Zscaler stock surged after the cloud security company reported a strong fiscal fourth quarter with revenue of $898.2 million, up 25% year-over-year, and non-GAAP operating margin reaching a record 24%, up from 22% in the same period last year.
The company’s adjusted earnings per share of $1.19 beat consensus estimates, extending a streak of beating EPS expectations to ten straight quarters, according to financial reports released after market close on September 3, 2026. Annual recurring revenue (ARR) grew 25% year-over-year to $3,771 million, with net new ARR reaching $246 million during the quarter.
Chief Financial Officer Kevin Rubin attributed the margin expansion to a broadening growth engine that extends beyond traditional user-based licensing. “Our growth engine continues to broaden beyond users, with a strong contribution from non-seat-based solutions, continued Z-Flex momentum, record large-deal activity, and improving sales productivity,” Rubin said in the earnings announcement.
Zscaler’s margin improvement reflects a strategic shift in its product mix and operational efficiency. The company’s gross margin remained stable at approximately 77% in the quarter, while the company invested heavily in research and development and sales infrastructure to support future growth. Operating cash flow reached $279.3 million, or 31% of revenue, compared to $250.6 million, or 35% of revenue, in the prior-year quarter.
The cybersecurity sector has experienced a strong rally in 2026 as enterprises accelerate spending on cloud security and Zero Trust architecture amid rising AI-driven threats. CrowdStrike and Okta both posted earnings beats and raised guidance in late August, citing accelerating demand for AI-powered security solutions. Zscaler’s CEO Jay Chaudhry emphasized the company’s positioning in this environment, noting that AI represents “one of the most significant opportunities in Zscaler’s history.”
For the full fiscal year 2026, Zscaler reported revenue of $3,353 million, up 25% year-over-year, and non-GAAP operating margin of 23%, up from 22% in fiscal 2025. The company also raised its full-year ARR guidance to $3.74 billion to $3.75 billion, representing growth of approximately 24%.
Looking ahead, Zscaler guided for fiscal 2027 ARR growth of 16.6% to 17.4%, slightly below fiscal 2026’s 25% growth rate, reflecting a natural deceleration as the company scales. Revenue is expected to grow 16.6% to 17.5% to approximately $3.908 billion to $3.938 billion. The company projects non-GAAP operating income growth of approximately 21% and maintained its free cash flow margin guidance at 23.0% to 23.5%.
Analysts responded positively to the results. Mizuho analyst Gregg Moskowitz raised the firm’s price target on Zscaler to $210 from $185, maintaining an Outperform rating. The broader analyst consensus, with a median price target of $200, reflects confidence in the company’s ability to sustain profitable growth despite the moderation in year-over-year expansion rates.
Sources
- Business Insider — official Zscaler press release on Q4 FY2026 earnings results, revenue, ARR, operating margin, and guidance
- SeekingAlpha — confirmation of Q4 earnings beat, revenue growth to $898M, and ARR growth to $3.77B
- 247wallst — verification of adjusted EPS of $1.19 and streak of ten consecutive EPS beats
- Investors.com — Q4 earnings details and stock reaction following announcement
- StockAnalysis — Mizuho analyst target price increase and Outperform rating
