Zscaler 2026 Q1 Earnings Revenue Surpasses Estimates by 25.5%

Zscaler (ZS) reported Q1 2026 earnings that exceeded expectations, with revenue growing 25.5% year-over-year to $788.11 million and non-GAAP EPS of $0.96, surpassing estimates by $0.10. The company raised full-year revenue guidance to $3.282–$3.301 billion, reflecting strong demand for its cloud security solutions.

Revenue

Zscaler’s total revenue surged 25.5% year-over-year to $788.11 million, driven by robust performance across its business segments. Channel partners contributed the lion’s share of revenue at $666.01 million, reflecting a 19.3% year-over-year increase, while direct customer sales grew by 75.5% to $122.10 million. The combined growth underscores the company’s expanding market penetration and diversified revenue streams.

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. Earnings per share improved by 12.5% as losses per share fell to $0.07 from $0.08. Despite these improvements, Zscaler has sustained losses for 10 consecutive years in the same quarter, highlighting ongoing challenges in achieving profitability.

Post-Earnings Price Action Review

A strategy of buying Zscaler shares after a revenue drop quarter-over-quarter on the report release date and holding for 30 days generated a 141.09% return over three years, outperforming the benchmark by 75.10%. This strategy’s 34.40% CAGR and minimal maximum drawdown of 0.00% underscore its effectiveness in capitalizing on post-earnings volatility.

CEO Commentary

Jay Chaudhry, CEO, highlighted a 26% YoY ARR growth, 35% RPO growth, and a Rule of 78 (52% free cash flow margin with 26% revenue growth). Strategic priorities include AI Security innovations, Zero Trust Cloud adoption, and the Zflex program to drive upsells. Chaudhry expressed confidence in exceeding $10B ARR through market leadership.

Guidance

Kevin Rubin, CFO, provided Q2 2026 guidance: revenue of $797–$799 million (23% YoY growth), operating profit of $172–$174 million, and EPS of $0.89–$0.90. For FY2026, ARR is projected at $3.698–$3.718B (22.7–23.3% growth), with revenue of $3.282–$3.301B and EPS of $3.78–$3.82.

Additional News

Zscaler completed the $692 million acquisitions of Red Canary and SPLXAI to enhance its AI security capabilities. The company also announced a 2% reduction in its non-GAAP tax rate to 21% for FY2026, citing new legislation. Insider selling activity has persisted, with seven transactions reported in the past three months.