Zscaler Stock Soars 3.8% as AI Cybersecurity Demand Drives Earnings Beat and Strong Guidance

Zscaler stock soars on earnings beat, upbeat guidance

* Zscaler beat Wall Street's fiscal fourth-quarter estimates. * CEO Jay Chaudhry said the company's agentic security tool is gaining momentum * Zscaler shares have dropped 20% this year as cyber peers notched new highs. In this article * ZS Follow your favorite stocksCREATE FREE ACCOUNT Cheng Xin | Getty Images Zscaler stock soared on Thursday after the cloud security company beat Wall Street's fiscal fourth-quarter estimates as rising artificial intelligence risk spurred urgent demand for cyber tools. Here's how the company performed compared to LSEG estimates: * Earnings per share: $1.19 adjusted vs. $1.09 expected * Revenue: $898 million vs. $877 million expected Revenue jumped 25% from about $719 million last year. Zscaler reported a net loss of $3.37 million, a loss of 2 cents per share, up from a net loss of $17.58 million, a loss of 11 cents per share, a year ago. CEO Jay Chaudhry said the company's Zero Trust architecture and innovative technology drove this quarter's beat. Chaudhry told CNBC he's "very bullish" on the AI agent iteration, which he views as a potentially larger long-term annual recurring revenue opportunity. The tool, launched earlier this year, is gaining early momentum and should accelerate rapidly into 2028 and 2029, he said. "It's a longer-term opportunity, but I think it's a fantastic opportunity with significant barriers to entry," Chaudhry said. Annual recurring revenue rose 25% from a year ago to $3.77 billion, beating a $3.75 billion estimate from StreetAccount. Cybersecurity stocks have skyrocketed this year on demand for new tools to secure swarms of AI agents. The period has also been defined by highly sophisticated cyber models and agent-led attacks capable of bringing down entire systems. Read more CNBC tech news While competitors have notched new highs this year, Zscaler shares have plummeted 20%. Last quarter, the stock recorded its worst day ever after management said it was taking a "prudent approach" to guidance following two sales leader departures. But Chaudhry says the market is misunderstanding Zscaler's differentiation play. "The core competency we bring to the table is pretty unique, and as the adoption of AI agents happens, the market will recognize more and more that Zscaler is a critical player," he said. Like other cyber executives, Chaudhry views security for AI as one of the biggest opportunities. Over the last year, bookings totaled $100 million and have grown 50% sequentially, quarter over quarter, he said. Zscaler's guidance also beat estimates. The company expects $935 million to $939 million in revenue for the first quarter and adjusted EPS of $1.15 to $1.16. That beat a revenue estimate of $927 million and adjusted EPS of $1.08 per share For the full year, the company projects revenue in the range of $3.91 billion and $3.94 billion, compared to a $3.90 billion estimate. Adjusted EPS is expected to range between $4.86 and $4.90, versus a $4.60 per-share estimate. watch now VIDEO5:4605:46 Jay Chaudhry, Zscaler CEO: A Fortt Knox Update Cybersecurity Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.

Zscaler Earnings Prediction Market Preview: What Will Jay Chaudhry Say? - Zscaler (NASDAQ:ZS)

Zscaler Inc. (NASDAQ:ZS) reports fiscal fourth-quarter earnings after the bell Thursday, three months after a cautious outlook triggered a record 31.5% one-day plunge. Shares have since recovered most of that loss. Unlike security companies built around hardware firewalls, Zscaler developed its platform in the cloud to replace VPNs and limit users and AI agents to approved applications and data. Analysts expect earnings of $1.08 per share on revenue of $877.51 million, according to Benzinga Pro. Revenue and annual recurring revenue grew 25% last quarter, but management's preliminary fiscal 2027 outlook calls for growth of just 16%-17% in both metrics. Kalshi traders are betting on which words, companies and products management will mention during the call. What Kalshi Predicts Zscaler Will Say "Breach" leads at 86%. The word sits at the center of Zscaler's pitch: keeping users off the corporate network may prevent one compromised account from exposing other systems. CEO Jay Chaudhry has repeatedly warned, "If you can be reached, you will be breached." Trending "Tailwind" trades at 62%, while "headwind" sits at 24%. Chaudhry recently used "tailwind" to describe Anthropic's Claude Mythos cybersecurity model, arguing that faster AI vulnerability discovery should increase demand for zero-trust security. "MCP" sits at 56%. The Model Context Protocol lets AI agents connect with databases, files and software tools. Zscaler's AI Broker inspects those connections and controls what data and applications an agent can reach. "Claude/Anthropic" trades at 51%. Through Anthropic's Project Glasswing, Zscaler can use Mythos to find and fix software vulnerabilities at machine speed. Glasswing partners have found more than 10,000 serious software flaws. Chaudhry argues attackers could use similar models to uncover vulnerabilities faster, increasing demand for Zscaler's zero-trust products. What Kalshi Predicts Zscaler Will Skip "Public Sector" sits at 45%, despite strong government demand last quarter. Zscaler said an unnamed federal agency expanded its contract by roughly $10 million. "SquareX" trades at 31% and "SPLX" at 22%. Zscaler bought SquareX to protect work done inside Chrome and Edge, including on personal devices, without requiring a separate corporate browser. SPLX identifies a company's AI systems and simulates attacks to uncover weaknesses. Traders may expect Zscaler to discuss browser and AI security without naming either acquisition. "Google" trades at 23% and "Wiz" at 7%. Alphabet Inc. (NASDAQ:GOOGL) bought Wiz for $32 billion in March. Google works with Zscaler across Chrome and Workspace, while Wiz competes with it in cloud security, making Alphabet both a partner and a rival. "Nvidia" sits at 17%. Zscaler's AI Guard integrates with NeMo Guardrails from Nvidia to screen AI prompts and responses for attacks and data leaks. "CrowdStrike" trades at 15%. The companies compete for security budgets, but their core tools fit together: CrowdStrike Holdings Inc. (NASDAQ:CRWD) detects threats on devices, while Zscaler controls their access. A new integration announced Wednesday will let CrowdStrike alerts trigger Zscaler restrictions automatically, making the low odds notable. Reading the Board Kalshi traders expect Zscaler to frame AI as both a new security problem and a new source of demand. Investors will likely focus on whether management improves its preliminary 16%-17% fiscal 2027 growth outlook. A stronger forecast could suggest the recent sales disruption was temporary. An unchanged outlook would confirm a sharp slowdown from the 25% pace reported last quarter. Kalshi and Benzinga have an existing data collaboration agreement. Image: Shutterstock Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

Earnings call transcript: Zscaler beats Q4 2026 estimates as AI demand lifts outlook By Investing.com

