Zscaler (NASDAQ:ZS) reported fourth-quarter fiscal 2026 revenue of $898 million, up 25% from a year earlier and 6% sequentially, as the cybersecurity company cited continued demand for its zero-trust platform, data security offerings and AI-related products.
Non-GAAP operating income rose 37% year over year to $218 million, while non-GAAP operating margin reached a record 24.3%, up 220 basis points. For the full fiscal year, revenue increased 25% to $3.4 billion, and the company generated $779 million in free cash flow, representing a 23% free-cash-flow margin.
ARR Growth and Enterprise Deal Activity
Total annual recurring revenue, or ARR, reached $3.8 billion at the end of the quarter, up 25% year over year. Total net new ARR was $246 million, an increase of 24%. Excluding the contribution from Red Canary, which Zscaler acquired during fiscal 2026, net new ARR was $232 million and grew 17% year over year.
CFO Kevin Rubin said the company’s net new ARR growth, excluding Red Canary, accelerated from 7% in fiscal 2025 to 10% in the first half of fiscal 2026 and 17% in the fourth quarter. Red Canary exited the quarter with $141 million in ARR.
Zscaler also reported record activity for new annual contract value deals above $1 million. The number of customers producing more than $10 million in ARR nearly doubled year over year, Rubin said. The company ended the quarter with:
- 785 customers generating more than $1 million in ARR, up 18% year over year.
- 4,182 customers generating more than $100,000 in ARR, up 20% year over year.
- More than 950 “Zero Trust Everywhere” enterprise customers, compared with more than 700 in the prior quarter and more than 350 at the end of fiscal 2025.
Remaining performance obligations totaled about $7.4 billion, up approximately 27%, with roughly 45% classified as current RPO.
AI Security and Platform Expansion
Management positioned AI security as a growing source of demand for the company’s platform. Chaudhry said organizations are seeking to protect AI models, agents, applications and data as more autonomous AI systems are deployed.
The company said Security for AI bookings increased more than 50% sequentially in the fourth quarter, following what it described as a strong third quarter. In addition, Rubin said the Security for AI pipeline rose 75% sequentially.
Chaudhry said Zscaler’s AI security products are intended to help customers discover AI assets, govern access to data and applications, inspect prompts and responses for security risks, and secure communications between agents. He added that 70% of Security for AI deals in the quarter also included the company’s data security solution.
Zscaler introduced two products at its ZenithLive conference in June: Zero Trust Exchange for Agents and Endpoint AI Security. Both products are in early access, and management expects them to scale in the second half of fiscal 2027.
The company also plans to launch an Agentic SecOps offering through a webcast on Sept. 9. Chaudhry said the solution combines Zscaler’s telemetry with Red Canary’s managed detection and response expertise to help security teams detect, investigate and respond to threats using specialized AI agents. He said the product is expected to begin contributing in the second half of fiscal 2027 and more meaningfully in fiscal 2028.
Z-Flex, Non-Seat Products and Sales Strategy
Zscaler said its Z-Flex commercial model generated more than $770 million in total contract value during the fourth quarter, up more than 60% sequentially. For fiscal 2026, Z-Flex produced more than $1.7 billion in total contract value, while customers using the model recorded an average ARR uplift of nearly 30%.
The model allows customers making multiyear commitments to activate or swap product modules without beginning a new procurement cycle. Management said it has supported upsells, shorter sales cycles and greater visibility into customer commitments.
Non-seat-based metered products accounted for approximately 30% of new and upsell annual contract value in the quarter and for the full year. ARR from those offerings grew more than 100% year over year. These products include offerings tied to cloud workloads, branches, data volumes and AI-related consumption.
The company said it is adding new sales resources, including dedicated representatives focused on enterprise new-logo opportunities, while also expanding channel activity. Zscaler recently broadened its partnership with Carahsoft to pursue commercial and small- and medium-sized business customers in the U.S. through a fully channel-led model.
At the same time, Zscaler is undertaking a workforce restructuring affecting about 3% of employees. The action is expected to result in restructuring charges of approximately $30 million to $33 million. Rubin said the company is reallocating resources to provide capacity for AI and growth initiatives.
Fiscal 2027 Outlook
For the first quarter of fiscal 2027, Zscaler forecast revenue of $935 million to $939 million, representing approximately 19% year-over-year growth. The company expects non-GAAP operating profit of $215 million to $217 million, or an operating margin of about 23%, and non-GAAP earnings per share of $1.15 to $1.16.
For the full fiscal year, Zscaler projected ARR of $4.396 billion to $4.426 billion, growth of approximately 16.6% to 17.4%. Revenue is expected to be $3.908 billion to $3.938 billion, representing growth of 16.6% to 17.5%.
The company forecast full-year non-GAAP operating profit of $924 million to $932 million and an operating margin of approximately 23.7%. It expects free-cash-flow margin of roughly 23% to 23.5%, while capital expenditures are projected to remain elevated amid higher pricing for memory, storage and processor components.
About Zscaler (NASDAQ:ZS)
Zscaler is a cloud security company that delivers a cloud-native platform to protect users, applications and data as organizations move away from traditional, network-centric security architectures. The company focuses on a zero trust approach that assumes no implicit trust for users or devices, providing secure access to the internet, SaaS applications and private applications regardless of where users are located. Zscaler positions its services as an alternative to legacy appliances and site-centric VPNs, aiming to simplify security while enabling modern, distributed workforces.
Key offerings are built around the Zscaler Zero Trust Exchange, a multi-tenant cloud platform that enforces security and access policies in-line.
