Summary
Zscaler reported revenue of $815.75 million for the quarter ended January 31, 2026, up 25.9% from $647.90 million in the prior-year quarter. Year-to-date revenue reached $1.60 billion, up 25.7%. Sales of additional subscriptions to existing customers contributed $96.9 million of the quarterly increase, with the rest coming from new accounts as the customer base grew 15% from January 31, 2025 to January 31, 2026. Annual recurring revenue, a non-GAAP metric, stood at $3,359 million as of January 31, 2026, against $2,683 million a year earlier. Subscription and support services supplied roughly 98% of revenue, so the mix stays concentrated in cloud security subscriptions.
Margins and the bottom line look weaker. Gross profit rose 25.0% to $624.49 million, but gross margin slipped to 76.6% from 77.1%, down 0.5 percentage points. Operating loss widened 29.0%, to $51.77 million from $40.14 million, and operating margin was -6.3%, down 0.2 percentage points from -6.2%. Net loss widened 344.2%, to $34.31 million from $7.72 million. Diluted EPS was a loss of $0.21, compared with a loss of $0.05 a year earlier. Tax explains much of that swing: the prior-year quarter carried a one-time release of a valuation allowance on U.K. deferred tax assets that did not repeat. Data center and equipment costs and higher headcount drove the increase in cost of revenue.
Non-GAAP results look steadier. Non-GAAP income from operations came in at $180.97 million, and non-GAAP operating margin held at 22%, level with the prior-year quarter. The distance between the two sets of numbers is mostly stock-based compensation and related payroll taxes, plus amortization of acquired intangibles. Management expects operating expenses to rise in absolute dollars as it keeps hiring in sales and marketing and in research and development, while targeting a lower expense ratio over the long term. The filing also notes that new sales land in reported results gradually, because revenue is recognized ratably over contract terms of one to three years.
Cash generation held up. Operating cash flow for the quarter was $204.07 million, up 13.7% from $179.43 million, and it reached $652.35 million for the six months, up 27.7%. Capital expenditures rose 18.2%, to $17.76 million. Free cash flow, a non-GAAP measure that subtracts purchases of property, equipment and other assets and capitalized internal-use software, was $169.13 million versus $143.43 million a year earlier, although free cash flow margin eased to 21% from 22%.
Backlog argues that demand is intact. Deferred revenue finished the quarter at $2.36 billion, up 25.4% from $1.88 billion, and remaining performance obligations reached $6.05 billion, up 31.1% from $4.62 billion. Both grew faster than reported revenue.
The risks in the filing are concrete. Management points to customers who scrutinize large purchases and require multiple approvals, a pattern that elongates sales cycles and pushes big contracts into later periods. Zscaler has posted net losses every year since inception and expects to keep doing so while it funds growth, legal matters and related accruals. Tax rules are another moving piece: the company is still assessing the OECD global minimum tax framework and a January 2026 safe harbor that may exempt U.S. operations but not foreign jurisdictions, with any impact showing up in fiscal 2027. Management states that existing cash, cash equivalents and short-term investments are sufficient to fund working capital, capital expenditures and convertible note repayment requirements for at least the next 12 months.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $815.8M | $788.1M | +3.5% | $647.9M | +25.9% |
| Gross profit | $624.5M | $603.4M | +3.5% | $499.4M | +25.0% |
| Gross margin | 76.5% | 76.6% | -0.0 pp | 77.1% | -0.5 pp |
| Research & development | $229.1M | $200.5M | +14.3% | $170.9M | +34.1% |
| Sales & marketing | $368.9M | $373.6M | -1.2% | $307.9M | +19.8% |
| General & administrative | $78.2M | $65.7M | +19.1% | $60.8M | +28.6% |
| Total operating expenses | $676.3M | $639.7M | +5.7% | $539.5M | +25.3% |
| Operating income (loss) | -$51.8M | -$36.4M | -42.4% | -$40.1M | -29.0% |
| Operating margin | -6.3% | -4.6% | -1.7 pp | -6.2% | -0.1 pp |
| Net income (loss) | -$34.3M | -$11.6M | -195.4% | -$7.7M | -344.2% |
| Net margin | -4.2% | -1.5% | -2.7 pp | -1.2% | -3.0 pp |
| Diluted EPS | -$0.21 | -$0.07 | -$0.14 | -$0.05 | -$0.16 |
| Customers | 9,400 | 9,400 | ±0.0% | 8,650 | +8.7% |
Risks
MD&A states customer scrutiny and elongated approval processes continue, particularly for larger deals, as customers require multiple approvals in an uncertain economic environment, and expects cautiousness to elongate sales cycles and timing of large deals in the near term.
Risk factors say sales cycles can be long and unpredictable, especially with large organizations and government entities, and MD&A notes macroeconomic conditions could reduce sales, lengthen sales cycles and lower prices for services.
Risk factors state AI technologies may lower barriers to entry for new competitors, including large AI providers, and enable faster development of alternative solutions, while MD&A emphasizes AI adoption is changing cybersecurity threats and competition.
Net loss widened to $34.3 million for the quarter from $7.7 million in the prior-year quarter, operating loss widened to $51.8 million from $40.1 million, and accumulated deficit was $1,235.5 million as of January 31, 2026; MD&A expects to continue incurring net losses for the foreseeable future.
Risk factors state sales through the top five channel partners and their affiliates represented 28% of revenue for fiscal 2025 and 30% of revenue for the six months ended January 31, 2026, and most revenue is derived from the channel partner network.
Risk factors highlight dependence on CEO Jay Chaudhry and other key personnel, recent senior management changes including the Chief Marketing Officer and Executive Vice President, Agentic AI Security Engineering, and intense competition for experienced sales, cybersecurity and AI talent.
Zscaler issued $1,725 million aggregate principal amount of 0.0% Convertible Senior Notes due 2028, and risk factors say repayment will require significant cash, may limit funds for working capital and capital expenditures, and expose the company to capped call counterparty risk.
Risk factors note the EU Data Act allows customers to cancel subscriptions without cause upon 30 to 60 days notice, and MD&A discusses OECD Pillar Two global minimum tax and related tax provision volatility.
MD&A expects general and administrative expenses to increase due to legal matters and related accruals described in Note 12, Commitments and Contingencies, and risk factors note litigation can be time-consuming and cause significant expenses or liability.
Risk factors state rapid revenue and other growth may not be indicative of future performance and MD&A notes revenue increased 25.9% for the quarter, while the company expects recent revenue growth rates to decline as the revenue base increases.
Risk factors state the cloud platform is served from over 160 public exchanges and thousands of private exchanges at the edge, with data center and network partner disruptions potentially causing service interruptions and customer losses.
SaaS KPIs
All quarters →Free Cash Flow Margin
Free Cash Flow
Non-GAAP Operating Margin
Non-GAAP Gross Margin
Total Customers
Customer Base Growth (YoY)
Forbes Global 2000 customers
Summary, forecast, risks and KPIs are extracted from Zscaler, Inc.'s SEC filings for Q2 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.