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ZS Q4 Earnings Call Highlights AI Tailwinds and Fiscal 2027 Outlook
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Key Takeaways
Zscaler says Security for AI bookings rose more than 50% sequentially in the fiscal fourth quarter.
ZS says metered offerings drove about 30% of new and upsell ACV, with related ARR up over 100% year over year.
Zscaler guides fiscal 2027 revenues to $3.908-$3.938B, representing growth of 16.6-17.5%.
Zscaler, Inc. (ZS - Free Report) used its fourth-quarter fiscal 2026 call to frame AI as a broad demand driver across Zero Trust, data security and newer AI offerings, while management pointed to improving organic ARR momentum.
The company reported fourth-quarter fiscal 2026 non-GAAP earnings of $1.19 per share, which beat the Zacks Consensus Estimate $1.09. Revenues of $898.2 million also surpassed the consensus estimate of $877.10 million by 2.40%.
CEO Jay Chaudhry said AI is becoming Zscaler's largest demand tailwind as enterprises face faster vulnerability exploitation and risks from autonomous agents. Security for AI bookings rose more than 50% sequentially in the fiscal fourth quarter.
CEO Jay Chaudhry highlighted the link between AI and data security. About 70% of Security for AI deals in the quarter included Zscaler's data security solution.
CEO Jay Chaudhry said Agentic SecOps will launch Sept. 9, combining Zscaler telemetry with Red Canary capabilities. Zero Trust Exchange for agents and Endpoint AI Security are expected to scale in the second half of fiscal 2027.
Zscaler Broadens Growth Beyond User Seats
CFO Kevin Rubin said non-seat-based metered offerings generated approximately 30% of new and upsell ACV in the fourth quarter and fiscal 2026. ARR tied to those offerings grew more than 100% year over year.
CFO Kevin Rubin pointed to Z-Flex as another expansion tool. Q4 Z-Flex TCV exceeded $770 million, up more than 60% sequentially, while fiscal 2026 TCV topped $1.7 billion.
CFO Kevin Rubin said Z-Flex customers recorded an average ARR uplift of nearly 30% in fiscal 2026. Zscaler ended Q4 with 785 customers above $1 million in ARR, up 18% year over year.
ZS Guides to Slower Fiscal 2027 Growth
CFO Kevin Rubin guided first-quarter fiscal 2027 revenues to $935 million to $939 million, approximately 19% growth, with a 23% non-GAAP operating margin and earnings of $1.15 to $1.16 per share.
For fiscal 2027, CFO Kevin Rubin expects revenue of $3.908 billion to $3.938 billion and ARR of $4.396 billion to $4.426 billion, representing growth of 16.6% to 17.5% and 16.6% to 17.4%, respectively.
CFO Kevin Rubin expects free cash flow margin of 23% to 23.5%. CapEx should remain elevated in the low teens as a percentage of revenue because of higher component prices, particularly memory.
Zscaler Leans on Sales Productivity
CFO Kevin Rubin said Q4 produced Zscaler's highest quarterly sales productivity, while fiscal 2026 marked its best annual productivity in four years. The company is adding dedicated new-logo sales executives.
CEO Jay Chaudhry said the sales organization has shifted from an opportunity-led model toward an account-focused approach. He also cited specialty teams and channel resources as investment areas.
CFO Kevin Rubin said sales leadership transitions should play out during the first half of fiscal 2027 and are reflected in guidance.
ZS Q&A Sharpens AI and Red Canary Timing
A Citi analyst asked what drove organic net new ARR acceleration. CFO Kevin Rubin cited broad-based strength, a steady 115% NRR through fiscal 2026 and a 75% sequential increase in the Security for AI pipeline.
A JPMorgan analyst pressed on Red Canary. CFO Kevin Rubin said Zscaler saw elevated churn and does not expect separate net new ARR contribution from Red Canary in fiscal 2027 as the technology moves into the integrated SecOps offering.
A Mizuho analyst asked about Agentic SecOps differentiation. CEO Jay Chaudhry emphasized telemetry, an agent-native model and closed-loop remediation, while saying the offering should begin contributing in the second half of fiscal 2027.
Zscaler Keeps Focus on Platform Expansion
CEO Jay Chaudhry centered the strategy on extending Zero Trust from users and workloads to AI agents and models. Zscaler exited the fiscal fourth quarter with more than 950 Zero Trust Everywhere enterprises, up from more than 700 in the fiscal third quarter.
CFO Kevin Rubin paired that expansion with a workforce restructuring affecting about 3% of employees and continued investment in sales coverage, AI and infrastructure.
ZS Rank and Style Scores Show Mixed Signals
ZS carries a Zacks Rank #5 (Strong Sell). Under the Zacks framework, that rank reflects unfavorable earnings estimate revision trends and takes precedence over Style Scores in assessing near-term prospects.
The Growth Score of B and Momentum Score of B are favorable, but the Value Score of F and VGM Score of D weaken the overall profile. The Zacks Rank can change as analysts revise estimates following the just-reported results.
