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Zscaler posted 26% revenue growth; ARR hit $3.4B, and RPO rose to $6.1B.
Zscaler, Inc. (ZS - Free Report) is seeing strong momentum from its Z-Flex program, and the offering is increasingly becoming an important contributor to revenue growth. Z-Flex allows enterprises to commit to long-term spending while giving them the flexibility to add, remove or swap security modules over time without restarting procurement processes. This flexible approach is helping the company close larger and longer-duration contracts.
In the second quarter of fiscal 2026, Z-Flex bookings crossed $290 million, rising 65% sequentially. Since its launch about a year ago, the platform has generated nearly $650 million in total contract value with average contract durations of around four years. Longer commitments improve revenue visibility and strengthen customer retention.
Z-Flex is helping Zscaler deepen relationships with existing customers. Enterprises are increasingly adopting multiple modules across AI security, data protection and Zero Trust offerings under one agreement. Some customers have deployed more than 10 modules in a single deal, reflecting strong platform stickiness and cross-selling potential.
The impact is already visible in broader financial performance. Zscaler reported 26% year-over-year revenue growth in the second quarter of fiscal 2026, while annual recurring revenues (ARR) climbed 25% to $3.4 billion. Remaining performance obligations also rose 31% to $6.1 billion, signaling strong future demand.
Z-Flex could become a durable growth catalyst by accelerating deal cycles, expanding customer spending and improving long-term revenue predictability for Zscaler. The Zacks Consensus Estimate for Zscaler’s fiscal 2026 and 2027 revenues indicates year-over-year growth of 24% and 19.7%, respectively.
How Do Rivals Fare Against Zscaler?
Zscaler faces intense competition from Palo Alto Networks, Inc. (PANW - Free Report) and CrowdStrike Holdings, Inc. (CRWD - Free Report) , which have similar platform-driven growth strategies. Both companies are using flexible bundles and integrated platforms to expand customer spending.
Palo Alto Networks focuses on subscription pricing and bundled offerings that combine firewalls, cloud security and XDR tools into integrated suites. These bundles can deliver 10-15% savings versus buying products separately, which encourages customers to adopt Palo Alto Networks’ broader platform packages rather than single solutions. In the second quarter of fiscal 2026, PANW’s next-generation security ARR grew 33% year over year to $6.33 billion, where the platformization strategy was a key driver.
CrowdStrike Holdings uses a similar expansion strategy through its Falcon platform bundles and the Falcon Flex licensing model. These models allow customers to add modules without new procurement cycles. In the fourth quarter of fiscal 2026, ARR from CrowdStrike Holdings’ Falcon Flex customers reached $1.69 billion, growing more than 120% year over year.
Zscaler’s Price Performance, Valuation and Estimates
Shares of Zscaler have plunged 38.1% over the past year compared to the Zacks Security industry’s rise of 5.2%.
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 6.41, significantly below the industry’s average of 12.73.
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 13%, respectively. Estimates for fiscal 2026 and 2027 have remained unchanged over the past 60 days.
View the Zacks #1 Rank List
Image: Shutterstock
Zscaler's Z-Flex Adoption Rises: Is It a New Revenue Growth Catalyst?
Key Takeaways
Zscaler, Inc. (ZS - Free Report) is seeing strong momentum from its Z-Flex program, and the offering is increasingly becoming an important contributor to revenue growth. Z-Flex allows enterprises to commit to long-term spending while giving them the flexibility to add, remove or swap security modules over time without restarting procurement processes. This flexible approach is helping the company close larger and longer-duration contracts.
In the second quarter of fiscal 2026, Z-Flex bookings crossed $290 million, rising 65% sequentially. Since its launch about a year ago, the platform has generated nearly $650 million in total contract value with average contract durations of around four years. Longer commitments improve revenue visibility and strengthen customer retention.
Z-Flex is helping Zscaler deepen relationships with existing customers. Enterprises are increasingly adopting multiple modules across AI security, data protection and Zero Trust offerings under one agreement. Some customers have deployed more than 10 modules in a single deal, reflecting strong platform stickiness and cross-selling potential.
The impact is already visible in broader financial performance. Zscaler reported 26% year-over-year revenue growth in the second quarter of fiscal 2026, while annual recurring revenues (ARR) climbed 25% to $3.4 billion. Remaining performance obligations also rose 31% to $6.1 billion, signaling strong future demand.
Z-Flex could become a durable growth catalyst by accelerating deal cycles, expanding customer spending and improving long-term revenue predictability for Zscaler. The Zacks Consensus Estimate for Zscaler’s fiscal 2026 and 2027 revenues indicates year-over-year growth of 24% and 19.7%, respectively.
How Do Rivals Fare Against Zscaler?
Zscaler faces intense competition from Palo Alto Networks, Inc. (PANW - Free Report) and CrowdStrike Holdings, Inc. (CRWD - Free Report) , which have similar platform-driven growth strategies. Both companies are using flexible bundles and integrated platforms to expand customer spending.
Palo Alto Networks focuses on subscription pricing and bundled offerings that combine firewalls, cloud security and XDR tools into integrated suites. These bundles can deliver 10-15% savings versus buying products separately, which encourages customers to adopt Palo Alto Networks’ broader platform packages rather than single solutions. In the second quarter of fiscal 2026, PANW’s next-generation security ARR grew 33% year over year to $6.33 billion, where the platformization strategy was a key driver.
CrowdStrike Holdings uses a similar expansion strategy through its Falcon platform bundles and the Falcon Flex licensing model. These models allow customers to add modules without new procurement cycles. In the fourth quarter of fiscal 2026, ARR from CrowdStrike Holdings’ Falcon Flex customers reached $1.69 billion, growing more than 120% year over year.
Zscaler’s Price Performance, Valuation and Estimates
Shares of Zscaler have plunged 38.1% over the past year compared to the Zacks Security industry’s rise of 5.2%.
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 6.41, significantly below the industry’s average of 12.73.
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 13%, respectively. Estimates for fiscal 2026 and 2027 have remained unchanged over 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.