Zscaler 2026 Q1 Earnings Revenue Surges 25.5% as Net Loss Narrows

Zscaler (ZS) reported fiscal 2026 Q1 results on Nov 25, 2025, with revenue rising 25.5% year-over-year to $788.11 million and non-GAAP EPS of $0.96, exceeding analyst estimates. The company raised full-year revenue guidance above consensus, though it remains unprofitable.

Revenue

Zscaler’s revenue surged 25.5% year-over-year to $788.11 million, driven by strong performance across its business segments. Channel partners accounted for the lion’s share at $666.01 million, while direct customers contributed $122.10 million. The total revenue growth reflects sustained demand for its cloud-native security solutions, with channel sales expanding at a 19.3% annual rate and direct sales surging 75.5%.

Earnings/Net Income

The company narrowed its net loss to $11.62 million in Q1 2026, a 3.6% reduction from $12.05 million in the prior year, and improved its EPS loss by 12.5% to $0.07 per share. Despite these improvements, Zscaler has posted losses in 10 consecutive quarters, underscoring ongoing challenges in achieving profitability.

Post-Earnings Price Action Review

The strategy of purchasing Zscaler shares after a revenue decline quarter-over-quarter and holding for 30 days delivered a 141.09% return over three years, outperforming the 65.99% benchmark by 75.10%. With a CAGR of 34.40% and a Sharpe ratio of 0.75, the approach demonstrated robust risk-adjusted returns. Notably, the strategy’s maximum drawdown was 0.00%, highlighting its resilience to downside risk.

CEO Commentary

CEO Jay Chaudhry highlighted a 26% year-over-year ARR growth and 35% RPO increase, emphasizing the “Rule of 78” (26% revenue growth + 52% free cash flow margin). Key growth pillars include AI Security (80% YoY growth, $400M+ ARR), Zero Trust Everywhere (450+ customers), and Data Security Everywhere ($450M ARR). Strategic initiatives like AI Guard, Red Canary integration, and the Zflex program are accelerating adoption.

Guidance

CFO Kevin Rubin provided Q2 2026 guidance: revenue of $797M–$799M (23% YoY growth), gross margin ~80%, and operating profit of $172M–$174M. For FY26, ARR is projected at $3.698B–$3.718B (22.7%–23.3% growth), with free cash flow margin expected at 26.0%–26.5%.

Additional News

Zscaler acquired Red Canary and SPLXAI for $692 million, bolstering its AI security capabilities to secure the enterprise AI lifecycle. The company also announced a 21% non-GAAP tax rate reduction for FY26, aligning with the One Big Beautiful Bill Act. No dividend or buyback news was disclosed.

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