Zscaler(US:ZS)2026-02-26 21:09Financial Performance - For the six months ended January 31, 2026, revenue was $1,603.9 million, a 25.6% increase from $1,275.9 million in the same period of 2025[129]. - The net loss for the six months ended January 31, 2026, was $45.9 million, compared to a net loss of $19.8 million for the same period in 2025, indicating an increase in losses[129]. - Non-GAAP gross profit for the six months ended January 31, 2026, was $1,284.1 million, compared to $1,026.8 million for the same period in 2025, reflecting a growth of 24.9%[143]. - Annual Recurring Revenue (ARR) as of January 31, 2026, reached $3,359 million, up 25.1% from $2,683 million in 2025[149]. - Total revenue for the three months ended January 31, 2026, was $815,751 thousand, representing a 26% increase from $647,900 thousand in 2025[167]. - Revenue for the six months ended January 31, 2026, also increased by $328.0 million, or 26%, compared to the same period in 2025, with similar drivers as the quarterly results[187]. Customer Growth - As of July 31, 2025, the company had over 9,400 customers, up from over 8,650 customers in 2024, representing a growth of approximately 8.6%[133]. - The company had approximately 40% of the Forbes Global 2000 as customers as of July 31, 2025, indicating strong market penetration[133]. - Revenue for the three months ended January 31, 2026, increased by $167.9 million, or 26%, compared to the same period in 2025, driven primarily by additional subscriptions from existing customers and a 15% increase in the customer base[170]. Expenses and Investments - Sales and marketing expenses for the three months ended January 31, 2026, were $368,946 thousand, an increase of 19.8% from $307,872 thousand in 2025[167]. - Research and development expenses for the three months ended January 31, 2026, totaled $229,137 thousand, up 34% from $170,860 thousand in 2025[167]. - Operating expenses for the three months ended January 31, 2026, were $676,264 thousand, compared to $539,542 thousand in 2025, reflecting increased investment in growth[167]. - Sales and marketing expenses rose by $128.5 million, or 21%, to $742.5 million for the six months ended January 31, 2026, primarily due to increased employee-related expenses[190]. - Research and development expenses increased by $104.5 million, or 32%, to $325.1 million for the six months ended January 31, 2026, driven by higher employee-related costs and expenses related to cloud hosting and software[191]. - General and administrative expenses grew by $26.2 million, or 22%, to $143.8 million for the six months ended January 31, 2026, mainly due to increased employee-related expenses[192]. Cash Flow and Liquidity - Net cash provided by operating activities for the six months ended January 31, 2026, was $652.4 million, despite a net loss of $45.9 million, driven by non-cash charges of $629.1 million[211]. - Free cash flow for the three months ended January 31, 2026, was $169,129 thousand, representing a 17.9% increase from $143,428 thousand in 2025[148]. - Net cash provided by operating activities for the three months ended January 31, 2026, was $204,073 thousand, an increase of 13.7% from $179,433 thousand in 2025[148]. - As of January 31, 2026, the company had cash, cash equivalents, and short-term investments totaling $3,512.8 million[203]. - Net cash used in investing activities during the six months ended January 31, 2026, totaled $1,863.1 million, primarily due to purchases of short-term investments of $1,401.5 million and payments for business acquisitions of $672.8 million[214]. Market Outlook - The company expects to continue incurring net losses as it invests in sales, marketing, and research and development to enhance its cloud platform[129]. - The company anticipates that macroeconomic conditions may impact future demand for subscriptions to its cloud platform[131]. - The company expects gross profit to increase in absolute dollars and gross margin to increase slightly over the long term[156]. Interest and Other Financial Metrics - Interest income increased by $3.0 million, or 10%, attributed to a higher balance of cash equivalents and short-term investments[176]. - Interest expense increased by $1.9 million, or 80%, primarily due to higher amortization of debt issuance costs[178]. - Other income (expense), net improved by $5.7 million, driven by fluctuations in foreign currency transactions[179]. - Provision for income taxes increased by $21.8 million, primarily due to the prior year's non-recurring release of valuation allowance on U.K. deferred tax assets[180]. - The effect of a hypothetical 100 basis point change in interest rates would have changed the fair value of the company's investments in available-for-sale securities by $31.4 million[222].