Zscaler 2026 Q1 Earnings Beats Expectations with 25.5% Revenue Growth and 12.5% EPS Improvement

Zscaler (ZS) reported first-quarter fiscal 2026 results that exceeded expectations, with revenue rising 25.5% year-over-year to $788.11 million and adjusted earnings per share (EPS) of $0.96, surpassing the $0.86 consensus. The company also raised its Q2 and full-year revenue guidance above market estimates, signaling confidence in its growth trajectory.

Revenue

Zscaler’s total revenue surged by 25.5% to $788.11 million in Q1 2026, driven by robust demand for its cloud-native cybersecurity solutions. Channel partners accounted for the lion’s share of revenue at $666.01 million, while direct customers contributed $122.10 million. This performance underscores the company’s strong market positioning and the scalability of its Zero Trust and AI Security platforms.

Earnings/Net Income

Zscaler narrowed its net loss to $11.62 million in Q1 2026, a 3.6% reduction compared to the $12.05 million loss in the prior-year quarter. On a per-share basis, the loss improved by 12.5% to $0.07 from $0.08, reflecting disciplined cost management. However, the company has sustained losses for 10 consecutive years in this quarter, highlighting ongoing challenges in achieving profitability despite revenue growth.

Post-Earnings Price Action Review

A strategy of purchasing Zscaler shares following a quarterly revenue decline on the earnings report date and holding for 30 days has historically delivered strong returns. Over the past three years, this approach yielded a 141.09% return, outperforming the 65.99% benchmark by 75.10%. The strategy’s compound annual growth rate (CAGR) of 34.40% underscores its consistency, while a Sharpe ratio of 0.75 and a maximum drawdown of 0.00% suggest minimal downside risk.

CEO Commentary

CEO Jay Chaudhry emphasized Zscaler’s momentum in AI Security, with annual recurring revenue (ARR) growing 26% year-over-year to $3.2 billion. The company’s AI Security segment, now valued at over $400 million, is accelerating ahead of schedule, and its Zero Trust initiatives have attracted 450+ customers. Chaudhry expressed optimism about the $10B ARR target, citing tailwinds from enterprise AI adoption and digital transformation.

Guidance

Zscaler provided bullish Q2 and full-year guidance:

• Q2 2026: Revenue of $797M–$799M (23% YoY growth), EPS of $0.89–$0.90, and operating profit of $172M–$174M.

• Fiscal 2026: ARR of $3.698B–$3.718B (22.7–23.3% growth), revenue of $3.282B–$3.301B (22.8–23.5% growth), and EPS of $3.78–$3.82.

Additional News

1. Post-Earnings Stock Drop: Despite beating revenue and EPS estimates, Zscaler shares fell 6% premarket, puzzling analysts. Wedbush Securities maintained an “Outperform” rating with a $350 price target, citing long-term growth potential.

2. AI Security Expansion: Zscaler’s AI Security ARR grew 80% YoY, surpassing $400M three quarters early, driven by demand for AI asset discovery and red-teaming tools.

3. SWOT Analysis Insights: A recent SWOT analysis highlighted Zscaler’s strong R&D investment (up 29.9%) as a strength but noted ongoing net losses and insider selling as risks.