8-K: Zscaler Reports Strong Q4 & FY25 Results, Exceeds $3B ARR

Cloud security leader Zscaler announced robust financial performance for its fiscal fourth quarter and full year 2025, surpassing $3 billion in Annual Recurring Revenue.

Summary

• Fourth fiscal quarter revenue increased 21% year-over-year to $719.2 million.
• Annual Recurring Revenue (ARR) grew 22% year-over-year to $3,015 million, achieving a new milestone of over $3 billion.
• Calculated billings increased 32% year-over-year to $1,202.3 million.
• Deferred revenue grew 30% year-over-year to $2,468.0 million.
• GAAP net loss for Q4 was $17.6 million, compared to $14.9 million in Q4 fiscal 2024.
• Non-GAAP net income for Q4 was $146.7 million, up from $115.8 million in Q4 fiscal 2024.
• Full fiscal year 2025 revenue was $2,673.1 million, a 23% increase year-over-year.
• Full fiscal year 2025 non-GAAP net income was $534.8 million, compared to $414.6 million in fiscal 2024.
• Cash provided by operations for fiscal year 2025 was $972.5 million, and free cash flow was $726.7 million.
• Issued $1,725.0 million in convertible senior notes due 2028 and repaid $1,150.0 million of 2025 notes, partially with 3.8 million new shares.
• Acquired Red Canary to enhance Security Operations with AI-driven threat intelligence and automation.
• Launched AI-powered security innovations, including Zscaler AI Guard, and Zscaler Cellular for IoT/OT security.
• Achieved U.S. Department of Defense's CMMC Level 2 certification and AWS ISV Competencies in Healthcare, Education, and Government.

Sentiment

Score: 8

Explanation: Zscaler reported strong financial results with significant growth in revenue, ARR, and billings, alongside improved non-GAAP profitability and cash flow. Strategic moves like the Red Canary acquisition and AI security innovations position the company well for future growth in a critical market. While GAAP net loss persists, the non-GAAP performance and positive outlook are highly encouraging.

Positives

• Strong revenue growth: Q4 revenue up 21% to $719.2 million; FY25 revenue up 23% to $2,673.1 million.
• Achieved over $3 billion in Annual Recurring Revenue (ARR), growing 22% year-over-year to $3,015 million.
• Significant increase in calculated billings, up 32% year-over-year to $1,202.3 million in Q4.
• Robust deferred revenue growth of 30% year-over-year to $2,468.0 million.
• Improved non-GAAP profitability: Q4 non-GAAP net income increased to $146.7 million from $115.8 million; FY25 non-GAAP net income increased to $534.8 million from $414.6 million.
• Achieved the highest ever operating margin for a quarter.
• Strong cash generation: Q4 cash provided by operations at $250.6 million (35% of revenue); FY25 cash provided by operations at $972.5 million (36% of revenue).
• Healthy free cash flow: Q4 free cash flow at $171.9 million (24% of revenue); FY25 free cash flow at $726.7 million (27% of revenue).
• Strategic acquisition of Red Canary to enhance AI-driven threat intelligence and automation.
• Expansion of AI security portfolio with new innovations like AI Guardrails and Zscaler AI Guard.
• Introduction of Zscaler Cellular, the industry's first Zero Trust solution for IoT/OT connectivity using only a SIM card.
• Achieved key certifications: U.S. Department of Defense's CMMC Level 2 and multiple AWS ISV Competencies.
• Positive outlook for Q1 and full year fiscal 2026, projecting continued revenue and ARR growth.

Negatives

• GAAP net loss increased in Q4 fiscal 2025 to $17.6 million from $14.9 million in Q4 fiscal 2024.
• GAAP loss from operations for Q4 was $32.2 million, compared to $27.0 million in Q4 fiscal 2024.
• GAAP loss from operations for fiscal year 2025 was $128.5 million, compared to $121.5 million in fiscal 2024.

Risks

• Macroeconomic influences and instability, geopolitical events, operations and financial results and the economy in general.
• Risks related to the use of AI in the platform.
• Ability to identify and effectively implement necessary changes to address execution challenges.
• Risks associated with managing rapid growth, including fluctuations from period to period.
• Limited experience with new products and subscriptions and support introductions and the risks associated with new products and subscription and support offerings, including the discovery of software bugs.
• Ability to attract and retain new customers.
• Failure to timely develop and achieve market acceptance of new products and subscriptions as well as existing products and subscription and support.
• Rapidly evolving technological developments in the market for network security products and subscription and support offerings and the ability to remain competitive.
• Length of sales cycles.
• Useful lives of assets and other estimates.
• General market, political, economic and business conditions.

Future Outlook

For the first quarter of fiscal 2026, Zscaler expects revenue of $772 million to $774 million, non-GAAP income from operations of $166 million to $168 million, and non-GAAP net income per share of approximately $0.85 to $0.86. For the full fiscal year 2026, the company anticipates Annual Recurring Revenue of $3.676 billion to $3.698 billion, revenue of approximately $3.265 billion to $3.284 billion, non-GAAP income from operations of $728 million to $736 million, and non-GAAP net income per share of $3.64 to $3.68.

