01—Abstract
Summary
Summary of the 10-Q filed February 26, 2026. Cited figures are marked; the original filing is the authoritative source.
Zscaler, Inc. reported revenue of $815.8 milliona for the three months ended January 31, 2026, up from $647.9 million a year earlier, and $1,603.9 million for the six months, up from $1,275.9 million.
Gross profit was $624.5 millionb for the quarter, with GAAP gross margin of 77% in both periods. Loss from operations widened to $51.8 million from $40.1 million, and net loss was $34.3 million, or $0.21 per share, compared with a net loss of $7.7 million, or $0.05 per share, in the prior-year quarter. Non-GAAP income from operations was $181.0 million, versus $140.5 million a year earlier, and free cash flow for the six months was $582.4 million, versus $435.3 million.
Annual recurring revenue was $3,359 millionc as of January 31, 2026, compared with $2,683 million a year earlier. The balance sheet shifted materially during the period. Cash, cash equivalents and short-term investments totaled $3,512.8 million, and goodwill rose to $1,001.4 million from $417.7 million following the acquisitions of Red Canary and SPLX.
Cash used in investing activities was $1,863.1 milliond for the six months, driven by $672.8 million of business acquisition payments and $1,401.5 million of short-term investment purchases. Deferred revenue totaled $2,355.4 million, and remaining performance obligations were $6,050.8 million, with 47% expected to be recognized over the next 12 months. The $1,725.0 million of 0.0% convertible senior notes due 2028 remain outstanding, and the company states its existing cash is sufficient to fund operations for at least the next 12 months.
A subsequent event disclosed in the filing is the February 5, 2026 acquisition of SquareX Holdings, Inc. for approximately $113.0 million in cash. The filing also notes that the company expects to continue incurring net losses for the foreseeable future as it invests in sales and marketing and research and development, and that there is no pending legal proceeding that it believes is likely to have a material adverse effect.
02—Key points
Key Highlights
- Revenue of $815.8 million for the three months ended January 31, 2026, up 26% from $647.9 million; six-month revenue of $1,603.9 million, up 26%.
- Net loss of $34.3 million ($0.21 per share) for the quarter, compared with a net loss of $7.7 million ($0.05 per share) a year earlier; prior-year quarter included a $17.2 million tax benefit from a U.K. valuation allowance release.
- Non-GAAP income from operations of $181.0 million for the quarter, versus $140.5 million a year earlier; non-GAAP operating margin of 22% in both periods.
- Annual recurring revenue of $3,359 million as of January 31, 2026, compared with $2,683 million as of January 31, 2025.
- Free cash flow of $582.4 million for the six months ended January 31, 2026, versus $435.3 million a year earlier, with operating cash flow of $652.4 million.
- Acquisitions of Red Canary (goodwill of $544.5 million) and SPLX during the period; goodwill increased to $1,001.4 million, and SquareX was acquired on February 5, 2026 for approximately $113.0 million.
- Cash, cash equivalents and short-term investments of $3,512.8 million, against $1,725.0 million principal of 0.0% convertible senior notes due 2028.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2026, Zscaler lost $0.04.
- Revenue$815.8M100.0%
- Cost of revenue−$191.3M23.4%
- Gross profit$624.5M76.6%
- Operating costs−$676.3M82.9%
- Operating income−$51.8M6.3%
- Interest, other & tax$17.5M2.1%
- Net income−$34.3M4.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2026filed February 26, 2026Financial Statements
Q2 FY2026 against Q2 FY2025
| Line item | Q2 FY2026Q2 FY2025 | Change |
|---|---|---|
| Revenue | $815.75M$647.90M | +25.9% |
| Cost of Revenue | $191.26M$148.50M | +28.8% |
| Gross Profit | $624.49M$499.40M | +25.0% |
| R&D Expenses | $229.14M$170.86M | +34.1% |
| Operating Expenses | $676.26M$539.54M | +25.3% |
| Operating Income | -$51.77M-$40.14M | −29.0% |
| Net Income | -$34.31M-$7.72M | −344.2% |
| EPS (Basic) | $-0.21$-0.05 | −320.0% |
| EPS (Diluted) | $-0.21$-0.05 | −320.0% |
| Shares Outstanding (Basic) | 159.68M153.67M | +3.9% |
| Shares Outstanding (Diluted) | 159.68M153.67M | +3.9% |
05—Questions
Frequently Asked Questions
How did Zscaler's revenue and profitability trend in the quarter ended January 31, 2026?
Revenue grew 26% to $815.8 million, and gross margin held at 77%. Operating expenses rose to $676.3 million from $539.5 million, so loss from operations widened to $51.8 million from $40.1 million. Net loss was $34.3 million, compared with $7.7 million a year earlier, which had benefited from a tax item.
What drove the revenue growth?
The filing states that sales of additional subscriptions to existing customers contributed $96.9 million of the quarterly revenue increase, with the remainder primarily from new customers. The customer base grew 15% from January 31, 2025 to January 31, 2026.
How did the acquisitions affect the balance sheet and cash position?
Payments for business acquisitions, net of cash acquired, totaled $672.8 million for the six months, and goodwill increased by $583.7 million. Cash and cash equivalents fell to $1,202.8 million from $2,389.0 million, while short-term investments rose to $2,310.0 million from $1,183.4 million, reflecting purchases of short-term investments.
What does the filing say about liquidity and the 2028 convertible notes?
The company states that its existing cash, cash equivalents and short-term investments will be sufficient to fund working capital, capital expenditures and convertible senior notes repayment requirements for at least the next 12 months. The 2028 Notes have a principal amount of $1,725.0 million and mature on July 15, 2028, and the company has the option to settle them in cash, shares or a combination of both.
What is the company's outlook on profitability?
The filing states that the company expects to continue incurring net losses for the foreseeable future, as it invests in sales and marketing, research and development, and legal matters. It also states it expects gross profit to increase in absolute dollars and gross margin to increase slightly over the long term.
06—Continue