock Earnings Reports

Key points for investors:

- Strong top-line and ARR growth: Q2 revenue $816M, +26% YoY; ARR $3.4B, +25% YoY; net new ARR $156M (+19% YoY). Management raised full‑year guidance and increased ARR target for FY26.

- Guidance and financial health: Q3 revenue guide $834M–$836M (~23% YoY growth). Full‑year revenue guide ~$3.309B–$3.322B and ARR guide $3.730B–$3.745B. Non‑GAAP gross margin ~80%; operating margin ~22%+; strong cash position ($3.5B cash) and high free cash flow (36% FCF margin H1; ~26.5–27% FCF margin FY guide). Management highlights Rule‑of‑62 performance in H1.

- Strategic growth drivers: Management positions Zscaler as a core AI security/Zero Trust vendor — three growth pillars: AI Security (AI Protect, Agentic Ops), Zero Trust Everywhere (Users, Branch, Cloud), and Data Security Everywhere (8 modules). Emphasis that AI agents and agentic traffic will materially expand TAM and metered usage — non‑seat, metered solutions accounted for >25% of new ACV and ARR from those offerings grew 100%+ YoY.

- Product and go‑to‑market momentum: Z‑Flex program driving large, multi‑year deals (>$650M TCV since launch; Q2 Z‑Flex TCV >$290M). Number of customers >$1M ARR = 728 (+18% YoY). Record number of $1M+ ACV deals in Q2; record pipeline conversion and improving sales productivity. Zero Trust Everywhere customers grew to >550 from ~130 a year ago.

- M&A and integrations: Closed Red Canary (Feb 1) and SquareX (Feb 5). Red Canary brought tech/talent and ARR (~$114M ARR at close) but has experienced elevated churn post‑acquisition; management will report Red Canary ARR separately in Q3/Q4. SquareX extends browser‑based Zero Trust capabilities for unmanaged devices.

- Risks / items to monitor: Elevated churn in the acquired Red Canary MDR business and impact on ARR mix; potential future increases in memory/storage/processor costs for data center and appliance purchases; the company’s increasingly metered pricing exposure as AI traffic scales (positive for growth but may change revenue dynamics). Overall, management is bullish on AI-driven demand, believes Zscaler is uniquely positioned to monetize increased agentic traffic, and is raising near‑term financial targets while investing in integration and product expansion.