Management Comments

• "We had an outstanding Q4, in which we achieved a new milestone of more than $3 billion of Annual Recurring Revenue while achieving our highest ever operating margin for a quarter."
• "We believe Zscaler's Zero Trust and AI security solutions are imperative in today's world and are driving robust demand."
• "We recently delivered AI Guardrails for Public and Private apps, and we are rapidly expanding our AI security portfolio to address the emerging risks of AI models and applications."

Industry Context

The cybersecurity industry is experiencing rapid evolution driven by increasing cyber threats, the imperative for Zero Trust architectures, and the emerging risks and opportunities presented by AI. Zscaler's focus on cloud-native Zero Trust and AI-powered security solutions positions it well within this context, addressing critical needs for enterprises to secure data across diverse environments (branches, multi-cloud, remote, IoT/OT). The reported surge in ransomware attacks (146% increase) and public extortion cases (70% increase) highlights the urgent demand for robust security solutions like those offered by Zscaler, reinforcing the company's strategic relevance in a high-growth, high-stakes market. The acquisition of Red Canary and the launch of AI Guardrails demonstrate a proactive approach to integrating advanced threat intelligence and AI into security operations, aligning with the industry's shift towards more automated and intelligent defense mechanisms.

Comparison to Industry Standards

• Zscaler's 21% year-over-year revenue growth in Q4 and 23% for FY25, alongside 22% ARR growth, demonstrates strong performance in the cloud security sector, often exceeding that of more mature, traditional cybersecurity players and aligning with high-growth SaaS companies.
• The achievement of over $3 billion in ARR places Zscaler among the elite cloud software companies, indicating significant market penetration and customer stickiness, comparable to leading SaaS providers.
• The company's non-GAAP operating margin of 22% for both Q4 and FY25, and its highest ever operating margin for a quarter, indicates improving operational efficiency and scalability, a key benchmark for successful SaaS companies.
• A report utilizing Marsh McLennan's data suggests Zero Trust architecture could cut cyber incident claims by 31%, potentially saving $465 billion annually, providing a strong, quantifiable value proposition that differentiates Zscaler's approach from traditional perimeter-based security models and positions it as a leader in a transformative security paradigm.
• The acquisition of Red Canary, a recognized leader in Managed Detection and Response (MDR), enhances Zscaler's competitive stance against integrated security platforms offered by companies like Palo Alto Networks, CrowdStrike, and Fortinet, by providing a more comprehensive, AI-driven SOC solution.
• Achieving CMMC Level 2 certification and multiple AWS ISV Competencies (Healthcare, Education, Government) demonstrates Zscaler's ability to meet stringent regulatory and industry-specific requirements, a critical differentiator in highly regulated sectors compared to less specialized competitors.

Stakeholder Impact

• Shareholders: Positive impact due to strong financial performance, growth in key metrics (ARR, revenue, billings), improved non-GAAP profitability, and a positive future outlook. The issuance of 3.8 million new shares for debt settlement could cause slight dilution but is part of a larger debt refinancing strategy.
• Customers: Positive impact through enhanced security offerings, including AI-powered solutions, expanded Zero Trust capabilities, and the integration of Red Canary's threat intelligence, leading to better cyber risk management and protection.
• Employees: Potential impact from "restructuring and other charges" mentioned in footnotes, which typically involve severance and termination benefits, suggesting some workforce adjustments to align with strategic priorities.
• Creditors: Positive impact from the successful issuance of new convertible notes and repayment of maturing notes, demonstrating financial stability and access to capital markets.

Next Steps

• Host a conference call for analysts and investors on September 2, 2025, at 1:30 p.m. Pacific time.
• Participate in the Citi 2025 Global TMT Conference on September 4, 2025.
• Participate in the 2025 Truist Securities Technology Symposium on September 4, 2025.
• Participate in the Goldman Sachs Communacopia + Technology Conference 2025 on September 10, 2025.
• Participate in the Wolfe Research TMT Conference 2025 on September 10, 2025.

Key Dates

Recommendation

Zscaler delivered an "outstanding Q4" and full fiscal year 2025, marked by robust revenue growth, a significant milestone of over $3 billion in Annual Recurring Revenue, and strong calculated billings. The company achieved its highest ever operating margin for a quarter and demonstrated substantial non-GAAP net income and free cash flow generation. Strategic initiatives, including the acquisition of Red Canary and the rapid expansion of AI-powered security solutions, position Zscaler at the forefront of the evolving cybersecurity landscape, addressing critical market demands for Zero Trust and AI security. The positive financial outlook for fiscal 2026 further reinforces confidence in sustained growth and profitability. While GAAP net losses persist, the underlying business momentum, market leadership, and strategic execution warrant a strong buy recommendation for long-term investors.

Keywords

Zscaler, cloud security, Zero Trust, AI security, cybersecurity, network security, SASE, ransomware, IoT/OT security, Red Canary, CMMC, AWS Competency, financial results, ARR, billings, revenue, GAAP, non-GAAP