Core Insights - Zscaler Inc reported better-than-expected financial results for Q4 fiscal 2025, with revenue of $719.23 million, surpassing the consensus estimate of $706.91 million and adjusted earnings of 89 cents per share, exceeding analyst estimates of 80 cents per share [1][2] Financial Performance - Fourth-quarter revenue: $719.23 million, beating estimates of $706.91 million [1] - Fourth-quarter adjusted earnings: 89 cents per share, surpassing estimates of 80 cents per share [1] - First-quarter revenue guidance: $772 million to $774 million, compared to estimates of $750.51 million [3] - First-quarter adjusted earnings guidance: 85 to 86 cents per share, against estimates of 84 cents per share [3] - Fiscal 2026 revenue forecast: $3.27 billion to $3.28 billion, exceeding estimates of $2.66 billion [3] - Full-year adjusted earnings forecast: $3.64 to $3.68 per share, compared to estimates of $3.18 per share [3] Market Reaction - Zscaler shares fell 4.5% to $262.19 following the earnings announcement [4] Analyst Ratings and Price Targets - Rosenblatt analyst maintained a Buy rating, raising the price target from $315 to $330 [6] - Baird analyst maintained an Outperform rating, increasing the price target from $330 to $345 [6] - Keybanc analyst maintained an Overweight rating, boosting the price target from $345 to $350 [6] - Stifel analyst maintained a Buy rating, raising the price target from $295 to $330 [6] - Piper Sandler analyst maintained a Neutral rating, increasing the price target from $260 to $280 [6] - Susquehanna analyst maintained a Positive rating, raising the price target from $320 to $340 [6] - Scotiabank analyst maintained a Sector Outperform rating, lowering the price target from $360 to $334 [6]

Market Overview - U.S. stock markets experienced a "risk off" attitude, with the Dow closing at -0.55%, S&P 500 at -0.69%, and Nasdaq at -0.60% [1] - Goldman Sachs was the worst performer on the Dow, down -1.9%, while Kraft Heinz fell -7%, the largest drop in the S&P 500 [2] Commodity Performance - Gold prices reached a new all-time high, increasing by +2.35% to just below $3600 per ounce [2] - Bitcoin also saw growth, rising +1.88% to $111,313 [2] Company Earnings - Zscaler reported fiscal Q4 results, with earnings of 89 cents per share, beating estimates by 9 cents, and quarterly sales of $719 million, surpassing expectations of $706 million [3] - Zscaler's billings were notably higher than expected, and guidance for the next quarter and full fiscal year was raised, leading to a +5% increase in shares during late trading [3] Economic Indicators - S&P Manufacturing PMI for August was slightly below expectations at +53.0, down -30 basis points from the previous month, while ISM Manufacturing improved to +48.7%, 70 basis points above the prior month [4] - Construction spending for July showed a slight improvement, moving from -0.4% in June to -0.1%, although it remains below expectations [5] Upcoming Reports - The Job Openings and Labor Turnover Survey (JOLTS) for July is expected to remain stable at 7.4 million job openings, consistent with the current labor market trends [6] - Factory Orders for July are anticipated to improve to -1.3% from -4.8% in June, with additional reports on the Beige Book and August Auto Sales expected [7] - Salesforce is expected to report quarterly earnings with +8.2% growth in earnings per share and +8.7% in revenues, having only missed earnings once in the past five years [8]

Core Viewpoint - Zscaler reported quarterly earnings of $0.89 per share, exceeding the Zacks Consensus Estimate of $0.80 per share, and showing a slight increase from $0.88 per share a year ago, indicating a positive earnings surprise of +11.25% [1][2] Financial Performance - The company achieved revenues of $719.23 million for the quarter ended July 2025, surpassing the Zacks Consensus Estimate by 1.84% and reflecting a year-over-year increase from $592.87 million [2] - Over the last four quarters, Zscaler has consistently exceeded consensus EPS and revenue estimates [2] Stock Performance - Zscaler shares have increased approximately 53.6% since the beginning of the year, significantly outperforming the S&P 500's gain of 9.8% [3] Future Outlook - The company's earnings outlook will be crucial for assessing future stock performance, with current consensus EPS estimates at $0.83 for the upcoming quarter and $3.57 for the current fiscal year, alongside projected revenues of $749.87 million and $3.19 billion respectively [7] - The Zacks Rank for Zscaler is currently 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Security industry, to which Zscaler belongs, is currently ranked in the top 33% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8]

