The quarter cleared the Street, not just prior-year comparisons. Published expectations were roughly $877.1 million of revenue and $1.09 of non-GAAP EPS; Zscaler delivered $898.2 million and $1.19, or about 2% and 9% above those benchmarks.
| Metric | Q4 FY26 | Q4 FY25 | External expectation |
|---|---|---|---|
| Revenue | $898.2M | $719.2M | ~$877.1M |
| Non-GAAP diluted EPS | $1.19 | $0.89 | ~$1.09 |
| ARR | $3.771B | — | — |
| Non-GAAP operating margin | 24% | 22% | — |
| Free cash flow | $60.8M | $171.9M | — |
Underlying recurring growth remains solid, but the acquisition flatters the headline. ARR rose 25% to $3.771 billion, while excluding Red Canary’s $141 million contribution, ARR growth was 20% and net new ARR growth was 17% (ARR disclosure). The filing says revenue and ARR both grew 25% year over year and non-GAAP operating margin reached a record 24%. 〔0〕
Cash conversion was the clear blemish. Operating cash flow increased to $279.3 million, but free cash flow fell to $60.8 million from $171.9 million as property and equipment spending surged to $199.8 million from $60.0 million (Cash Flow statement). Management explicitly attributed the decline to $218.5 million of capex and capitalized software, versus $78.7 million a year earlier.
The surprise restructuring makes this more than a clean earnings beat. Zscaler plans to cut worldwide headcount by approximately 3% and expects $30 million to $33 million of largely severance-related charges, with most recognized in the first half of fiscal 2027 (Restructuring plan). The net read is therefore a genuine earnings beat, but only a slight one in sentiment: better-than-expected profitability and growth are offset by weaker cash generation and evidence that management is reallocating resources to address execution and AI priorities.
Read the original 8-K on SEC EDGAR ↗