ZS · Zscaler, Inc.

Zscaler's Q3 FY2026 results underscore robust execution in the cloud security market, with revenue of $850.5 million growing 25% year-over-year, driven by strong demand for its Zero Trust SASE architecture. The company achieved a record non-GAAP operating margin of 23%, up from 22% a year ago, reflecting improved operating leverage. ARR reached $3.525 billion, up 25% year-over-year, with net new ARR of $166 million in the quarter; excluding the Red Canary acquisition, ARR grew 21% to $3.398 billion. GAAP net loss widened to $13.9 million from $4.1 million, primarily due to higher stock-based compensation and acquisition-related costs, while non-GAAP net income rose to $177.9 million from $136.8 million. Free cash flow grew 14% to $136.0 million, though free cash flow margin contracted to 16% from 18% due to increased capex. Management commentary highlighted the strategic importance of AI-driven security, with CEO Jay Chaudhry emphasizing the company's positioning for the AI era and CFO Kevin Rubin noting record profitability. The company raised its full-year fiscal 2026 guidance: revenue now expected at $3.3295-$3.3325 billion (up from $3.309-$3.322 billion), ARR at $3.740-$3.749 billion (up from $3.730-$3.745 billion), and non-GAAP income from operations at $755-$757 million (up from $742-$748 million). For Q4 FY2026, revenue guidance of $875-$878 million implies approximately 22% growth, with non-GAAP EPS of $1.08-$1.09. The guidance reflects confidence in sustained demand and margin expansion, though free cash flow margin guidance was lowered to 22.8-23.3% from 26.5-27% due to higher capex. Overall, the results and raised outlook signal strong momentum, with the Red Canary acquisition contributing to ARR growth and the company's AI-focused strategy resonating with customers.