Zscaler (ZS) Morgan Stanley Technology, Media & Telecom Conference 2026 summary

Business performance and growth drivers

• Achieved 25% ARR growth in fiscal Q2, with a record number of $1 million deals and strong performance from the Z-Flex flexible buying program, totaling $290 million in bookings for the quarter and $650 million since launch.

• Raised full-year ARR targets, with consistent net new ARR expectations and a positive outlook for the second half of the year.

• Non-seat-based ARR reached 25%, driven by AI security and data security modules, with expectations for continued growth in these areas.

• Data security, Zero Trust, and AI security businesses now exceed $1 billion in combined ARR, growing faster than the overall business.

• Z-Flex is driving larger, longer-term deals and facilitating easier upsell across the product suite.

Product innovation and AI security

• AI is viewed as a net positive, with security for AI deployments seen as essential due to the risks posed by rapid hacker adoption.

• Launched AI Protect, an integrated solution for AI visibility, secure access, vulnerability assessment, and governance.

• Zero Trust Exchange is being extended to secure AI agents, addressing new productivity and security challenges as agent adoption grows.

• AI security suite and agent security products are token-based, reflecting a shift in monetization models.

• Integration of Red Canary’s agentic SecOps technology is advancing, aiming to disrupt the SecOps market with AI-driven solutions.

Market positioning and competitive landscape

• Maintains strong leadership in large enterprise SASE, with competition decreasing in this segment and more competitors present downmarket.

• Differentiation is based on Zero Trust architecture, comprehensive data security, and the ability to replace legacy firewalls and SD-WAN.

• Significant opportunity remains for new customer acquisition and upsell, with less than 25% penetration in the targeted enterprise base.

• Channel and GSI partnerships are improving, supporting complex transformations and driving increased sales productivity.