01—Abstract
Summary
Summary of the 10-Q filed November 25, 2025. Cited figures are marked; the original filing is the authoritative source.
Zscaler, Inc. reported revenue of $788.1 milliona for the three months ended October 31, 2025, up from $628.0 million a year earlier, with a net loss of $11.6 million compared with $12.1 million in the prior-year quarter.
Gross profit was $603.4 millionb versus $486.5 million, and loss from operations was $36.4 million versus $30.7 million. Operating expenses rose to $639.7 million from $517.2 million, led by sales and marketing and research and development. Stock-based compensation expense was $188.6 million in the quarter, and the company recorded $4.7 million of restructuring charges.
Cash flow from operations was $448.3 millionc, compared with $331.3 million a year earlier, and free cash flow was $413.3 million. Cash, cash equivalents and short-term investments totaled $3,321.3 million at October 31, 2025. The company completed two acquisitions in the period: Red Canary Inc. (August 1, 2025) for a total purchase price of $651.4 million, and SPLXAI Inc. (October 31, 2025) for $40.6 million in cash.
Goodwill rose to $994.5 milliond from $417.7 million at July 31, 2025, and business acquisitions used $672.8 million in cash during the quarter. The balance sheet includes $1,725.0 million principal of 0.0% convertible senior notes due 2028 and total remaining performance obligations of $5,932.6 million, of which 47% is expected to be recognized over the next 12 months. The company reported ARR of $3,204 million, up from $2,553 million, and a dollar-based net retention rate of 115%, which it will stop reporting beginning with its fiscal 2026 second-quarter report.
02—Key points
Key Highlights
- Revenue of $788.1 million, up from $628.0 million in the prior-year quarter; ARR of $3,204 million versus $2,553 million.
- GAAP net loss narrowed slightly to $11.6 million from $12.1 million; loss from operations was $36.4 million versus $30.7 million.
- Non-GAAP income from operations was $171.9 million (22% non-GAAP operating margin) versus $134.1 million (21%) a year earlier.
- Operating cash flow of $448.3 million and free cash flow of $413.3 million (52% free cash flow margin) versus $291.9 million a year earlier.
- Acquisitions of Red Canary ($651.4 million total purchase price) and SPLX ($40.6 million) pushed goodwill to $994.5 million and acquired intangibles to $215.3 million.
- Cash, cash equivalents and short-term investments of $3,321.3 million at October 31, 2025, against $1,725.0 million of 2028 convertible notes.
- Dollar-based net retention rate of 115%; the company will stop reporting this metric beginning with its fiscal 2026 second-quarter report.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2026, Zscaler lost $0.01.
- Revenue$788.1M100.0%
- Cost of revenue−$184.8M23.4%
- Gross profit$603.4M76.6%
- Operating costs−$639.7M81.2%
- Operating income−$36.4M4.6%
- Interest, other & tax$24.7M3.1%
- Net income−$11.6M1.5%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed November 25, 2025Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $788.11M$627.96M | +25.5% |
| Cost of Revenue | $184.75M$141.46M | +30.6% |
| Gross Profit | $603.36M$486.49M | +24.0% |
| R&D Expenses | $200.50M$154.25M | +30.0% |
| Operating Expenses | $639.72M$517.16M | +23.7% |
| Operating Income | -$36.36M-$30.67M | −18.6% |
| Net Income | -$11.62M-$12.05M | +3.6% |
| EPS (Basic) | $-0.07$-0.08 | +12.5% |
| EPS (Diluted) | $-0.07$-0.08 | +12.5% |
| Shares Outstanding (Basic) | 158.60M152.56M | +4.0% |
| Shares Outstanding (Diluted) | 158.60M152.56M | +4.0% |
05—Questions
Frequently Asked Questions
How did Zscaler's revenue and profitability trend in the quarter?
Revenue rose to $788.1 million from $628.0 million, and gross profit increased to $603.4 million from $486.5 million. Operating expenses grew faster, to $639.7 million from $517.2 million, so the loss from operations widened to $36.4 million from $30.7 million. The GAAP net loss was $11.6 million, slightly smaller than the $12.1 million loss a year earlier, helped by a $4.4 million valuation allowance release tied to acquisitions.
What acquisitions did Zscaler complete, and what did they cost?
Zscaler acquired Red Canary Inc., a managed detection and response technology company, on August 1, 2025, for a total purchase price of $651.4 million, which resulted in goodwill of $544.5 million. It also acquired SPLXAI Inc. on October 31, 2025, for a total cash purchase price of $40.6 million, resulting in goodwill of $32.2 million. Payments for business acquisitions, net of cash acquired, totaled $672.8 million in the quarter.
How strong is Zscaler's liquidity and what debt does it carry?
Cash, cash equivalents and short-term investments totaled $3,321.3 million as of October 31, 2025. The company's main debt is $1,725.0 million principal of 0.0% convertible senior notes due July 15, 2028, with a carrying amount of $1,699.9 million. The company states that existing cash and investments will be sufficient to fund working capital, capital expenditures and convertible note repayment requirements for at least the next 12 months.
What does the filing say about future revenue visibility?
Remaining performance obligations were $5,932.6 million as of October 31, 2025, with 47% expected to be recognized over the next 12 months and 91% over the next three years. Deferred revenue, including current and noncurrent balances, was $2,351.3 million. Subscription and support revenue accounted for approximately 98% of revenue for the quarter.
What are the main risks highlighted for investors?
The filing highlights a history of net losses, intense competition, dependence on channel partners (top five channel partners represented 30% of revenue for the three months ended October 31, 2025), macroeconomic-driven elongation of large-deal approval processes, and potential cash obligations or dilution from the 2028 convertible notes. It also flags risks tied to cybersecurity incidents, AI regulation, and India operations, where 37% of the global workforce was based as of July 31, 2025.
06—Continue