Financial Data and Key Metrics Changes - Revenue grew 21% year over year in Q4, reaching $719 million, and total revenue for fiscal year 2025 was $2.7 billion, representing 23% year over year growth [8][24] - Annual recurring revenue (ARR) surpassed $3 billion, marking a 22% year over year increase [9][23] - Operating margin exceeded 22%, a quarterly record, and free cash flow margin was 24% for Q4 [8][26] Business Line Data and Key Metrics Changes - AI security solutions, including AI Guard and JNI security offerings, saw significant customer interest, contributing to the overall growth [8][10] - SecOps ARR grew over 85% year over year, while IT operations innovations drove 58% year over year growth in bookings of ZDX Advanced plus SKU [14][19] - Data Security Everywhere ARR reached approximately $425 million, with strong demand for comprehensive data security capabilities [19][20] Market Data and Key Metrics Changes - The Americas accounted for 55% of revenue, EMEA for 29%, and APJ for 16% in Q4 [24] - The company now serves nearly 40% of the Global 2000 and over 45% of Fortune 500 companies, indicating a strong market presence [25] Company Strategy and Development Direction - The company is focusing on three growth factors: AI security, Zero Trust Everywhere, and Data Security Everywhere, which together surpassed $1 billion in ARR in Q4 [10][20] - The Z Flex program generated over $100 million in TCV bookings in Q4, representing over 50% sequential growth, and is becoming a preferred method for strategic multi-year deals [21][70] - The company aims to accelerate platform innovations and capitalize on the $100 billion security market opportunity [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for their solutions and the operational scale, expecting continued growth in fiscal year 2026 [23][31] - The macro environment is anticipated to remain relatively unchanged, with a focus on ARR as the primary growth metric moving forward [28][95] Other Important Information - The company successfully closed the acquisition of Red Canary, contributing approximately $83 million to ARR at close [27] - The gross margin for Q4 was 79.3%, lower than the historical target of 80% due to a one-time deployment [25][26] Q&A Session Summary Question: How is SASE replacing firewall appliances? - Management indicated that firewall appliances, particularly in branches, are being replaced by Zero Trust architecture, with significant demand for Zero Trust branch solutions [34][36] Question: How will Z Flex help exceed sales goals? - Z Flex provides flexibility in module adoption and pricing, allowing for larger and better deals, and is being expanded to a broader customer base [40][44] Question: What does a Zero Trust Everywhere customer look like? - A Zero Trust Everywhere customer typically sees significant increases in ARR, with many deals resulting in 2x or 3x growth [46][50] Question: What is the focus of AI security product adoption? - Customers are primarily focused on securing public AI applications and private models, with growing interest in agent-to-agent communication [54][56] Question: What is the expected growth for data security solutions? - Data security solutions are being adopted alongside Zero Trust solutions, with a significant opportunity for upselling additional modules [61][65] Question: What is the methodology behind fiscal year guidance? - The company maintains a prudent approach to guidance, shifting focus from billings to ARR as a better alignment with the business model [92][94]

Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $719 million, representing a 21% year-over-year growth and exceeding guidance [19] - Annual recurring revenue (ARR) surpassed $3 billion, marking a 22% year-over-year increase [19][6] - Operating margin reached 22.1%, a record high, with a free cash flow margin of 24% [21][19] - Gross margin was 79.3%, slightly lower than the historical target of 80% due to a one-time deployment [21] Business Line Data and Key Metrics Changes - AI Security, Zero Trust Everywhere, and Data Security Everywhere collectively surpassed $1 billion in ARR in Q4 [6] - SecOps ARR grew over 85% year-over-year, while ZDX Advanced Plus Queue bookings increased by 58% year-over-year [10] - Data Security Everywhere ARR grew to approximately $425 million, with significant deal wins [16] Market Data and Key Metrics Changes - The Americas accounted for 55% of revenue, EMEA for 29%, and APJ for 16% [20] - The company serves nearly 40% of the Global 2000 and over 45% of Fortune 500 companies [19][5] Company Strategy and Development Direction - The company is focusing on three growth vectors: AI Security, Zero Trust Everywhere, and Data Security Everywhere [6] - The ZFlex program