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Zscaler, Inc.’s (ZS - Free Report) second-quarter fiscal 2026 results highlight a sharp rise in remaining performance obligations (RPO), a key indicator of future revenue visibility. In the second quarter, RPO grew 31% year over year to nearly $6.1 billion, reflecting strong customer commitments and a healthy pipeline of contracted business yet to be recognized as revenues.
This growth is meaningful because RPO captures long-term deals and multi-year contracts. Zscaler’s increasing focus on larger enterprise customers and bundled platform sales is driving this trend. The company closed a record number of $1 million-plus deals in the quarter, while its growing base of high-value customers continued to expand. It ended the second quarter with 728 customers now generating more than $1 million in annual recurring revenues (ARR).
The robust growth in RPO is driven by strong demand across Zscaler’s three core pillars — AI security, Zero Trust Everywhere and Data Security Everywhere platforms. Programs like Z-Flex are also playing a key role by encouraging multi-year commitments and increasing deal sizes. This not only boosts upfront bookings but also improves long-term revenue predictability.
Introduced just four quarters ago (the third quarter of fiscal 2025), Z-Flex already delivered more than $290 million in total contract value bookings in the second quarter of fiscal 2026, a 65% sequential increase. The program gives customers the flexibility to adopt multiple modules over time under predictable pricing, making it easier to expand usage. This model encourages long-term commitments, strengthens customer relationships and supports sustainable long-term growth.
Growing deal sizes are driving Zscaler’s overall financial performance. In the second quarter, the company’s revenues grew 26% year over year to $816 million, while ARR increased 24% to $3.36 billion. The 31% rise in RPO signals solid visibility into future revenue streams. If execution remains strong, this backlog of committed business could translate into steady and durable growth for Zscaler. The Zacks Consensus Estimate for fiscal 2026 revenues is pegged at $3.31 billion, indicating year-over-year growth of 23.9%.
How Do Competitors Fare Against Zscaler?
Zscaler’s major peers, including Palo Alto Networks, Inc. (PANW - Free Report) and CrowdStrike Holdings, Inc. (CRWD - Free Report) , are also witnessing strong ARR growth driven by growing adoption of their artificial intelligence (AI)-enabled security solutions.
Palo Alto Networks has been expanding its platform approach across cloud, network and AI security, driving large, multi-year deals. Its ability to bundle products under integrated platforms like Prisma Cloud is helping increase contract sizes and improve revenue visibility over time. In the second quarter of fiscal 2026, Palo Alto Networks’ next-generation security ARR surged 33% year over year to $6.33 billion.
CrowdStrike Holdings is leveraging its Falcon platform and AI-native architecture to secure endpoints and workloads. Its focus on real-time threat detection and large-scale data analytics positions it well to handle AI-driven cyber risks. CrowdStrike Holdings is also expanding into identity and cloud security, areas where AI agents are increasingly active. In the fourth quarter of fiscal 2026, CrowdStrike Holdings’ ARR increased 24% year over year to $5.25 billion.
Zscaler’s Price Performance, Valuation and Estimates
Shares of Zscaler have plunged 30.5% over the past year, while the Zacks Security industry has fallen 1.7%.
Zscaler One-Year Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, ZS trades at a forward price-to-sales ratio of 5.73, significantly below the industry’s average of 10.30.
Zscaler Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Zscaler’s fiscal 2026 and 2027 earnings implies a year-over-year increase of 22.9% and 12.8%, respectively. Estimates for fiscal 2026 and 2027 have been revised upward in the past 60 days.
View the Zacks #1 Rank List
Image: Shutterstock
Is Zscaler's 31% RPO Growth Signaling Strong Future Demand?
Key Takeaways
Zscaler, Inc.’s (ZS - Free Report) second-quarter fiscal 2026 results highlight a sharp rise in remaining performance obligations (RPO), a key indicator of future revenue visibility. In the second quarter, RPO grew 31% year over year to nearly $6.1 billion, reflecting strong customer commitments and a healthy pipeline of contracted business yet to be recognized as revenues.
This growth is meaningful because RPO captures long-term deals and multi-year contracts. Zscaler’s increasing focus on larger enterprise customers and bundled platform sales is driving this trend. The company closed a record number of $1 million-plus deals in the quarter, while its growing base of high-value customers continued to expand. It ended the second quarter with 728 customers now generating more than $1 million in annual recurring revenues (ARR).
The robust growth in RPO is driven by strong demand across Zscaler’s three core pillars — AI security, Zero Trust Everywhere and Data Security Everywhere platforms. Programs like Z-Flex are also playing a key role by encouraging multi-year commitments and increasing deal sizes. This not only boosts upfront bookings but also improves long-term revenue predictability.
Introduced just four quarters ago (the third quarter of fiscal 2025), Z-Flex already delivered more than $290 million in total contract value bookings in the second quarter of fiscal 2026, a 65% sequential increase. The program gives customers the flexibility to adopt multiple modules over time under predictable pricing, making it easier to expand usage. This model encourages long-term commitments, strengthens customer relationships and supports sustainable long-term growth.
Growing deal sizes are driving Zscaler’s overall financial performance. In the second quarter, the company’s revenues grew 26% year over year to $816 million, while ARR increased 24% to $3.36 billion. The 31% rise in RPO signals solid visibility into future revenue streams. If execution remains strong, this backlog of committed business could translate into steady and durable growth for Zscaler. The Zacks Consensus Estimate for fiscal 2026 revenues is pegged at $3.31 billion, indicating year-over-year growth of 23.9%.
How Do Competitors Fare Against Zscaler?
Zscaler’s major peers, including Palo Alto Networks, Inc. (PANW - Free Report) and CrowdStrike Holdings, Inc. (CRWD - Free Report) , are also witnessing strong ARR growth driven by growing adoption of their artificial intelligence (AI)-enabled security solutions.
Palo Alto Networks has been expanding its platform approach across cloud, network and AI security, driving large, multi-year deals. Its ability to bundle products under integrated platforms like Prisma Cloud is helping increase contract sizes and improve revenue visibility over time. In the second quarter of fiscal 2026, Palo Alto Networks’ next-generation security ARR surged 33% year over year to $6.33 billion.
CrowdStrike Holdings is leveraging its Falcon platform and AI-native architecture to secure endpoints and workloads. Its focus on real-time threat detection and large-scale data analytics positions it well to handle AI-driven cyber risks. CrowdStrike Holdings is also expanding into identity and cloud security, areas where AI agents are increasingly active. In the fourth quarter of fiscal 2026, CrowdStrike Holdings’ ARR increased 24% year over year to $5.25 billion.
Zscaler’s Price Performance, Valuation and Estimates
Shares of Zscaler have plunged 30.5% over the past year, while the Zacks Security industry has fallen 1.7%.
Zscaler One-Year Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, ZS trades at a forward price-to-sales ratio of 5.73, significantly below the industry’s average of 10.30.
Zscaler Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Zscaler’s fiscal 2026 and 2027 earnings implies a year-over-year increase of 22.9% and 12.8%, respectively. Estimates for fiscal 2026 and 2027 have been revised upward in the past 60 days.
Image Source: Zacks Investment Research
Zscaler currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.