ZS earnings call summary

Prepared Highlights

• Q4 revenue $719M, +21% YoY, exceeding guidance high end (prepared); full FY revenue $2.7B, +23% YoY (prepared)
• ARR surpassed $3B, +22% YoY; Zscaler is one of only two pure-play SaaS security vendors to reach this milestone (CEO, CFO)
• Operating margin 22.1% in Q4, a quarterly record, +60 bps YoY (CEO, CFO)
• Free cash flow margin 24% in Q4; FY 2025 FCF margin 27%, operating at rule of 50 (CEO, CFO)
• RPO $5.8B, +31% YoY; current RPO ~46% (CFO)
• Gross margin 79.3% in Q4 (vs 81.1% YoY), impacted by one-time private cloud deployment; expected to return to 80% in Q1 (CFO)
• Data center CapEx 8% of revenue in Q4; FY 2025 data center CapEx 6% of revenue (CFO)
• Over 9,400 customers; 664 customers >$1M ARR; 3,494 customers >$100K ARR (CFO)
• AI security, zero trust everywhere, and data security everywhere combined surpassed $1B ARR in Q4 (CEO)
• SecOps ARR grew >85% YoY (CEO); ZDX Advanced Plus bookings grew 58% YoY in FY 2025 (CEO)
• Zero Trust Everywhere enterprises: over 350 as of FY 2025 end (goal was 390 by FY 2026) (CEO)
• Data security everywhere ARR ~$425M (CEO)
• Z Flex program generated >$100M TCV bookings in Q4, >50% sequential growth (CEO)
• Red Canary acquisition closed Aug 1; ARR at close ~$83M; FY 2026 ARR guidance assumes $95M contribution, revenue guidance assumes ~$90M (CFO)

Official guidance (non-GAAP):

• Q1 FY 2026: revenue $772M–$774M (+23% YoY); gross margin ~80%; operating profit $166M–$168M; EPS $0.85–$0.86 (167M diluted shares) (CFO)
• Full FY 2026: ARR $3.676B–$3.698B (+21.9%–22.7% YoY); revenue $3.265B–$3.284B (+22%–23% YoY); operating profit $728M–$736M; EPS $3.64–$3.68 (169M diluted shares); FCF margin 26%–26.5% (CFO)

Mgmt quotes:

• "We had an outstanding Q4, and I am very pleased to share our strong growth which once again exceeded our guidance." (CEO)
• "For fiscal year 2025, with our revenue growth of 23% and free cash flow margin of 27%, we operated at rule of 50." (CEO)
• "Our ThreatLabs report revealed that AIML transactions on our cloud increased 3500% in the past year." (CEO)
• "We are one of only two pure-play SaaS security companies to surpass this level of ARR." (CFO)
• "Our Q4 results represent a strong finish to fiscal 2025, reinforcing the demand for our solutions and our operational scale." (CFO)

Prepared Metrics

Q&A Batch (1-5 of 16)

Q1 — Saket Kalia

• Topic: SASE replacing firewall appliances
• Key points:
  • Branch spiral appliances are "the first to go"; zero-trust branch adoption accelerating since launch.
  • Only two products with "no demand generation" due to high demand: zero-trust branch and AI security.
  • Data center firewalls will go second, virtual firewalls third; firewalls expected to become "like mainframes."
  • Zscaler prefers "zero trust SASE" term as SASE includes firewall and SD-WAN.
• Mgmt stance: Bullish — sees acceleration in branch firewall elimination driven by zero-trust architecture.

Q2 — Brad Zelnick

• Topic: Z Flex program and sales strategy
• Key points:
  • Z Flex TCV bookings grew 50% sequentially.
  • Based on two foundations: architectural workshops to eliminate point products, and business value assessment quantifying cost savings.
  • Offers flexible pricing: customers can choose 6 modules, with ability to add within 3–5 year term via a rate card.
  • Program is 4–4.5 months old, started with large customers, now expanded to next tier and partners.
• Mgmt stance: Bullish — Z Flex enables larger, better deals by fitting customer budgets.

