Zscaler (ZS) Q2 2026 earnings summary

Executive summary

• Revenue for Q2 FY26 grew 26% year-over-year to $816 million, driven by strong demand for AI security, Zero Trust, and Data Security solutions, with robust adoption of AI Protect and agentic operations.

• ARR increased 25% year-over-year to $3.36 billion, with 21% growth excluding Red Canary acquisition.

• Non-GAAP operating margin reached 22%, with non-GAAP operating income at $181 million, and non-GAAP net income per share up to $1.01.

• Major acquisitions included Red Canary ($651.4M), SPLXAI ($40.6M), and SquareX ($113M), expanding AI and Zero Trust capabilities.

• Ended Q2 with $3.5 billion in cash and equivalents, supporting ongoing operations and strategic initiatives.

Financial highlights

• Q2 revenue reached $816 million, up 26% year-over-year and 4% sequentially, exceeding guidance.

• Net new ARR was $156 million, up 19% year-over-year; total ARR reached $3.36 billion, up 25%.

• Free cash flow margin was 20.7% for Q2; operating cash flow was $204 million, up 14% year-over-year.

• Non-GAAP operating income was $181 million, up 29% year-over-year; non-GAAP operating margin improved to 22%.

• GAAP net loss was $34.3 million, reflecting higher operating expenses and investments in growth.

Outlook and guidance

• Q3 FY26 revenue expected at $834–$836 million (23% year-over-year growth); gross margin ~80%.

• Full-year FY26 ARR guidance raised to $3.730–$3.745 billion (24% growth).

• Full-year FY26 revenue guidance of $3.309–$3.322 billion (24% growth); operating profit of $742–$748 million (28–29% growth).

• Free cash flow margin expected at 26.5–27% for the year.

• Management anticipates continued investment in sales, marketing, and R&D, with operating losses expected in the near term.