is being utilized to facilitate strategic multi-year deals and increase module adoption [17] - The company aims to replace legacy solutions in various sectors, including finance, healthcare, and retail [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for their solutions, particularly in AI and Zero Trust security [5] - The company anticipates a stable macro environment for fiscal 2026, with a focus on ARR as the primary growth metric [24][72] - Management expects to continue strong growth in AI Security and Zero Trust solutions, with significant upsell opportunities [67] Other Important Information - The acquisition of Red Canary is expected to contribute approximately $95 million to ARR in fiscal 2026 [23] - The company ended Q4 with $3.6 billion in cash and short-term investments [23] Q&A Session Summary Question: How is SASE replacing firewall appliances? - Management indicated that Zero Trust architecture is essential, and firewall appliances are being phased out, starting with branch firewalls [29] Question: How will ZFlex be utilized by the sales force? - ZFlex is designed to provide flexibility in module adoption, allowing for larger and better deals, and is being expanded to a broader customer base [33] Question: What does a Zero Trust Everywhere customer look like? - A Zero Trust Everywhere customer typically adopts multiple modules, leading to significant increases in ARR [36] Question: What is the focus of AI security product adoption? - Customers are primarily interested in securing both public and private AI applications, with a growing focus on agent-to-agent communication [41] Question: What is the expected growth trajectory for net new ARR? - Management is guiding for high single-digit net new ARR growth in fiscal 2026 on an organic basis [46] Question: How is the data security portfolio performing? - Data security solutions are often purchased alongside Zero Trust solutions, with significant growth potential as customers consolidate their security products [49] Question: What is the impact of ZFlex on financial metrics? - ZFlex is applicable to both new and existing customers, increasing potential deal sizes without fundamentally changing the financial model [53]

Financial Data and Key Metrics Changes - Revenue for Q4 2025 grew 21% year over year, reaching $719 million, and total revenue for fiscal year 2025 was $2.7 billion, representing a 23% year over year growth [6][23] - Annual recurring revenue (ARR) surpassed $3 billion, marking a 22% year over year increase [7][22] - Operating margin for Q4 was 22.1%, exceeding long-term targets and growing approximately 60 basis points year over year [26] - Free cash flow margin for Q4 was 24%, with data center CapEx at 8% of revenue [26] Business Line Data and Key Metrics Changes - AI security solutions, including AI Guard and JNI security offerings, saw significant customer interest, contributing to the overall growth [6][10] - SecOps ARR grew over 85% year over year, while ZDX Advanced plus SKU bookings increased by 58% year over year [12][19] - Data Security Everywhere ARR reached approximately $425 million, with strong demand driving growth [18] Market Data and Key Metrics Changes - The Americas accounted for 55% of revenue, EMEA for 29%, and APJ for 16% [23] - The company now serves nearly 40% of the Global 2000 and over 45% of Fortune 500 companies, indicating a strong market presence [22][24] Company Strategy and Development Direction - The company is focusing on three growth factors: AI security, Zero Trust Everywhere, and Data Security Everywhere, which together surpassed $1 billion in ARR in Q4 [8][19] - The Z Flex program generated over $100 million in TCV bookings in Q4, representing over 50% sequential growth, and is expected to drive future growth [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing demand for their solutions and the potential for growth in the Zero Trust and AI security markets, which are expected to disrupt a $100 billion security market [20][21] - The macro environment is anticipated to remain relatively unchanged, with a focus on ARR as the primary growth metric moving forward [28][92] Other Important Information - The acquisition of Red Canary is expected to contribute approximately $95 million to ARR and $90 million to revenue in fiscal year 2026 [27] - The company plans to optimize new products for margins over time as they scale [29] Q&A Session Summary Question: How is SASE replacing firewall appliances? - Management indicated that firewall appliances, particularly in branches, are being replaced by Zero Trust architecture, with significant demand for Zero Trust branch solutions [33][36] Question: How will Z Flex help exceed sales goals? - Z Flex provides flexibility