Zscaler reported fiscal fourth-quarter results that topped Wall Street's expectations, with adjusted earnings of $1.19 a share on revenue of $898.2 million. Analysts had expected $1.09 a share on revenue of $877.0 million. The cybersecurity company also said revenue rose 25% from a year earlier, while net new annual recurring revenue accelerated and operating margin hit a record. Shares rose 2.94% in regular trading to $177.80 and added another 0.86% after hours to $179.34. Key Takeaways * Zscaler beat estimates on both earnings and revenue in fiscal Q4. * Revenue rose 25% year over year to $898 million, while ARR also grew 25%. * Net new ARR growth accelerated to 17% in the quarter, excluding Red Canary. * Operating margin reached a record 24.3%, showing stronger profitability. * Management said AI security is becoming a major growth driver for the business. Company Performance Zscaler said it finished fiscal 2026 with strong momentum across its platform, including Zero Trust SASE, data security, and its newer Security for AI offerings. The company said annual revenue reached $3.4 billion, up 25% from the prior year, while free cash flow for the year was $779 million, equal to a 23% margin. The company also pointed to broad customer adoption. It ended the quarter with 785 customers generating more than $1 million in annual recurring revenue, up 18% from a year earlier, and 4,182 customers with more than $100,000 in ARR, up 20%. Fortune 500 penetration improved to 50% from 45% a year earlier. Management said demand was strong across regions. In the quarter, revenue in the Americas rose about 30%, EMEA grew 17%, and APJ increased 23%. Financial Highlights * Revenue: $898.2 million, up 25% year over year and 6% sequentially. * Adjusted EPS: $1.19, up from the $1.09 forecast. * Annual recurring revenue: $3.8 billion, up 25% year over year. * Net new ARR: $246 million, up 24% year over year; $232 million excluding Red Canary, up 17%. * Non-GAAP gross margin: 80.2%, up 90 basis points from a year earlier. * Non-GAAP operating income: $218 million, up $60 million, or 37%. * Non-GAAP operating margin: 24.3%, up 220 basis points and a quarterly record. * Operating cash flow: $279 million in the quarter. * Free cash flow: $779 million for fiscal 2026, equal to a 23% margin. * RPO: $7.4 billion, up about 27% year over year. Earnings vs. Forecast Zscaler beat the consensus estimate by $0.10 a share, or about 9.2%, on adjusted earnings. Revenue beat by $21.2 million, or about 2.4%. The earnings beat was stronger than the revenue beat, but investors appeared to focus more on the company's underlying growth trends. Net new ARR growth accelerated from 7% in fiscal 2025 to 10% in the first half of fiscal 2026 and then to 17% in the fourth quarter, excluding Red Canary. That suggests sales momentum improved as the year progressed. The quarter also compared favorably with the company's recent history. Zscaler has been working to balance growth and profitability, and this report showed both moving in the right direction at the same time. The record operating margin and strong free cash flow were as important to the story as the top-line beat. Market Reaction The stock rose before and after the report. It closed the regular session at $177.80, up 2.94% from the previous close of $172.73, then moved to $179.34 in after-hours trading, up another 0.86% from the close. From the prior close to the after-hours price, the shares gained about 3.8%. The move was positive, but not dramatic, suggesting investors viewed the report as solid rather than surprising. The stock remains far below its 52-week high of $336.99, though it is well above the low of $114.63. Over the past year, shares have declined 34%, reflecting broader market concerns about growth stocks. An InvestingPro tip notes the company is trading at a high revenue valuation multiple, which may explain investor caution despite strong operational performance. For deeper insights into Zscaler's valuation and growth prospects, InvestingPro offers 11 additional exclusive tips for subscribers. Outlook & Guidance For the current quarter, Zscaler forecast revenue of $935 million to $939 million and adjusted EPS of $1.15 to $1.16. For the full fiscal year, it guided for revenue of $3.908 billion to $3.938 billion and EPS of $4.86 to $4.90. The company said it expects continued strength from AI-related demand, Zero Trust Everywhere, and data security. It also pointed to the planned launch of its Agentic SecOps solution on Sept. 9, which combines Zscaler telemetry with Red Canary's managed detection and response expertise. Management said fiscal 2027 will also reflect sales leadership transitions and the pace of adoption for new products. Capital spending is expected to remain elevated because of higher component costs, especially for memory. Executive Commentary Chief Executive Jay Chaudhry said AI is becoming "the largest tailwind we've ever seen," adding that customers are relying on Zscaler to secure AI use while also protecting against new threats created by AI agents. He also said, "Our Zero Trust Exchange makes applications, AI models, and data invisible. An attacker, human or agent, cannot breach what it cannot reach." The comment reflects the company's core message that its platform can limit exposure by keeping assets out of reach. Chief Financial Officer Kevin Rubin said the quarter showed "continued acceleration in net new ARR growth" and noted that the company reached a record operating margin. He also said fiscal 2027 should bring profitable growth across multiple vectors, including product innovation and customer expansion. Risks and Challenges * Sales leadership turnover: Management said two sales leaders departed last quarter, and the transition may take time in some regions. * Red Canary integration: The company does not expect Red Canary to add net new ARR in fiscal 2027, and the business still carries different churn patterns than Zscaler's core model. * Higher capital spending: CapEx is expected to stay elevated due to tighter supply and higher prices for memory, storage, and processors. * Growth moderation: Full-year guidance implies slower growth than the 25% revenue growth reported in fiscal 2026. * Competition in AI security: The market is crowded, and customers are weighing multiple vendors as they build AI security programs. Q&A Analysts focused on sales execution, AI security demand, and the Red Canary acquisition. Questions centered on whether the sales organization transition had stabilized, what drove the acceleration in net new ARR, and how much Red Canary would contribute going forward. Management said the sales reorganization is working and that productivity in the quarter was the highest ever. On AI, executives said customers are showing strong interest in integrated security tools rather than point products. On Red Canary, the company said it is now being folded into the broader Agentic SecOps offering and will not be treated as a separate growth driver in fiscal 2027. Other questions addressed Z-Flex, the company's flexible buying model. Management said the program helps customers adopt more products without repeated procurement cycles and has become an important part of the go-to-market strategy. Full transcript - Zscaler Inc (ZS) Q4 2026: Operator, Conference Call Operator, Zscaler: I would now like to hand the conference over to your speaker today, Kim Watkins, SVP, Investor Relations and Strategic Finance. Kim Watkins, SVP, Investor Relations and Strategic Finance, Zscaler: Good afternoon, and thank you for joining us today. Welcome to Zscaler's fourth quarter fiscal 2026 earnings conference call. On the call with me today are Jay Chaudhry, Chairman and CEO, and Kevin Rubin, CFO. Please note that we posted our earnings release, shareholder letter, and a supplemental financial schedule to our investor relations website. Unless otherwise noted, all numbers we talk about today will be on an adjusted non-GAAP basis. You will find a reconciliation of GAAP to the non-GAAP financial measures in our earnings release. Before we get started, I'd like to remind you that today's discussion will contain forward-looking statements, including, but not limited to, the company's anticipated future revenue, annual recurring revenue, net new annual recurring revenue, operating margin, gross margin, operating profit, net other income, earnings per share, and free cash flow margin, our customer response to our products, our expectations regarding AI and its impact on our business and customers, and our market share and market opportunity, and our objectives and outlook. These statements and other comments are not guarantees of future performance, but rather are subject to risk and uncertainty, some of which are beyond our control. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. For a more complete discussion of the risks and uncertainties, please see our filings with the SEC, as well as in today's earnings release. I also want to inform you that we'll be attending the following conferences this quarter: Citi 2026 Global TMT Conference on September 9, Goldman Sachs Communacopia + Technology Conference on September 9, Wolfe Research TMT Conference 2026 on September 9, and JP Morgan 2026 Software Forum on October 1. With that, I'll turn the call over to Jay. Jay Chaudhry, Chairman and CEO, Zscaler: Thank you, Kim. Good afternoon, everyone. We delivered a strong finish to the fiscal year with 25% ARR growth and a non-GAAP operating margin of 24%. We are seeing significant positive trends in net new ARR, with growth excluding Red Canary accelerating to 17% in Q4. These results reflect increasing market adoption of our Zero Trust platform. AI is quickly becoming the largest tailwind we've ever seen, driving demand for our Zero Trust Everywhere data security and Security for AI solutions. Our customers are relying on us to both combat the threats created by agentic AI and safely deploy AI agents and models at scale. Since our last earnings call, new AI models have become more powerful, more autonomous, and more dangerous from a cybersecurity perspective. The ability of these new frontier AI and open weight models to uncover previously unknown vulnerabilities at a rapid pace has become even more apparent. Organizations simply do not have enough time or resources to fix the unprecedented number of software vulnerabilities that are being discovered. The time between vulnerabilities being discovered and exploited is also shrinking. You cannot win a patching race against AI. This is leaving organizations exposed and likely leads to more breaches. Over the past few months, our team has conducted hundreds of frontier AI risk assessments for global enterprises to help them assess their cyber resilience posture to minimize potential breaches. The takeaways have been incredibly revealing. Over 90% of organizations had AI applications, models, and other servers exposed to the internet, and more than one-third had known exploitable vulnerabilities. At the same time, the threat landscape has been compounded by the ability of new AI models to power ungoverned autonomous agents. We are now seeing the impact of fully autonomous AI attacks. There have already been multiple high-profile incidents from three leading frontier model companies where agents went rogue and took unauthorized actions. This includes the recent Hugging Face incident, where a swarm of agents went to extreme lengths to break out of a sandbox training environment, get onto the corporate network, and move laterally to conduct a sophisticated attack. This is driving urgency at the highest levels, and Zscaler is uniquely equipped to meet the moment. CEOs and boards are looking to us as their trusted partner to address three essential business challenges. First, how do we secure our environment when we can't patch security vulnerabilities fast enough? Our Zero Trust Exchange makes applications, AI models, and data invisible. An attacker, human or agent, cannot breach what it cannot reach. Second, how do we minimize the impact of a potential breach? Our Zero Trust Exchange connects users, workloads, branches, and agents directly to the applications they need without placing them on the network. This eliminates lateral threat movement, containing the impact of a breach. Third, how do we take advantage of all the benefits of AI without introducing significant new risks? Zscaler has a full portfolio of data security and Security for AI solutions that prevents data exfiltration, provides guardrails to prevent abuse or misuse of AI applications, and enables secure agentic communication. Because of these advantages, customers trust us to secure their business-critical environments. We are also differentiated by our scale, operating the world's largest distributed inline security cloud, processing more than 750 billion transactions per day. This scale provides unmatched high-fidelity telemetry that continuously improves our AI-powered security capabilities. In the AI era, zero trust is now an imperative, and we are not alone in this belief. Anthropic published a white paper in late May encouraging adoption of a zero trust architecture for AI agents, emphasizing the importance of treating every agent like an untrusted entity and making sure it only has access to authorized data and applications. This is why customers are expanding their investments with us to secure their agentic infrastructure and why we are confident our platform is uniquely equipped to address the risks companies face in this new world. In addition to protecting companies from the threats created by agentic AI, we are also enabling organizations to safely deploy AI agents and models. Our AI solutions are key to providing enterprise visibility, governing what data and applications agents can access, and what actions they are permitted to perform. We are often asked why our solutions are needed alongside identity for AI security. While identity solutions answer who is requesting access, our in-line exchange determines what that user or agent should be allowed to do and enforces that policy in real time. Put simply, identity is only the starting point for securing AI. Greater visibility and control is needed for organizations to trust agents accessing sensitive data, interacting with applications, and taking action on behalf of users. Earlier this year, we introduced the industry's most comprehensive Security for AI solution designed for exactly that reason. We are seeing strong, proactive inbound interest from both new and existing customers, and we are seeing no budget constraints. Security for AI bookings increased more than 50% sequentially in Q4 on top of a strong Q3. Our Security for AI solution provides new logo opportunities by offering organizations an integrated way to secure AI use at scale. At our ZenithLive conference in June, we unveiled the latest additions to our Security for AI lineup, including our Zero Trust Exchange for Agents and Endpoint AI Security, both of which we expect to scale in the second half of fiscal 2027. Both products are in early access, and we are seeing tremendous interest from customers. These new solutions will provide organizations the ability to enforce AI policy, both at our exchange and the endpoint, enabling policy enforcement at the optimal location. We continue to innovate in this area at a rapid pace. Next week, we are announcing the next major innovation on our platform with our new Agentic SecOps solution. Just as AI is increasing the threat surface, it is also stressing the human-driven traditional SOC approach where remediation can take days or weeks. In contrast, our AI-first approach brings together our proprietary telemetry and Red Canary's decades plus of experience in managed detection and response, or MDR. Our Agentic SecOps solution enables security teams to prioritize real threats and leverage specialized AI agents to detect, investigate, and respond to threats at machine speed. We are driving closed-loop remediation in real time by integrating our Agentic SecOps with our Zero Trust Exchange, enabling customers to move with speed as the time between detection and exploitation has decreased from months to minutes. We will be launching our new Agentic SecOps solution with a webcast on September 9th, which will be streamed on our website. Our approach for securing users and non-users and ensuring safe adoption of AI is resonating. This is increasingly evident in my conversations with customers and partners and is illustrated with a few customer examples. First, we had a notable seven-figure upsell Z-Flex win with a Fortune 500 transportation customer who deployed our Security for AI portfolio to secure their full AI life cycle. Our Security for AI solution provides an integrated approach to secure AI use at scale. This includes discovery and management of all AI assets, including shadow AI and enforcement of safe access to approved apps. It also includes real-time prompt and response inspection to stop data leaks and threats like prompt injections and continuous red teaming assessments. This customer selected our Security for AI solution over two major platform competitors, and with this win, the customer's ARR grew to nearly $10 million. In another seven-figure Z-Flex upsell, a Fortune 500 semiconductor manufacturer expanded its adoption of the Zscaler platform to secure a company-wide rollout of Cloud Cowork. After assessing several vendors, this client determined Zscaler's Security for AI was the only solution capable of securing the customer's AI adoption, including its endpoints, secure agent-to-agent communication, and model usage in private and public environments. This is a great example of how our customers are expanding the use of Zero Trust Exchange to safely deploy AI agents and models as well as combat the threats created by agentic AI. While we are in the early innings of Security for