- Revenue Growth: FY2025 Q4 revenue hit $719M, up 21% YoY, driven by AI security, Zero Trust, and data security.
- ARR Milestone: Achieved $3B ARR, +22% YoY, becoming one of two pure-play SaaS security companies to cross this threshold.
- Operating Margin: Exceeded 22% in FY2025, meeting the "rule of 50" (ARR x margin > 50x operating profit).
- Z Flex Program: Generated $100M+ TCV bookings in Q4, growing 50% sequentially as a strategic multiyear deal driver.
- Red Canary Impact: Expected to add $95M ARR and $90M revenue in FY2026 post-acquisition, enhancing threat detection capabilities.
Platform Expansion and Emerging Growth Areas
Zscaler's platform expansion into AI security, Zero Trust Everywhere, and data security everywhere ARR grew significantly, exceeding $1 billion in Q4 combined. The company is seeing a significant shift in the market, with customers actively seeking to eliminate firewalls and embrace Zero Trust solutions. Zero Trust branch, in particular, is gaining traction, driven by the need for enhanced security and simplified network management.
Guidance and Outlook
Zscaler provided guidance for fiscal 2026, projecting ARR growth of 21.9% to 22.7% to reach $3.676 billion to $3.698 billion, revenue growth of 22% to 23% to reach $3.265 billion to $3.284 billion, and operating profit of $728 million to $736 million. The company's financial model remains strong, with high single-digit net new ARR growth guided for FY2026. Analysts estimate next year's revenue growth at 20.4%.
Valuation and Metrics
With a P/E Ratio of 1020.9, P/B Ratio of 23.53, and P/S Ratio of 15.76, the market has priced in significant growth expectations for Zscaler. The EV/EBITDA ratio stands at 369.5, indicating high expectations for future profitability. The company's ROE and ROIC are negative, but this is not unusual for a growth company. The Free Cash Flow Yield is 1.83%, which is relatively low.
Red Canary Acquisition and Integration
The acquisition of Red Canary is expected to contribute $95 million to ARR and $90 million to revenue in fiscal 2026. Zscaler is taking a cautious approach to Red Canary's ARR due to the historically higher churn rates of managed security service providers (MSSPs). The company is focused on continuing to improve sales execution and further integrate Red Canary's technology.
Future Growth Drivers
Zscaler expects continued growth in AI security, Zero Trust Everywhere, and data security. The company is well-positioned to capitalize on the growing demand for Zero Trust solutions and is expanding its platform to address new market segments, such as AI workload security and user-to-agent communication security.