Q3 — Mike Cikos

• Topic: Zero Trust Everywhere customer profile and sales incentives
• Key points:
  • Full zero trust requires users, branches (zero-trust branch), and cloud workloads; AI workloads drive cloud demand.
  • Many deals where ARR becomes "2x or 3x and sometimes higher." Workloads grow over time even if users don't.
  • Sales team not given per-product targets, but additional incentives for new products/logos.
• Mgmt stance: Bullish — customer journey from users to branches to cloud is natural and expanding, with strong demand for additional pillars.

Q4 — Meta Marshall

• Topic: AI security opportunity
• Key points:
  • Secured public AI (e.g., Gemini) for ~18 months; ensures data doesn't leak to public apps.
  • Recently launched "AI guardrails" for private models in data centers or public cloud; early stage with "tremendous interest."
  • Next focus: agent-to-agent zero-trust communication, with "serious amount of effort" and expected to be a sizable opportunity.
• Mgmt stance: Bullish — AI security is a natural and growing area with strong pipeline.

Q5 — Joshua Tilton

• Topic: Net new ARR growth guidance for fiscal 2026
• Key points:
  • Guiding for "high single-digit net new ARR growth in fiscal 2026 on an organic basis" (excluding Red Canary).
  • Request for fiscal 2025 net new ARR growth for comparison not answered with a specific number.
• Mgmt stance: Neutral — guidance stated but no acceleration/deceleration comparison provided from prior year.

Q&A Batch (6-10 of 16)

Q6 — Andrew Nowinski

• Topic: 数据安全组合的客户扩展与交叉销售机会
• Key points:
  • 数据安全ARR为4.25亿美元，本季度新增约7500万美元。
  • 仅30%的数据安全客户拥有3个或以上模块，仅10%拥有4个或以上模块。
  • 数据安全拥有约8个模块，客户模块数通常从0增至4或2增至5/7。
• Mgmt stance: 看好——管理层认为数据安全模块扩展空间大，若独立运营将成为最大数据安全公司之一。

Q7 — Kevin Rubin

• Topic: Z Flex对财务模型的影响
• Key points:
  • Z Flex适用于新客户和现有客户，且不会从根本上改变财务模型。
  • Z Flex显著提升了潜在交易规模，因客户可灵活部署多种模式并获得价格透明度。
  • 战术性购买Z Flex对任何财务指标无直接影响，但有助于增加TCV和ARR。
• Mgmt stance: 中性——管理层强调Z Flex是提升交易规模的工具，但对核心财务指标无直接后果。

Q8 — Gray Powell

• Topic: Zero Trust Everywhere中分支解决方案的驱动因素
• Key points:
  • 用户端的零信任最为成熟；云端零信任增长良好；分支解决方案需求“超出所有预期”。
  • 分支需求主要来自SD-WAN替换，因SD-WAN存在运营复杂性和横向威胁移动风险。
  • 分支解决方案提供即插即用能力，已发展至成熟阶段。
• Mgmt stance: 看好——管理层认为分支解决方案无需需求生成，因其解决了SD-WAN的安全核心问题。

Q9 — Eric Heath

• Topic: 零售行业中Zero Trust分支的机会
• Key points:
  • 零售是“优秀”板块，典型部署从小型商店开始，逐步扩展至工厂和厂房。
  • 零售分支通常简单且相似，部署和推广更易执行。
  • 管理层计划在FY26将零售作为零信任分支业务增长的关键领域之一。
• Mgmt stance: 看好——管理层认为零售分支结构简单、部署便捷，是FY26增长的核心来源。