in module adoption for customers, allowing for larger and better deals, and is being expanded to a broader customer base [39][42] Question: What does a Zero Trust Everywhere customer look like? - A Zero Trust Everywhere customer typically adopts multiple modules, with significant increases in ARR observed as they transition to this model [45][50] Question: What is the focus of AI security product adoption? - Customers are primarily focused on securing public AI applications first, followed by private models, with significant interest in agent-to-agent communication solutions [54][56] Question: What is the expected growth for data security solutions? - Data security solutions are being adopted alongside Zero Trust solutions, with a significant opportunity for upselling additional modules to existing customers [60][63] Question: What is the methodology behind fiscal year guidance? - The company maintains a prudent approach to guidance, shifting focus from billings to ARR as a more aligned growth metric [90][92]

Financial Performance - Zscaler's fourth-quarter calculated billings reached a record high [1] Product & Service - Growth is driven by sales of AI products [1]

Financial Performance - Zscaler's Annual Recurring Revenue (ARR) reached $3.015 billion, exceeding guidance[6,8] - Fiscal Year 2025 revenue totaled $2.673 billion, a 23% year-over-year increase[8] - Calculated billings for Fiscal Year 2025 were $3.246 billion, representing a 24% year-over-year growth[8] - The company achieved an operating margin of approximately 22% for Fiscal Year 2025[8] - Free cash flow margin for Fiscal Year 2025 was 27.2%, resulting in $727 million[8] - Q4'25 revenue was $719 million, a 21% year-over-year increase[6] Growth Vectors and Customer Adoption - Three Growth Vectors (Zero Trust Everywhere, Data Security Everywhere, and Agentic Operations) combined for over $1 billion in ARR, growing faster than the total ARR[11] - Data Security Everywhere ARR reached approximately $425 million[11] - The number of "Zero Trust Everywhere" enterprises exceeded 350, a 60%+ quarter-over-quarter increase[11] Future Outlook - Zscaler projects revenue between $3.265 billion and $3.284 billion for Fiscal Year 2026, including a $90 million contribution from the Red Canary acquisition[64] - The company anticipates ARR between $3.676 billion and $3.698 billion for Fiscal Year 2026, with a $95 million contribution from the Red Canary acquisition[64]

[Executive Summary](index=1&type=section&id=Executive%20Summary) [Introduction and CEO Commentary](index=1&type=section&id=Introduction%20and%20CEO%20Commentary) Zscaler reported strong Q4 and full-year FY2025 results, exceeding $3 billion in ARR and achieving record quarterly operating margin, driven by robust demand for zero trust and AI security solutions - Zscaler achieved a new milestone in Q4 FY2025 with **Annual Recurring Revenue (ARR) exceeding $3 billion**, alongside its highest operating margin for the quarter[4](index=4&type=chunk) - CEO Jay Chaudhry stated that Zscaler's zero trust and AI security solutions are crucial in today's world, driving strong market demand[4](index=4&type=chunk) - Zscaler recently launched AI Guardrails for public and private applications and is rapidly expanding its AI security portfolio to address emerging risks from AI models and applications[4](index=4&type=chunk) [About Zscaler](index=4&type=section&id=About%20Zscaler) Zscaler is a cloud security leader, accelerating customer digital transformation with its Zero Trust Exchange™ platform, the world's largest inline cloud security platform - Zscaler's Zero Trust Exchange™ platform protects customers from cyberattacks and data loss by securely connecting users, devices, and applications[21](index=21&type=chunk) - This SASE-based Zero Trust Exchange platform is deployed in over **160 data centers globally**, making it the world's largest inline cloud security platform[21](index=21&type=chunk) [Financial Performance](index=1&type=section&id=Financial%20Performance) [Fourth Quarter Fiscal 2025 Financial Highlights](index=1&type=section&id=Fourth%20Quarter%20Fiscal%202025%20Financial%20Highlights) Zscaler achieved strong Q4 FY2025 financial growth with revenue up 21% to $719.2 million and calculated billings increasing by 32% 2025 Fiscal Year Fourth Quarter Key Financial Data | Metric | Q4 FY2025 | Q4 FY2024 | YoY Change | | :-------------------------------- | :---------- | :---------- | :--------- | | Revenue | $719.2 million | $592.9 million | +21% | | Annual Recurring Revenue (ARR) | $3,015 million | $2,471 million | +22% | | Calculated Billings | $1,202.3 million | $910.8 million | +32% | | Deferred Revenue | $2,468.0 million | $1,894.9 million | +30% | | GAAP Net