Zscaler, Inc. Q4 FY2025 earnings

Zscaler's fiscal 2025 fourth quarter delivered revenue of $719.2 million, up 21.3% from the prior-year quarter. The top line grew, but profitability remained under pressure. GAAP operating loss widened to $32.2 million, and GAAP net loss widened to $17.6 million. Gross profit was $547.0 million, up 18.2%, while gross margin slipped to 76.1%, down 2.0 percentage points from the prior-year quarter. On a non-GAAP basis, income from operations was $158.9 million, or 22% of revenue, and non-GAAP net income was $146.7 million. The quarter generated $250.6 million in operating cash flow, up 23.1%, and free cash flow of $171.9 million. Capital expenditures were $60.0 million, up 21.6%. GAAP operating margin was negative 4.5%, flat with the prior-year quarter. Non-GAAP gross margin was 79%, and non-GAAP operating margin was 22%.

For the full year, revenue reached $2.67 billion, up 23.3%. GAAP net loss narrowed to $41.5 million, and diluted GAAP net loss per share narrowed to $0.27. GAAP operating loss for the full year was $128.5 million, wider than fiscal 2024. Operating cash flow was $972.5 million, up 24.7%. Deferred revenue at July 31, 2025, was $2.47 billion, up 30.2%, while remaining performance obligations were $5.78 billion, up 30.8%. Annual recurring revenue hit $3,015 million, up 22%, and calculated billings were $1,202.3 million, up 32%. Full-year GAAP operating margin was negative 4.8%, up 0.8 percentage points from fiscal 2024.

Zscaler ended the quarter with more than 9,400 customers, and about 40% of the Forbes Global 2000 were customers. The dollar-based net retention rate for the trailing 12 months ended July 31, 2025, was 114%, compared with 116% a year earlier. On the product side, the company acquired Red Canary to build an AI-driven security operations center, launched Zscaler AI Guard for AI security, and introduced Zscaler Cellular for IoT and OT connectivity. Zscaler also published its 2025 ThreatLabz Ransomware Report, which found a 146% surge in ransomware attacks and a 70% increase in public extortion cases. The company achieved the U.S. Department of Defense's CMMC Level 2 certification and became the first independent software vendor to earn AWS ISV Competencies in Healthcare, Education, and all subcategories of the relaunched Government Competency. A separate report using Marsh McLennan's cyber losses dataset found that Zero Trust architecture could cut cyber incident claims by 31%, potentially saving $465 billion annually.

Guidance points to continued growth. For the first quarter of fiscal 2026, Zscaler expects non-GAAP income from operations of $166 million to $168 million and non-GAAP net income per share of $0.85 to $0.86, assuming about 167 million fully diluted shares and a 23% non-GAAP tax rate. For the full fiscal year 2026, the company guides to annual recurring revenue of $3.676 billion to $3.698 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, assuming about 169 million fully diluted shares and a 23% non-GAAP tax rate. Management also noted that calculated billings will no longer be reported beginning in fiscal 2026, as ARR becomes a key business metric. Risks include macroeconomic uncertainty and geopolitical events, customer scrutiny and elongated approval processes for larger deals, execution challenges, rapid growth, risks tied to the use of AI in the platform, new products and software bugs, competition, and sales cycle length. The company also expects operating expenses to increase in absolute dollars as it invests in sales and marketing and research and development, and it warned that litigation-related expenses may fluctuate. Customer scrutiny is expected to continue in the near term, elongating sales cycles and the timing of large deals. The company expects to continue incurring net losses for the foreseeable future.