Q10 — Patrick Colville

• Topic: 新兴产品占比上升及FY26增长重点
• Key points:
  • 新兴产品占净新增ACV比例从22%提升至27%。
  • FY26将聚焦三大增长领域：AI安全、Zero Trust Everywhere、数据安全，每块均为十亿美元ARR级别。
  • AI安全目前规模较小，但预计将以更快速度增长；ZPA将受益于零信任微分割等新功能。
• Mgmt stance: 看好——管理层认为三大增长领域均具备高ARR潜力，并强调销售执行力将持续提升。

Q&A Batch (11-15 of 16)

Q11 — Joseph Gallo

• Topic: 首次财年指引方法无变化，转向ARR指标
• Key points:
  • 指引哲学无根本变化，仍将保持历史审慎态度
  • 联邦业务在2025财年占整体业务高个位数百分比，预计未来表现相似
  • 从计费（billings）转向年度经常性收入（ARR）作为指引核心指标
  • 宏观环境无预期变化，指引中未纳入宏观假设变动
• Mgmt stance: 谨慎（沿用历史审慎方法，主动切换指标以确保与业务更好对齐）

Q12 — Brian Essex

• Topic: Agentic Operations（SecOps和IT Ops）的客户对话与策略
• Key points:
  • 安全运营方向：整合Avalor漏洞管理、资产暴露管理，结合Red Canary构建统一平台；客户支付模式转向按结果付费，而非按数据量计费
  • IT运营方向：扩展ZDX覆盖到非人类实体（机器对机器），用于检测代理和模型间的性能与延迟问题
  • 传统SIEM市场被视为可颠覆领域，客户不需再自建数据湖
• Mgmt stance: 乐观（认为两个方向均具备重大机遇，产品差异化明确）

Q13 — Shrenik Kothari

• Topic: AI安全机遇与新客户获取策略
• Key points:
  • 新客户占比：约45%的财富500强和近40%的全球2000强尚未使用Zscaler
  • 平台规模足够大，向上销售与新客户获取均为重要机会
  • AI安全等新解决方案主要通过现有客户基础的向上销售路径推进，可利用已有CSO/CIO关系作为设计合作伙伴
• Mgmt stance: 乐观（现有客户关系提供信任基础，新方案亦能打开新客户大门）

Q14 — Todd Weller

• Topic: 下一代SecOps平台时间表与市场竞争
• Key points:
  • 分两阶段：先聚焦暴露管理（统一漏洞管理、资产暴露、风险360），后推进安全运营
  • 数据编织架构差异化：不依赖保留全部日志，而是合成数据并建立实体关系，分析师不需处理数十亿日志
  • Red Canary已展现出互补作用，有客户反馈其当前SIEM无法检测某些威胁，而Red Canary可胜任
  • 完整解决方案预计在几个季度内推出，客户迁移需分阶段（如先减少50TB遗留数据）
• Mgmt stance: 谨慎乐观（承认需要时间，但认为市场已准备好被颠覆，关键组件已齐备）

Q15 — Jay Chaudhry

• Topic: Red Canary整合优先事项与销售策略
• Key points:
  • 首要任务：将Red Canary的agentic检测/调查技术与Zscaler数据编织深度集成，构建一体化解决方案
  • 销售团队分工：Zscaler大团队挖掘商机，Red Canary专业团队负责成交
  • MDR业务仍是Red Canary重要组成部分，持续服务客户，数据提升带来品牌和获客改善
• Mgmt stance: 乐观（产品整合与市场执行均进展顺利，预期良好结果）

Q&A Batch (16-16 of 16)

Q16 — Andrew DeCasperi

• Topic: Red Canary ARR contribution guidance for FY2026
• Key points:
  • At close, Zscaler recognized $83 million of ARR from Red Canary (not the previously mentioned ~$70 million half of $140 million).
  • FY2026 guidance assumes $95 million contribution from Red Canary, implying low double-digit growth.
  • Management notes MER providers historically have higher churn than Zscaler’s core business; this is a new segment.
• Mgmt stance: Neutral – taking a “prudent approach” to Red Canary ARR due to higher expected churn and new business segment dynamics.