Zscaler reported adjusted earnings of $1.19 per share for the quarter ending July 31, exceeding analyst expectations of $1.09. Revenue grew 25% year-over-year to $898.2 million, surpassing the predicted $877 million.
The company's annual recurring revenue reached $3.771 billion, a 25% increase. This total includes $141 million from the acquisition of Red Canary Inc., which was completed on August 1, 2025, for $675 million. Excluding Red Canary, the growth rate was 20%.
Adjusted operating income hit a record 24% of revenue, totaling $218.4 million. The unadjusted net loss narrowed to $3.4 million from $17.6 million. Deferred revenue increased by 19% to $2.926 billion.
Free cash flow dropped to $60.8 million, or 7% of revenue, down from $171.9 million and 24% previously. This decline was driven by capital expenditures and internal-use software costs, which rose to $218.5 million from $78.7 million.
Zscaler is expanding its product line with Agentic SecOps, data security, and Security for AI, alongside its Zero Trust SASE products. The company is shifting its growth strategy from seat-based pricing to a broader model, including the Z-Flex buying program.
For the first quarter of fiscal 2027, Zscaler forecasts revenue between $935 million and $939 million, with adjusted earnings of $1.15 to $1.16 per share. For the full fiscal year, it expects revenue of $3.908 billion to $3.938 billion and annual recurring revenue of $4.396 billion to $4.426 billion.