Loss | $(17.6) million | $(14.9) million | -18.1% | | Non-GAAP Net Income | $146.7 million | $115.8 million | +26.7% | | GAAP Net Loss per Share, Diluted | $(0.11) | $(0.10) | -10% | | Non-GAAP Net Income per Share, Diluted | $0.89 | $0.72 | +23.6% | | Cash Provided by Operations | $250.6 million | $203.6 million | +23.1% | | Free Cash Flow | $171.9 million | $136.3 million | +26.1% | - Cash, cash equivalents, and short-term investments increased to **$3.5724 billion** as of July 31, 2025, an increase of **$1.1628 billion** from July 31, 2024, partly due to the issuance of **$1.725 billion** in 2028 convertible senior notes and the repayment of **$1.15 billion** in 2025 notes[8](index=8&type=chunk) [Full Year Fiscal 2025 Financial Highlights](index=1&type=section&id=Full%20Year%20Fiscal%202025%20Financial%20Highlights) For full-year FY2025, Zscaler reported 23% revenue growth to $2.6731 billion, with strong non-GAAP profitability and cash generation 2025 Fiscal Year Full Year Key Financial Data | Metric | FY2025 | FY2024 | YoY Change | | :-------------------------------- | :---------- | :---------- | :--------- | | Revenue | $2,673.1 million | $2,167.8 million | +23% | | GAAP Loss from Operations | $(128.5) million | $(121.5) million | -5.8% | | Non-GAAP Income from Operations | $580.1 million | $442.2 million | +31.2% | | GAAP Net Loss | $(41.5) million | $(57.7) million | +28.1% | | Non-GAAP Net Income | $534.8 million | $414.6 million | +29.0% | | GAAP Net Loss per Share, Diluted | $(0.27) | $(0.39) | +30.8% | | Non-GAAP Net Income per Share, Diluted | $3.28 | $2.60 | +26.2% | | Cash Provided by Operations | $972.5 million | $779.8 million | +24.7% | | Free Cash Flow | $726.7 million | $585.0 million | +24.2% | - Full-year FY2025 revenue reached **$2.6731 billion**, representing a **23% year-over-year increase**[6](index=6&type=chunk) [Business Developments and Future Outlook](index=2&type=section&id=Business%20Developments%20and%20Future%20Outlook) [Recent Business Highlights](index=2&type=section&id=Recent%20Business%20Highlights) Zscaler made strategic advancements in AI-driven security and zero trust, including the acquisition of Red Canary and the launch of AI Guard and Zscaler Cellular - Acquisition of Red Canary aims to redefine security operations through proxy-AI-driven threat intelligence and automation, enhancing customer cyber risk management[10](index=10&type=chunk) - Introduction of AI-driven security innovations, including Zscaler AI Guard, to block attacks, protect sensitive data, and ensure compliance, enabling enterprises to safely adopt AI[10](index=10&type=chunk) - Launch of Zscaler Cellular, the industry's first SIM-only zero trust solution for IoT/OT connectivity, eliminating VPNs and ensuring resilient global communication[10](index=10&type=chunk) - Expansion of the "Zero Trust Everywhere" suite with new advanced solutions, enabling enterprises to secure data across branch offices, multi-cloud, and remote environments with seamless end-to-end segmentation and scalability[10](index=10&type=chunk) - Achieved U.S. Department of Defense CMMC Level 2 certification and became the first independent software vendor (ISV) to earn AWS ISV Competency in Healthcare, Education, and all relaunched Government capability subcategories[10](index=10&type=chunk) - A new report utilizing Marsh McLennan's cyber loss dataset indicates that zero trust architecture can reduce cyber incident claims by **31%**, potentially saving **$465 billion annually**[10](index=10&type=chunk) [Financial Outlook](index=2&type=section&id=Financial%20Outlook) Zscaler provides optimistic financial guidance for Q1 and full-year FY2026, projecting continued revenue growth and enhanced non-GAAP profitability [First Quarter Fiscal 2026 Outlook](index=2&type=section&id=First%20Quarter%20Fiscal%202026%20Outlook) Zscaler forecasts Q1 FY2026 revenue between $772 million and $774 million, with non-GAAP operating income of $166 million to $168 million 2026 Fiscal Year First Quarter Financial Guidance | Metric | Q1 FY2026 Guidance | | :----------------------------- | :----------------- | | Revenue | $772 million to $774 million | | Non-GAAP Income from Operations | $166 million to $168 million | | Non-GAAP Net Income per Share | $0.85 to $0.86 | | Fully Diluted Shares Outstanding | ~167 million | | Non-GAAP Tax Rate | 23% | [Full Year Fiscal 2026 Outlook](index=3&type=section&id=Full%20Year%20Fiscal%202026%20Outlook) Zscaler projects full-year FY2026 Annual Recurring Revenue (ARR) between $3.676 billion and $3.698 billion, with total revenue from $3.265 billion to $3.284 billion 2026 Fiscal Year Full Year Financial Guidance | Metric | FY2026 Guidance | | :----------------------------- | :----------------- | | Annual