AI, these deals give us tremendous confidence in our ability to expand this offering significantly over time. Next, our leadership in data security is a powerful tailwind for our Security for AI business. As enterprises embrace gen AI and agentic AI, they're confronting a new wave of data exfiltration risks, including data abuse and over-privileged access to data. Our inline architecture, coupled with our endpoint DLP and now Endpoint AI Security, enhances our ability to enforce data loss prevention in the cloud as well as on the endpoint. Securing data and AI go hand-in-hand, as evidenced by the fact that 70% of our Security for AI deals this quarter included our data security solution. In Q4, we also closed a seven-figure Z-Flex upsell win with a large global asset management firm. The customer selected Zscaler's Data Security Posture Management solution over a privately held DSPM vendor. This customer chose Zscaler to address gaps related to sensitive data discovery across its multi-cloud environment and data governance. With this upsell, the annual spend of this customer increased by nearly 40%, reaching an ARR of $5 million plus. We are also seeing continued traction across our Zero Trust SASE solutions, including customers expanding their Zero Trust SASE deployments. For example, this quarter, we signed a seven-figure Z-Flex upsell with a Global 2000 financial services customer who upgraded to Zscaler Private Access with AI-powered app segmentation for 120,000 users, increasing their ARR by nearly 50%. We are also driving new logos. We closed a seven-figure new logo Z-Flex win with a Fortune 500 life sciences company that is deploying our Zero Trust SASE and Security for AI platform across 75,000 users and displacing a legacy firewall-based SASE platform. This customer, led by a newly appointed CISO, who is a three-time repeat Zscaler customer, chose us for our ability to deliver unified visibility and control across both enterprise security and gen AI. This is a great example of a new logo purchasing the entire Zscaler platform. Customers are also increasingly starting their Zero Trust journey by securing non-user environments. For example, we closed a seven-figure new logo win with a Global 2000 healthcare equipment manufacturer to deploy our Zero Trust Branch solution across the critical production sites to secure its OT environment, displacing an existing long-time legacy vendor. This is an example of a sizable opportunity Zscaler has within factories and warehouses to secure IoT/OT and provide zero trust device segmentation. Zero Trust Branch simplifies customers' branch deployments by eliminating traditional branch firewalls, SD-WAN, and MPLS networks, reducing operational complexity. It also minimizes the impact from an infected machine in a branch or a manufacturing plant by limiting lateral movement across the environment and therefore containing the breach. In another known user deal win, we closed a seven-figure upsell with a Fortune 500 aerospace customer. This customer was going through a divestiture and expanded its Zero Trust Cloud deployment between its on-prem and public cloud environments to securely migrate workloads. With this deal, the ARR of this customer grew by more than 30% to over $5 million. We're seeing tremendous momentum with Zero Trust Cloud. This quarter, we extended the solution by offering a managed service through Google Cloud, which can be configured in under 10 minutes, reducing the deployment time and operational costs significantly. This expands on our existing offering for AWS and enables multi-cloud flexibility. The strength we're seeing in Zero Trust Branch and in Zero Trust Cloud is translating to meaningful momentum with Zero Trust Everywhere enterprises, those that have purchased Zero Trust users, Zero Trust Branch, and Zero Trust Cloud. We exited Q4 with more than 950 Zero Trust Everywhere enterprises versus over 700 in Q3 and over 350 at the end of fiscal 2025. To summarize, AI represents one of the most significant opportunities in Zscaler's history. Our platform was built for this moment. Zscaler has always secured interactions between every user and applications, and now Zscaler secures interaction between every user, every agent, and every AI model. We have a large and growing market. Adoption of our platform is expanding, and we are continuing to innovate across Zero Trust SASE, Agentic SecOps, data security, and Security for AI. We are well-positioned to extend our leadership as the cybersecurity platform for the AI era, drive durable growth, and create long-term shareholder value. Now, I will hand it over to Kevin to walk through the financials. Kevin Rubin, CFO, Zscaler: Thanks, Jay. We delivered strong Q4 results with revenue and ARR both growing 25% year over year, net new ARR growing 24%, and non-GAAP operating margin reaching a record 24.3%. For full year fiscal 2026, revenue also grew 25%, and when combined with 23% free cash flow margin, our performance exceeded the rule of 40, landing at approximately 49%. Our growth engine continues to broaden beyond users with increasing contribution from non-seat-based solutions, continued Z-Flex momentum, record large deal activity, and improved sales productivity. ARR momentum remained strong in Q4. Excluding the contribution from our acquisition of Red Canary, net new ARR was $232 million, up 17% year over year, and total ARR was up 20%. Importantly, this marks a continued acceleration in net new ARR growth from 7% in fiscal 2025 to 10% in the first half of fiscal 2026 and to 17% in Q4. Red Canary exited Q4 with $141 million of ARR. Total net new ARR was $246 million, up 24%, bringing total ARR to $3.8 billion, up 25% year over year. Performance was broad-based with strength across Americas, EMEA, and APJ. We also continued to deepen enterprise adoption. In Q4, we closed with a record number of $1 million-plus new ACV deals, and the number of $10 million-plus ARR customers nearly doubled year over year. We ended the quarter with 785 customers generating over $1 million in ARR and 4,182 customers generating more than $100,000 in ARR, growing 18% and 20% year over year respectively. As our platform expands beyond users to protect branches, workloads, AI applications, and AI agents, our monetization model is also expanding. In Q4 and for the full year, our non-seat-based metered usage solutions delivered approximately 30% of new and upsell ACV. ARR tied to these offerings grew more than 100% year over year. Turning to revenue, Q4 revenue was $898 million, up 25% year over year and 6% sequentially, exceeding the high end of our guidance. Growth was broad-based across the geographies. The Americas accounted for 57% of revenue and grew approximately 30% year over year. EMEA accounted for 27% of revenue and grew approximately 17%, and APJ accounted for 16% of revenue and grew 23%. For full fiscal 2026, revenue of $3.4 billion grew 25% year over year. Excluding Red Canary, revenue of $3.2 billion grew 20% year over year. Red Canary contributed $144 million of revenue in fiscal 2026. The Americas accounted for 57% of revenue and grew approximately 31%. EMEA accounted for 28% of revenue and grew approximately 16%, and APJ accounted for 15% of revenue and grew approximately 23%. Remaining performance obligation, or RPO, of approximately $7.4 billion grew approximately 27%, with approximately 45% classified as current RPO. Turning to go-to-market, we are pleased with the continued strong sales execution. In Q4, we delivered double-digit sales productivity growth and achieved our highest quarterly productivity ever and the highest annual productivity since 2022. This reflects continued improvement in our account-centric sales motion and our ability to drive broader platform adoption with customers. Entering fiscal 2027, our priorities are focused on deepening relationships with existing customers, accelerating platform adoption, improving new logo execution, expanding coverage in key segments, and increasing partner-led contribution. These priorities are especially important as the rapid proliferation of frontier AI models increases customer engagement at senior levels of the organization, as Jay discussed earlier. To support new logo growth, we are expanding coverage through both direct and partner-led motions. For example, we recently expanded our partnership with Carahsoft