Zscaler's Q3 Revenue Up 23% YoY, Margins Slip Amid Product Expansion

Zscaler reported a 23% YoY revenue increase to $678 million in Q3 of fiscal 2025. However, non-GAAP gross margins slipped to 80.3%, a 110-basis point contraction. The dip in margins is attributed to the rollout of new products, which are built to gain market share quickly rather than deliver high margins. Despite this, Zscaler achieved revenue growth of 24% and a free cash flow margin of 28% for the year-to-date period. Management guides for a gross margin of 80% for Q4, indicating a sequential decline of 30 basis points.