Recurring Revenue (ARR) | $3.676 billion to $3.698 billion | | Revenue | $3.265 billion to $3.284 billion | | Non-GAAP Income from Operations | $728 million to $736 million | | Non-GAAP Net Income per Share | $3.64 to $3.68 | | Fully Diluted Shares Outstanding | ~169 million | | Non-GAAP Tax Rate | 23% | [GAAP Financial Statements](index=6&type=section&id=GAAP%20Financial%20Statements) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements of operations detail Zscaler's GAAP financial performance for Q4 and full-year FY2025, including revenue, expenses, and net loss Condensed Consolidated Statements of Operations (GAAP, in thousands) | Metric (in thousands) | Q4 FY2025 | Q4 FY2024 | FY2025 | FY2024 | | :-------------------------------- | :-------- | :-------- | :------- | :------- | | Revenue | $719,226 | $592,868 | $2,673,115 | $2,167,771 | | Cost of Revenue | $172,240 | $130,205 | $618,178 | $477,129 | | Gross Profit | $546,986 | $462,663 | $2,054,937 | $1,690,642 | | Sales and Marketing | $330,594 | $294,200 | $1,259,158 | $1,100,239 | | Research and Development | $177,606 | $139,150 | $672,485 | $499,828 | | General and Administrative | $71,028 | $56,263 | $251,754 | $212,052 | | Total Operating Expenses | $579,228 | $489,613 | $2,183,397 | $1,812,119 | | Loss from Operations | $(32,242) | $(26,950) | $(128,460) | $(121,477) | | Net Loss | $(17,578) | $(14,878) | $(41,478) | $(57,706) | | Net Loss per Share, Basic and Diluted | $(0.11) | $(0.10) | $(0.27) | $(0.39) | - Stock-based compensation expense and related employer payroll taxes were **$180.8 million** in Q4 FY2025 and **$685.5 million** for the full FY2025[25](index=25&type=chunk) [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Zscaler's total assets increased to $6.42 billion as of July 31, 2025, driven by higher cash and investments, with liabilities also rising due to convertible notes Condensed Consolidated Balance Sheets (GAAP, in thousands) | Metric (in thousands) | July 31, 2025 | July 31, 2024 | YoY Change | | :-------------------------------- | :------------ | :------------ | :--------- | | Total Assets | $6,419,888 | $4,704,968 | +36.4% | | Cash and Cash Equivalents | $2,389,023 | $1,423,080 | +67.9% | | Short-term Investments | $1,183,386 | $986,574 | +19.9% | | Accounts Receivable, net | $992,181 | $736,529 | +34.7% | | Deferred Revenue (Current) | $2,054,417 | $1,643,919 | +25.0% | | Convertible Senior Notes (Current) | $0 | $1,142,275 | -100% | | Convertible Senior Notes (Noncurrent) | $1,700,727 | $0 | N/A | | Total Liabilities | $4,620,615 | $3,430,866 | +34.7% | | Total Stockholders' Equity | $1,799,273 | $1,274,102 | +41.2% | - The company issued **$1.725 billion** in 2028 convertible senior notes and fully repaid **$1.15 billion** in 2025 convertible senior notes with cash, impacting both current and noncurrent liabilities[8](index=8&type=chunk)[27](index=27&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Zscaler's FY2025 cash flow statement shows a 24.7% increase in net cash from operating activities to $972.5 million, with significant financing activity from convertible notes Condensed Consolidated Statements of Cash Flows (GAAP, in thousands) | Metric (in thousands) | FY2025 | FY2024 | YoY Change | | :-------------------------------- | :------- | :------- | :--------- | | Net Cash Provided by Operating Activities | $972,453 | $779,846 | +24.7% | | Net Cash Used in Investing Activities | $(427,022) | $(683,180) | +37.5% | | Net Cash Provided by Financing Activities | $420,512 | $64,208 | +554.9% | | Net Increase in Cash and Cash Equivalents | $965,943 | $160,874 | +500.0% | | Cash and Cash Equivalents at End of Period | $2,389,023 | $1,423,080 | +67.9% | - Financing activities were significantly impacted by the issuance of **$1.725 billion** in 2028 convertible senior notes and the cash settlement of **$1.15 billion** in 2025 convertible senior notes[8](index=8&type=chunk)[30](index=30&type=chunk) [Non-GAAP Financial Measures](index=10&type=section&id=Non-GAAP%20Financial%20Measures) [Reconciliation of GAAP to Non-GAAP Financial Measures](index=10&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section provides detailed reconciliations of Zscaler's GAAP to non-GAAP financial metrics, including gross profit, operating income, and diluted net income per share [Non-GAAP Gross Profit and Operating Income Reconciliation](index=10&type=section&id=Non-GAAP%20Gross%20Profit%20and%20Operating%20Income%20Reconciliation) Zscaler's FY2025 non-GAAP gross profit reached $2.141 billion with an 80% margin, and non-GAAP operating income increased to $580.1 million with a 22% margin Non-GAAP Gross Profit and Operating Income Reconciliation (in thousands) | Metric (in