to further penetrate the commercial and SMB segments in the U.S. through 100% channel-led motion. We are also adding dedicated new logo sales executives focused specifically on pursuing new enterprise customer opportunities. Z-Flex remains an important part of our go-to-market strategy. It provides customers with multi-year commitments the flexibility to activate or swap modules without starting a new procurement cycle, while also providing premium deployment assistance and support. We saw strong momentum again this quarter with Z-Flex, driving meaningful upsell, shorter sales cycles, and greater forward visibility. In Q4, Z-Flex generated over $770 million in TCV, up more than 60% quarter-over-quarter. For fiscal 2026, Z-Flex customers saw an ARR uplift averaging nearly 30%. For fiscal 2026, Z-Flex generated more than $1.7 billion in TCV, underscoring customers' long-term commitment to Zscaler. Two recent examples illustrate the value of this model. In a five-year, eight-figure Z-Flex deal, a Global 2000 services customer increased its ARR by nearly 90%, crossing $5 million this quarter and driven by expansion with existing products and adoption of new products, including our Security for AI and Zero Trust Cloud solutions. In another example, an existing seven-figure ARR Global 2000 retail and wholesale customer increased its annual spend with us by 140% in a three-year, eight-figure Z-Flex deal. This customer expanded adoption across nine existing modules and adopted six new modules, including our Security for AI solution. Turning to operating performance, we delivered strong profitability while continuing to invest in the business. Non-GAAP gross margin was 80.2%, compared to 79.3% a year ago. The year-ago period included a one-time deployment of a large private cloud in a government customer's data center, which included a hardware component that carried a lower gross margin profile. We also delivered significant operating leverage in the quarter. Non-GAAP operating income was $218 million, up $60 million or 37% compared to $159 million last year. Non-GAAP operating margin was 24.3%, up 220 basis points year-over-year. For the full year, non-GAAP gross margin was 80.3%, up 20 basis points year-over-year. Non-GAAP operating margin was 22.9%, up 120 basis points year-over-year. This performance reflects the strength of our business model, disciplined execution, and our ability to deliver durable growth with expanding profitability while continuing to invest in the significant market opportunity ahead. Turning to the balance sheet, we ended the quarter with approximately $3.5 billion in cash equivalents, and short-term investments, and $1.7 billion of debt. In Q4, we generated $279 million in operating cash flow, and CapEx was $200 million, or 22% of revenue. This brought our full-year CapEx to $277 million, or 8% of revenue, and coupled with capitalized internal use software of $73 million, resulted in free cash flow of $779 million for the full fiscal 2026, or a free cash flow margin of 23%, down from 27% last year. The year-over-year declines reflect the timing of cash collections and CapEx expenditures. Looking ahead, I want to provide an update on our expectations for capital expenditures to support our growth. As I shared last quarter, we are seeing higher prices and tighter availability for memory, storage, and processors. These components support our data center infrastructure and our Zero Trust Branch appliances. In Q4, we opportunistically accelerated certain purchases where data center equipment was available. As a result, fiscal 2026 CapEx was 8% of revenue, consistent with the expectations we provided last quarter for CapEx of high single digits as a percentage of revenue. We expect CapEx to remain elevated during fiscal 2027 due to higher component pricing, especially memory. We will continue to monitor our costs and share regular updates about the impact. To provide additional capacity to support our AI and growth initiatives, we are strategically reallocating resources through a workforce restructuring. This action is expected to affect approximately 3% of employees and result in restructuring charges of approximately $30 million to $33 million. Turning to guidance. Let me provide our outlook for Q1 and full year fiscal 2027. As a reminder, these numbers are all on a non-GAAP basis. For the first quarter, we expect revenue of $935 million to $939 million, approximately 19% year-over-year growth. Gross margin of approximately 80%. Operating profit of $215 million to $217 million, up approximately 25%-26% year-over-year, representing a 23% operating margin. Net other income of approximately $33 million. Earnings per share of approximately $1.15 to $1.16 per share, assuming a 21% tax rate and 170 million fully diluted shares. For the full year fiscal 2027, we expect ARR of $4.396 billion to $4.426 billion, or year-over-year growth of approximately 16.6%-17.4%. For net new ARR seasonality, we expect approximately 37% of net new ARR in the first half of fiscal 2027, with 15% in Q1 fiscal 2027. Revenue of $3.908 billion to $3.938 billion, reflecting year-over-year growth of 16.6%-17.5%. Gross margin of approximately 80%. Operating profit of $924 million to $932 million, up approximately 21% year-over-year, and equating to an operating margin of approximately 23.7%. Net other income approximately $140 million to $142 million. Earnings per share of $4.86 to $4.90, assuming a 21% tax rate and approximately 173 million fully diluted shares. Free cash flow margin of approximately 23%-23.5%, reflecting CapEx not including internal use software in the low teens as a percentage of revenue. We expect free cash flow margin to be seasonally stronger in Q1 and Q4, reflecting timing of CapEx and cash collections. Looking ahead, we are excited by the opportunities we see to continue scaling our rapidly expanding AI security portfolio, accelerating Zero Trust Everywhere adoption, and growing our data security revenue. In summary, we are pleased with the results we delivered in fiscal 2026. We achieved 25% year-over-year ARR growth, record operating income, and operating margin. We also saw continued momentum with Z-Flex and closed an all-time record number of $1 million plus ARR deals. I am excited about the substantial opportunity ahead in fiscal 2027. We are confident in our ability to continue to drive profitable growth across multiple vectors, including product innovation, go-to-market, and customer expansion, and creating value for our shareholders. To learn more about our strategy and plans for the future, please join us at our upcoming Investor Day on October 6th in New York City. I want to thank our employees, customers, and partners for their continued support. With that, operator, you may now open the call for questions. Thank you. Operator, Conference Call Operator, Zscaler: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please limit yourself to one question. Our first question comes from Saket Kalia with Barclays. You may proceed. Saket Kalia, Analyst, Barclays: Okay, great. Hey, guys. Thanks for taking my question here, and nice close to the year. I will keep it to one, but maybe address it to both you, Jay and Kevin. It is great to see the higher growth rate for next year in ARR. Maybe the question is, how are we thinking about the impact of some of the sales churn here that we talked about last quarter in terms of productivity, and do we feel like the sales churn here is stabilized as we go into 2027? Jay Chaudhry, Chairman and CEO, Zscaler: Let me start. Over the past few quarters, we have gone through transformation of our sales organization, where we expanded from opportunity-led sales to account-focused sales. The strong results of Q4 show that the transformation, the changes we have driven are working well. If you look at the sales productivity, actually, the sales productivity in Q4 was the highest. I think we are very well-positioned with a strong sales team, with good channel partnership, and a very strong product portfolio as we enter fiscal 2027. Kevin? Kevin Rubin, CFO, Zscaler: Yeah. Thanks, Jay and Saket. Maybe just to reemphasize the point. So Q4 marked the highest productivity quarter that we have ever seen, and fiscal 2026 was the highest annual sales productivity in four years. So I think we are really positioned and set up well going