View the Zacks #1 Rank List
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ZS Q4 Earnings Call Highlights AI Tailwinds and Fiscal 2027 Outlook
Key Takeaways
Zscaler, Inc. (ZS - Free Report) used its fourth-quarter fiscal 2026 call to frame AI as a broad demand driver across Zero Trust, data security and newer AI offerings, while management pointed to improving organic ARR momentum.
The company reported fourth-quarter fiscal 2026 non-GAAP earnings of $1.19 per share, which beat the Zacks Consensus Estimate $1.09. Revenues of $898.2 million also surpassed the consensus estimate of $877.10 million by 2.40%.
Zscaler, Inc. Price, Consensus and EPS Surprise
Zscaler, Inc. price-consensus-eps-surprise-chart | Zscaler, Inc. Quote
ZS Sees AI as the Primary Demand Tailwind
CEO Jay Chaudhry said AI is becoming Zscaler's largest demand tailwind as enterprises face faster vulnerability exploitation and risks from autonomous agents. Security for AI bookings rose more than 50% sequentially in the fiscal fourth quarter.
CEO Jay Chaudhry highlighted the link between AI and data security. About 70% of Security for AI deals in the quarter included Zscaler's data security solution.
CEO Jay Chaudhry said Agentic SecOps will launch Sept. 9, combining Zscaler telemetry with Red Canary capabilities. Zero Trust Exchange for agents and Endpoint AI Security are expected to scale in the second half of fiscal 2027.
Zscaler Broadens Growth Beyond User Seats
CFO Kevin Rubin said non-seat-based metered offerings generated approximately 30% of new and upsell ACV in the fourth quarter and fiscal 2026. ARR tied to those offerings grew more than 100% year over year.
CFO Kevin Rubin pointed to Z-Flex as another expansion tool. Q4 Z-Flex TCV exceeded $770 million, up more than 60% sequentially, while fiscal 2026 TCV topped $1.7 billion.
CFO Kevin Rubin said Z-Flex customers recorded an average ARR uplift of nearly 30% in fiscal 2026. Zscaler ended Q4 with 785 customers above $1 million in ARR, up 18% year over year.
ZS Guides to Slower Fiscal 2027 Growth
CFO Kevin Rubin guided first-quarter fiscal 2027 revenues to $935 million to $939 million, approximately 19% growth, with a 23% non-GAAP operating margin and earnings of $1.15 to $1.16 per share.
For fiscal 2027, CFO Kevin Rubin expects revenue of $3.908 billion to $3.938 billion and ARR of $4.396 billion to $4.426 billion, representing growth of 16.6% to 17.5% and 16.6% to 17.4%, respectively.
CFO Kevin Rubin expects free cash flow margin of 23% to 23.5%. CapEx should remain elevated in the low teens as a percentage of revenue because of higher component prices, particularly memory.
Zscaler Leans on Sales Productivity
CFO Kevin Rubin said Q4 produced Zscaler's highest quarterly sales productivity, while fiscal 2026 marked its best annual productivity in four years. The company is adding dedicated new-logo sales executives.
CEO Jay Chaudhry said the sales organization has shifted from an opportunity-led model toward an account-focused approach. He also cited specialty teams and channel resources as investment areas.
CFO Kevin Rubin said sales leadership transitions should play out during the first half of fiscal 2027 and are reflected in guidance.
ZS Q&A Sharpens AI and Red Canary Timing
A Citi analyst asked what drove organic net new ARR acceleration. CFO Kevin Rubin cited broad-based strength, a steady 115% NRR through fiscal 2026 and a 75% sequential increase in the Security for AI pipeline.
A JPMorgan analyst pressed on Red Canary. CFO Kevin Rubin said Zscaler saw elevated churn and does not expect separate net new ARR contribution from Red Canary in fiscal 2027 as the technology moves into the integrated SecOps offering.
A Mizuho analyst asked about Agentic SecOps differentiation. CEO Jay Chaudhry emphasized telemetry, an agent-native model and closed-loop remediation, while saying the offering should begin contributing in the second half of fiscal 2027.
Zscaler Keeps Focus on Platform Expansion
CEO Jay Chaudhry centered the strategy on extending Zero Trust from users and workloads to AI agents and models. Zscaler exited the fiscal fourth quarter with more than 950 Zero Trust Everywhere enterprises, up from more than 700 in the fiscal third quarter.
CFO Kevin Rubin paired that expansion with a workforce restructuring affecting about 3% of employees and continued investment in sales coverage, AI and infrastructure.
ZS Rank and Style Scores Show Mixed Signals
ZS carries a Zacks Rank #5 (Strong Sell). Under the Zacks framework, that rank reflects unfavorable earnings estimate revision trends and takes precedence over Style Scores in assessing near-term prospects.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Growth Score of B and Momentum Score of B are favorable, but the Value Score of F and VGM Score of D weaken the overall profile. The Zacks Rank can change as analysts revise estimates following the just-reported results.