thousands) | Q4 FY2025 | Q4 FY2024 | FY2025 | FY2024 | | :-------------------------------- | :-------- | :-------- | :------- | :------- | | GAAP Gross Profit | $546,986 | $462,663 | $2,054,937 | $1,690,642 | | Non-GAAP Gross Profit | $570,103 | $481,036 | $2,141,048 | $1,756,287 | | GAAP Gross Margin | 76% | 78% | 77% | 78% | | Non-GAAP Gross Margin | 79% | 81% | 80% | 81% | | GAAP Loss from Operations | $(32,242) | $(26,950) | $(128,460) | $(121,477) | | Non-GAAP Income from Operations | $158,870 | $127,544 | $580,131 | $442,247 | | GAAP Operating Margin | (4)% | (5)% | (5)% | (6)% | | Non-GAAP Operating Margin | 22% | 22% | 22% | 20% | [Non-GAAP Net Income per Share Reconciliation](index=11&type=section&id=Non-GAAP%20Net%20Income%20per%20Share%20Reconciliation) Zscaler's FY2025 non-GAAP net income was $534.8 million, resulting in diluted non-GAAP net income per share of $3.28, up from $2.60 in FY2024 Non-GAAP Net Income per Share Reconciliation (in thousands, except per share) | Metric (in thousands, except per share) | Q4 FY2025 | Q4 FY2024 | FY2025 | FY2024 | | :-------------------------------------- | :-------- | :-------- | :------- | :------- | | GAAP Net Loss | $(17,578) | $(14,878) | $(41,478) | $(57,706) | | Non-GAAP Net Income | $146,725 | $115,785 | $534,836 | $414,575 | | GAAP Net Loss per Share, Diluted | $(0.11) | $(0.10) | $(0.27) | $(0.39) | | Non-GAAP Net Income per Share, Diluted | $0.89 | $0.72 | $3.28 | $2.60 | | Weighted-average shares used in computing non-GAAP net income per share, diluted | 165,584 | 160,497 | 163,412 | 159,817 | - Effective August 1, 2024 (the start of FY2025), Zscaler adopted a **23% long-term projected non-GAAP tax rate** for determining non-GAAP net income and net income per share, with prior period data restated[35](index=35&type=chunk)[42](index=42&type=chunk) [Calculated Billings and Free Cash Flow Reconciliation](index=13&type=section&id=Calculated%20Billings%20and%20Free%20Cash%20Flow%20Reconciliation) Zscaler's FY2025 calculated billings grew 23.8% to $3.2462 billion, with free cash flow reaching $726.7 million and a 27% margin Calculated Billings and Free Cash Flow Reconciliation (in thousands, except percentages) | Metric (in thousands, except percentages) | Q4 FY2025 | Q4 FY2024 | FY2025 | FY2024 | | :---------------------------------------- | :-------- | :-------- | :------- | :------- | | Calculated Billings | $1,202,267 | $910,828 | $3,246,167 | $2,623,069 | | Net Cash Provided by Operating Activities | $250,604 | $203,557 | $972,453 | $779,846 | | Free Cash Flow | $171,921 | $136,318 | $726,693 | $584,950 | | Free Cash Flow Margin | 24% | 23% | 27% | 27% | [Explanation of Non-GAAP Financial Measures](index=14&type=section&id=Explanation%20of%20Non-GAAP%20Financial%20Measures) This section explains the rationale for using non-GAAP financial measures, detailing specific exclusions and defining key non-GAAP metrics for consistent performance evaluation - Non-GAAP financial information is provided to offer supplementary insights, aiding management and investors in assessing financial and business trends and ensuring consistency and comparability with past financial performance[40](index=40&type=chunk) - Expenses excluded from non-GAAP measures primarily include stock-based compensation expense and related employer payroll taxes, amortization of acquired intangible assets, amortization of debt issuance costs, acquisition-related expenses, and restructuring and other charges[41](index=41&type=chunk) - Key non-GAAP metrics are defined as follows: - **Non-GAAP Gross Profit and Non-GAAP Gross Margin**: GAAP gross profit adjusted for stock-based compensation expense and related employer payroll taxes and amortization of acquired intangible assets[43](index=43&type=chunk) - **Non-GAAP Income from Operations and Non-GAAP Operating Margin**: GAAP loss from operations adjusted for stock-based compensation expense and related employer payroll taxes, amortization of acquired intangible assets, restructuring and other charges, and acquisition-related expenses[44](index=44&type=chunk) - **Non-GAAP Net Income per Share, Diluted**: GAAP net loss adjusted for various non-GAAP items and non-GAAP income tax provision, divided by diluted weighted-average shares[45](index=45&type=chunk) - **Calculated Billings**: Revenue plus the change in deferred revenue, reflecting amounts invoiced for subscriptions and related support services[46](index=46&type=chunk) - **Annual Recurring Revenue (ARR)**: The revenue from subscription contracts over the next 12 months as of the measurement date[47](index=47&type=chunk) - **Free Cash Flow and Free Cash Flow Margin**: Net cash provided by operating activities less purchases of property, equipment, and other