into fiscal 2027. Just as a reminder, we did have two sales leaders depart last quarter. One was a geo leader and the other was a vertical leader. We backfilled and internally promoted the vertical leader. Since then, a new leader has accepted the offer for the geo position. Just keep in mind that certain geos may take longer to onboard than others. Finally, as we think about the shape of the transition, we expect that the leadership transition will play out in the first half of this fiscal, and that is reflected in our guidance. Jay Chaudhry, Chairman and CEO, Zscaler: I am excited about how this leadership team is coming together as we think about augmenting our existing team into this year. Saket Kalia, Analyst, Barclays: Very helpful. Thanks, guys. Jay Chaudhry, Chairman and CEO, Zscaler: Thanks, Saket. Operator, Conference Call Operator, Zscaler: Thank you. Our next question comes from Fatima Boolani with Citi. You may proceed. Fatima Boolani, Analyst, Citi: Oh, good afternoon. Thank you for taking my question. I was hoping to have you unpack some of the discrete drivers of that organic net new acceleration in the quarter. Provided that this is your fourth fiscal quarter, it is an abundant period of renewals and expansionary behavior from customers. So I would love to have you stack rank between some of those inputs. How did you feel and think about your new logo activity in the quarter? Just wanted to get a sense of the most sensitive drivers of upside and strength there relative to what we were looking for. Thank you. Jay Chaudhry, Chairman and CEO, Zscaler: I will start. I am Kevin Pinheiro. Q4 was a very strong quarter from almost all measurements. You saw all the metrics. We did very well. Our product portfolio has become pretty broad. Zero Trust Everywhere has been driving a lot of our sales. AI security fears are growing out there, and one of the things AI security needs is zero trust architecture and zero trust solutions. Our solution, like Zscaler Zero Trust Branch, did extremely well. Data security drove a big part of business, and even the young offerings of Security for AI has grown very nicely. So all the products actually did very well. Kevin? Kevin Rubin, CFO, Zscaler: Yeah, thanks. So maybe just a couple other points to emphasize. We did have broad-based strength in the quarter, so I think that is number 1 to reflect. NRR, although it is not a metric that we provide each and every quarter, it was consistent each quarter this year at 115%. So we have seen very consistent performance in terms of our upsell motion that I think is important to appreciate. Maybe one other comment I will make is, as Jay mentioned, the early success with our Securing AI. Obviously, it had a strong performance in the quarter, but another optimistic point of view is that we also saw a 75% increase in pipeline in Security for AI as we think about what that sets up for 2027. Jay Chaudhry, Chairman and CEO, Zscaler: If I may add two more points. From new logo point of view, our Fortune 500 penetration moved up from 45% to 50%. That is pretty remarkable. Also worth noting is the million-dollar-plus deals with a record quarter for new million ACV deals. Kevin Rubin, CFO, Zscaler: Fatima, my reference to the increase in the pipeline relative to AI was quarter-over-quarter sequential, not year-over-year. Fatima Boolani, Analyst, Citi: I appreciate it. Thank you very much. Jay Chaudhry, Chairman and CEO, Zscaler: Thank you. Operator, Conference Call Operator, Zscaler: Thank you. Our next question comes from Roger Boyd with UBS. You may proceed. Roger Boyd, Analyst, UBS: Awesome. Thanks for taking the questions. Jay, I wanted to touch on the competitive environment you are seeing with some of these AI security wins. I want to maybe pick on the seven-figure upsell you called out with an airline company where you won over two other platform competitors. Can you just talk about what you are seeing in these bake-offs? Presumably, companies are taking these decisions pretty seriously and trying to make strategic bets on which layer of security they see as best positioned to secure AI. I would be curious to see what you are seeing and what is causing you to win these large deals. Thanks. Jay Chaudhry, Chairman and CEO, Zscaler: Yeah. AI security is in demand, and there are probably lots and lots of AI security companies, probably tons of startups as well. One of the things we see out there is our customers tell us that they do not want one more or three more AI security products. They are looking for an integrated solution, not only for AI security, but also that works with the rest of security as well. This transformation customers that we highlighted, they are a Zscaler customer for Zero Trust Everywhere. It is natural for them to say, "If I need to expand into AI security, and tomorrow I need to be ready for my agent communication, where Zero Trust Exchange should be able to ensure policy for agents," we were the natural choice for that to happen. Every company is offering AI security, but they all come from different sides of it. Our differentiation is we have an integrated solution for asset management to communication to us actually relationship, figuring out the access graph, as well as agentic communication. That is really what is setting us apart. Jay Chaudhry, Chairman and CEO, Zscaler: Thanks for the question. Operator, Conference Call Operator, Zscaler: Thank you. Our next question comes from Richard Poland with Wells Fargo. You may proceed. Richard Poland, Analyst, Wells Fargo: Thanks for taking my question. I just wanted to get a sense for unpacking some of the verticals in the quarter. I guess when we think about federal, I know last year federal was a little bit softer than we would have hoped for. But just as we think about this quarter and heading into fiscal year-end for federal, anything to keep in mind there? Thanks. Kevin Rubin, CFO, Zscaler: Yeah, I'll take that quickly. Look, the federal business contributed high single digits to new ACV in 2026. That was very similar to 2025. Expectations for fiscal 2027 are similar. There's nothing in particular that I would point out. Obviously, earlier in the year with DOGE, it was a difficult environment, but we've seen it perform fairly consistently with the last several years. Kevin Rubin, CFO, Zscaler: Thank you. Operator, Conference Call Operator, Zscaler: Thank you. Our next question comes from Joseph Gallo with Jefferies. You may proceed. Joseph Gallo, Analyst, Jefferies: Hey, guys. Thanks for the question and nice job on the quarter. I was just hoping if you could break out the Symmetry contribution to net new ARR in F4Q. As a part of that really strong strength in non-seats in fiscal 2026, what are the expectations as we go into fiscal 2027? Because you are obviously offering more and more there. Does Zscaler expect larger mix of the new business coming from that non-seat? Thank you. Jay Chaudhry, Chairman and CEO, Zscaler: Symmetry is a very innovative technology that essentially connects the dot between different entities accessing different data sources. As we have seen proliferation of AI agents, this innovative technology becomes extremely important. This was essentially acquired as a technology company with very little revenue for it, but it is becoming an important part of Zero Trust Exchange, not only for agents, but zero trust cloud workloads and zero trust devices, because understanding relationships of entities to what they access is foundational piece. That is where it is fitting in. Regarding non-seat, at a broader level, the comment I will make is, while early on our products like ZIA for users, ZPA for users, were largely user-centric, a lot of our offerings subsequently have not been user-centric. For example, zero trust for cloud workloads, it is all about workloads. It is essentially consumption-based. Zero Trust Branch, which is largely about branch devices, IoT/OT devices communicating, is all about non-seats. Data security. Some of the modules are seat-based, others are data volume based. Almost all of our AI security products or Security for AI products are essentially consumption based, linked to queries. Essentially, it translates to token consumption, fundamentally. Kevin? Kevin Rubin, CFO, Zscaler: Yeah. With respect to Symmetry, again, to Jay's point, it really was a technology and talent acquisition, and provided the access graph technology for us. The results are immaterial to our results and nothing else to call out there. Joseph Gallo, Analyst, Jefferies: Thank you. Operator, Conference Call Operator, Zscaler: Thank you. Our next question comes from John DiFucci with Guggenheim Securities. You may proceed. John DiFucci, Analyst, Guggenheim Securities: Thank you. I apologize. I have a three-part question, but I promise it's all related. You said you're adding new enterprise reps to go after enterprise accounts while also restructuring, and that's going to affect 3% of your employees. Can you give more color around this? One, what kind of employees will be affected, and what will be the net employee count effect? Also, where are these new reps needed? Is it specialized sales, or will it be broadly across your geos and product? Finally, what's driving this? Is it an inflection point in demand that Jay talks about AI? Or is it just as you also said here, you're seeing very good sales productivity, so now is just the time to be hiring more to keep on growing. Thanks. Jay Chaudhry, Chairman and CEO, Zscaler: Yeah. Let me start. First of all, the reduction you pointed out, it's essentially rebalancing, reallocation of some of our resources with better leverage and also better investments in the AI area we are looking at. That's fairly straightforward. If you look at adding our sales resources, when a company is growing at a pretty good pace, it's natural to add resources. We have essentially almost always done it. Now the question is: where do we add the most resources? We do have specialty teams and we have account execs. Our specialty teams have been making a pretty meaningful contribution. I'm extremely proud of it. Our CRO, Mike Rich, and his team evolved the idea of takeoff teams that we had started about 3 years ago. It has become a very good specialty team, and we are adding resources to specialty teams. But also in geos too, a number of account execs are being added. One of the areas for addition of account execs is probably the enterprise. If you look at the top end of the enterprise, we're pretty well covered. As you come down in the enterprise market, our coverage has been thinner. We are making that coverage. We are also investing on some of the channel resources because channel is helping us expand in the mid-market and wide. Kevin? Kevin Rubin, CFO, Zscaler: Yeah, John, the only thing I would add is the restructuring is about 3%, so it's modest, about $30 million-$33 million in restructuring charges. Maybe just to also double down on what Jay mentioned. Mike is adding people to the organization, both to address opportunities we have with new logos as well as upsell. We have about 4,600 of 20,000 targeted companies, so there's a big opportunity just with new logos alone. Mike does see an opportunity to do that through dedicated new logo hunters, along with reps that hold both existing customers and prospecting territories. So there's opportunity for us to continue to expand across both of those dimensions. John DiFucci, Analyst, Guggenheim Securities: So just to be clear, guys, and thank you for that detail, it's more about, hey, listen, our sales force is getting really good and productivity's gone up. So in order to continue to grow, and you're bigger too, the law of large numbers, you just need to hire more salespeople. But it's more that than it is when Jay talked about AI changing demand for security out there. Am I reading you right? Kevin Rubin, CFO, Zscaler: I don't think it's either/or, to be honest. We certainly are- Okay seeing strong tailwinds with respect to AI broadly, whether it's specific to Security for AI or just broad-based interest in zero trust and our existing core Zero Trust Exchange. I wouldn't limit the discussion to simply just generally continuing to hire, to grow. I think there is a unique momentum at the moment with respect to this AI tailwind. John DiFucci, Analyst, Guggenheim Securities: Perfect. Thank you, Kevin. Thank you, Jay. Jay Chaudhry, Chairman and CEO, Zscaler: Thank you. Operator, Conference Call Operator, Zscaler: Thank you. Our next question comes from Brian Essex with J.P. Morgan. You may proceed. Brian Essex, Analyst, J.P. Morgan: Great. Good afternoon. Thanks for taking the question. I guess I want to take the other side of the coin, relative to what Fatima asked, and I want to ask about the health of the Red Canary business. I know when you entered the year, there was some question of what the renewal experience would be on that platform, and you've now had a year worth of renewal experience. I think it's performed relatively well. But you also commented, I think at the beginning of the year, that some of those customers aren't your typical Zscaler customers. So now that you've had a year of experience, what is your expectation for the growth of that business? I totally understand the rationale behind the IP acquisition and the value that's going to provide to the products being released very shortly. I just want to get a baseline of what is your view of the health of that customer base, the renewals and growth of that base business going forward, so we can gauge how to interpret the outlook for fiscal 2027. Thank you. Jay Chaudhry, Chairman and CEO, Zscaler: I will start with a broader comment. Acquisition of Red Canary was number one, to make sure we have agentic technology that could become part of our SecOps platform. Number two, we don't have any SecOps expertise. Red Canary had 10 years experience about understanding how a SecOps runs, and that was important for us. In that area, we've done a pretty good job integrating their technology with our technology, and that's becoming an important part of our SecOps solution. Regarding financials, Kevin? Kevin Rubin, CFO, Zscaler: Look, fiscal 2026 was really focused on integrating the Red Canary technology into our Agentic SecOps solution that is launching next week. When we closed the acquisition a year ago, we did not know what portion of their business was going to be durable. We took a conservative approach in how we picked up ARR. Quite frankly, we are pleased with the ability to maintain the book of business while going through the integration. As I mentioned last quarter, as we think about fiscal 2027, we are integrating their technology. It is a combined integrated offering that launches next week. As it relates to Red Canary, we are not expecting any net new ARR contribution. All of that will show up in the integrated solution going forward. Brian Essex, Analyst, J.P. Morgan: Very helpful. Do you think the churn is pretty much in the rearview mirror at this point, in terms of any churn on that platform that may happen? Kevin Rubin, CFO, Zscaler: We have talked, I think, ad nauseam about the different churn rates that MDR businesses experience, discretely different from ours. That played out that way. We did see elevated churn in Red Canary's business in 2026. Despite that, we were able to continue to maintain its book of business, as I mentioned. I would expect that as it relates to accounts that are up for renewal, that we will continue to see the higher, more traditional churn rates of an MDR business. Not our rates, but that has all been contemplated in the guide. Brian Essex, Analyst, J.P. Morgan: Very helpful. Thank you very much. Jay Chaudhry, Chairman and CEO, Zscaler: Thank you. Operator, Conference Call Operator, Zscaler: Thank you. Our next question comes from Meta Marshall with Morgan Stanley. You may proceed. Meta Marshall, Analyst, Morgan Stanley: Great, thanks. I wanted to ask a question about the Z-Flex traction that you're seeing. As you continue to expand the platform with AI security and Agentic SecOps, do you envision mandating flex plans more with some of these new products? How is it impacting sales cycles relative to the traditional sales approach? Thanks. Jay Chaudhry, Chairman and CEO, Zscaler: I'll start. Z-Flex is not about mandating. Z-Flex is about providing flexibility. As our platform is getting bigger, many times our customers will look at evaluating product A or B or C or D, and they're not sure which one do they want, and this will take longer time. By giving them the flexibility that you can start with certain number of products, you can swap other products without going through, again, typical procurement