assets and capitalized internal-use software[48](index=48&type=chunk) [Corporate Information and Disclosures](index=3&type=section&id=Corporate%20Information%20and%20Disclosures) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section provides a cautionary note on forward-looking statements, highlighting that actual results may differ significantly due to various risks and uncertainties - This press release contains forward-looking statements regarding future financial and operating performance, including the financial outlook for Q1 and full-year FY2026, and the anticipated impact of the Red Canary acquisition[18](index=18&type=chunk) - Actual results may differ materially due to factors such as macroeconomic impacts and instability, geopolitical events, risks from AI platform use, execution challenges, managing rapid growth, limited experience with new product and subscription introductions, technological developments, length of sales cycles, and general market, political, economic, and business conditions[18](index=18&type=chunk) - Investors should not place undue reliance on these forward-looking statements and should consult additional risks and uncertainties listed in the company's periodic reports filed with the SEC, such as Form 10-Q[19](index=19&type=chunk) [Conference Call and Investor Information](index=3&type=section&id=Conference%20Call%20and%20Investor%20Information) Zscaler announced details for its Q4 FY2025 earnings conference call on September 2, 2025, and listed upcoming investor conference participations - Zscaler held a conference call on September 2, 2025, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss Q4 FY2025 results and the outlook for Q1 and full-year FY2026[14](index=14&type=chunk)[15](index=15&type=chunk) - The company plans to participate in a series of investor conferences during Q1 FY2026, including the Citi 2025 Global TMT Conference, the 2025 Truist Securities Technology Symposium, Goldman Sachs Communacopia + Technology 2025, and the Wolfe Research TMT 2025 Conference[17](index=17&type=chunk) [Investor Relations Contacts](index=4&type=section&id=Investor%20Relations%20Contacts) Contact information for Zscaler's investor relations and media relations is provided for inquiries - Ashwin Kesireddy, VP of Investor Relations, can be reached at (415) 798-1475 or ir@zscaler.com[23](index=23&type=chunk) - Pavel Radda, Media Relations contact, can be reached at press@zscaler.com[23](index=23&type=chunk)

Core Insights - Zscaler achieved a significant milestone with over $3 billion in Annual Recurring Revenue (ARR) and the highest operating margin in a quarter, driven by demand for its Zero Trust and AI security solutions [3][6][11] - The company reported a 21% year-over-year revenue growth to $719.2 million for Q4 fiscal 2025, with a 22% increase in ARR to $3.015 billion [6][7] - Zscaler's calculated billings grew by 32% year-over-year to $1.202 billion, and deferred revenue increased by 30% to $2.468 billion [6][7] Financial Highlights for Q4 Fiscal 2025 - Revenue reached $719.2 million, a 21% increase from the previous year [6][7] - GAAP net loss was $17.6 million, compared to a loss of $14.9 million in Q4 fiscal 2024, while non-GAAP net income was $146.7 million, up from $115.8 million [6][7] - Cash provided by operations was $250.6 million, representing 35% of revenue, with free cash flow of $171.9 million, or 24% of revenue [7][8] Full Year Fiscal 2025 Financial Highlights - Total revenue for the fiscal year was $2.673 billion, a 23% increase year-over-year [6][8] - GAAP net loss for the year was $41.5 million, an improvement from a loss of $57.7 million in fiscal 2024, while non-GAAP net income rose to $534.8 million from $414.6 million [6][8] - Cash provided by operations for the year was $972.5 million, or 36% of revenue, with free cash flow of $726.7 million, also 27% of revenue [8] Recent Business Developments - Zscaler acquired Red Canary to enhance its AI-driven threat intelligence and automation capabilities, aiming to improve cyber risk management [11] - The company launched AI-powered security innovations, including Zscaler AI Guard, to protect sensitive data and ensure regulatory compliance [11] - Zscaler published a report indicating a 146% increase in ransomware attacks, highlighting the need for a comprehensive Zero Trust strategy [11] Financial Outlook - For Q1 fiscal 2026, Zscaler expects revenue between $772 million and $774 million, with non-GAAP income from operations projected at $166 million to $168 million [10] - For the full year fiscal 2026, revenue is anticipated to be approximately $3.265 billion to $3.284 billion, with non-GAAP income from operations expected to be between $728 million and $736 million [10]