level. This was one of the biggest thing they needed. Sometimes they wanted the ability to ramp, because if they bought six products rather than three of them, they want some ability to ramp. That became part of the Z-Flex deal. They also wanted longer duration. The customer engagement with us are not transactional. They're generally long-term. Once they deploy us, they invest. They want to stay with us for the longer time. They also want the ability to buy additional product from us to base card. All those things are very good for business, for customers, good for us as well. It's true, as our platform becomes bigger, all the products will be available as a part of our Z-Flex offering. Kevin Rubin, CFO, Zscaler: Yeah. One of the other advantages, it was in my prepared remarks, is it eliminates the need to go through new procurement cycles every time a customer wants to adopt and implement new modules or features on the platform. You go through that discussion once. They have the complete flexibility to choose what's appropriate for them to use with their business at different points in time. These are longer term commitments, so we can offer that level of flexibility. We've been very pleased with the momentum, with Z-Flex, and as I mentioned, we ended fiscal 2026 with more than $1.7 billion in Z-Flex bookings. It's been very well received. Meta Marshall, Analyst, Morgan Stanley: Great. Thanks. Operator, Conference Call Operator, Zscaler: Thank you. Our next question comes from Shrenik Kothari with Baird. You may proceed. Shrenik, your line is now open. Our next question comes from Ittai Kidron with Oppenheimer & Co.. You may proceed. Ittai Kidron, Analyst, Oppenheimer & Co.: Thanks, and a solid finish for the year, guys. Kevin, I want to dig into your outlook for fiscal 2027, specifically on the ARR front. I would love if you can give us a little bit more insights into the puts and takes that you've taken into account into that ARR guide. Clearly, you've had very good momentum here with net new ARR. If my math is right, that declines to 4%, the midpoint for your guide for fiscal 2027. So would love to get a little bit more color as to what's included, with respect to the go-to-market, the new products, and any other components that you think it's important to call out. Appreciate it. Kevin Rubin, CFO, Zscaler: Yeah. Thanks, Ittai. Maybe at the highest level, what I would say is we're very optimistic with the momentum that we do carry into 2027, especially after a 17% net new ARR growth in Q4, excluding Red Canary. I am considering the time it will take for the sales transition that we've talked about, both in terms of the geo and the verticals, as well as the pace of the uptake of the integrated SecOps solution. In addition to that, look, as I mentioned, we have had consistent NRR. I mentioned each of the quarters of fiscal 2026, it was 115. So I do expect that to continue. We also have an opportunity to accelerate new logo growth, which we've talked about. We're adding dedicated new logo sales executives, specifically focused on enterprise customers. We also have, from a product point of view, a larger opportunity to land new logos with a variety of products. Very different than was the case years ago. I'm pretty optimistic in terms of the different dimensions that we think about, for 2027, and opportunities for us to continue growing. Jay Chaudhry, Chairman and CEO, Zscaler: AI security is adding further tailwinds as well. Kevin Rubin, CFO, Zscaler: That's right. Ittai Kidron, Analyst, Oppenheimer & Co.: Very good. Is the AI security contemplated materially into your outlook? Because a lot of that portfolio still needs to come. Kevin Rubin, CFO, Zscaler: Yeah. We haven't specifically called out the contributions from Security for AI in the guidance. But as I mentioned, AI is very quickly becoming a strong and durable tailwind for the business. It is driving demand not just for Security for AI solutions, but Zero Trust Everywhere and data security. We expect that these drivers will persist in 2027. Ittai Kidron, Analyst, Oppenheimer & Co.: Appreciate it. Good luck. Operator, Conference Call Operator, Zscaler: Thank you. Our next question comes from Gregg Moskowitz with Mizuho. You may proceed. Gregg Moskowitz, Analyst, Mizuho: Great. Thank you for taking the question. Jay, as you mentioned, you are hosting a launch event for Agentic SecOps next Wednesday. Quite frankly, a lot of time has passed since you acquired Red Canary, and now that the day is upon us or almost upon us, it would be helpful to hear just a bit more from you as to what might be unique about your Agentic SecOps and what it will unlock for your customers. Thanks. Jay Chaudhry, Chairman and CEO, Zscaler: Yeah, very good question. Our customers have been talking to us for the last few years. They are telling us that we have the best data, best telemetry across the network. It is because sitting in line from endpoint, it is sitting on the endpoint and cloud as it is sitting on cloud workloads as well. This is resulting in over 750 billion transaction logs per day. That is a starting point of really good SecOps. Our customers are saying, "We have to send this data to another vendor. You got the data right here. Why can't you give us more meaningful information that is needed for SecOps?" Which is natural. We should be doing that. That was number one driver. Number two was we observed over the years that there was a first generation of SecOps solution. Then second generation came where they are still human-centric, but automation driven. They are essentially human driven. We saw the opportunity to really build a SecOps solution, truly agent native, where agents are driving, detecting, and able to investigate this thing at machine speed versus a traditional solution. I think it's an opportunity to disrupt traditional SecOps solution, even the one that they call themselves next gen SecOps. The last factor was closed loop remediation. These days, the time between a vulnerability being discovered and exploitation is shrinking. Typically it takes days or weeks for a typical SecOps solution to get all the telemetry, do all the detection and finding, and really take an action. With Zscaler, since we have most of the data, we could do it within minutes. Those were the big drivers for us. We have a large number of customers who are waiting for our solution to really be deployed. We are pretty excited about it. I think we'll have a meaningful opportunity for us. In the first half of the year, it's going to take some time to take off, but it should start contributing in second half and then fiscal 2028. Gregg Moskowitz, Analyst, Mizuho: Very helpful. Thank you. Operator, Conference Call Operator, Zscaler: Thank you. I would now like to turn the call back over to Jay Chaudhry for any closing remarks. Jay Chaudhry, Chairman and CEO, Zscaler: Thank you all for joining us today. We hope to see you at one of our investor conferences. Thank you again. Operator, Conference Call Operator, Zscaler: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect. Meta Marshall, Analyst, Morgan Stanley: Goodbye. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Zscaler surges on AI-driven cybersecurity demand

Zscaler beat Wall Street expectations in the fourth quarter and delivered a solid outlook, supported by rising demand for cybersecurity tools as companies grapple with risks tied to artificial intelligence. Revenue rose 25% to $898m, versus $877m expected, while adjusted profit came in at $1.19 per share, compared with $1.09 anticipated. Net loss narrowed to $3.4m. The stock rose 2% in after-hours trading. Annual recurring revenue also climbed 25% to $3.77bn. Zscaler is leaning on its Zero Trust technology to secure AI agents, an area CEO Jay Chaudhry views as a major source of long-term growth. Orders tied to AI security reached $100m over the past 12 months and rose 50% sequentially in the latest quarter, with an acceleration expected in 2028 and 2029. For the first quarter, Zscaler forecast revenue of $935m to $939m and adjusted earnings of $1.15 to $1.16 per share, above Wall Street expectations. For the full fiscal year, the company targets revenue of $3.91bn to $3.94bn and adjusted earnings of $4.86 to $4.90 per share, compared with $4.60 expected. The outlook supports the stock, which was still down 20% year to date.