Cloud security platform Zscaler (NASDAQ:ZS) reported Q1 CY2026 results topping the market\u2019s revenue expectations , with sales up 25.4% year on year to $850.5 million. The company expects next quarter\u2019s revenue to be around $876.5 million, close to analysts\u2019 estimates. Its GAAP loss of $0.08 per share was 43.7% above analysts\u2019 consensus estimates.<\/p>\n
Is now the time to buy ZS? Find out in our full research report (it\u2019s free).<\/a><\/p>\n Zscaler (ZS) Q1 CY2026 Highlights: <\/p>\n Revenue: $850.5 million vs analyst estimates of $835.4 million (25.4% year-on-year growth, 1.8% beat)<\/p>\n EPS (GAAP): -$0.08 vs analyst estimates of -$0.15 (43.7% beat)<\/p>\n Adjusted Operating Income: $195.8 million vs analyst estimates of $188.1 million (23% margin, 4.1% beat)<\/p>\n Revenue Guidance for Q2 CY2026 is $876.5 million at the midpoint, roughly in line with what analysts were expecting<\/p>\n Operating Margin: -3.5%, in line with the same quarter last year<\/p>\n Annual Recurring Revenue: $3.53 billion vs analyst estimates of $3.51 billion (25.1% year-on-year growth, in line)<\/p>\n Billings: $972.3 million at quarter end, up 23.9% year on year<\/p>\n Market Capitalization: $29.68 billion<\/p>\n StockStory\u2019s Take <\/p>\n Zscaler\u2019s first quarter results for 2026 were met with a significant negative market reaction, despite the company surpassing Wall Street\u2019s revenue and non-GAAP profit expectations. Management attributed quarterly momentum to robust adoption of its Zero Trust SASE platform, expanded usage in the public sector, and strong performance in the Americas. CEO Jagtar Singh Chaudhry highlighted the critical role of Zscaler\u2019s security architecture as organizations accelerate AI adoption, noting, \u201cAI is changing the nature of cybersecurity in real time.\u201d However, the departure of two senior sales leaders and uncertainty around new customer growth contributed to investor concerns.<\/p>\n Looking forward, management\u2019s guidance suggests cautious optimism as Zscaler navigates both opportunities and challenges in the cybersecurity landscape. The company expects continued demand for its AI security offerings and broader platform adoption, but is approaching its outlook prudently due to recent sales leadership changes. CFO Kevin Rubin emphasized a tempered view on new customer acquisition and the impact of integrating Red Canary, while reiterating the company\u2019s focus on upselling to existing clients and scaling new AI-driven solutions. Chaudhry stated, \u201cZero Trust has never been more important before,\u201d underscoring the company\u2019s belief that its platform is well-positioned for future security needs.<\/p>\n Key Insights from Management\u2019s Remarks <\/p>\n Management pointed to strong product adoption in AI security and Zero Trust solutions as primary drivers of the quarter, while also acknowledging risks from sales team turnover and shifting customer acquisition dynamics.<\/p>\n AI-driven cyber protection: The rapid deployment of AI applications has made organizations more vulnerable to new threats, but Zscaler\u2019s Zero Trust platform\u2014designed to hide applications and restrict access\u2014drove increased customer demand, particularly for the AI Protect solution, which saw over $100 million in bookings over the past year.<\/p>\n Branch and cloud expansion: Zscaler reported significant momentum in Zero Trust branch and cloud solutions, including its largest-ever branch upsell with a healthcare system and strong adoption by a global automotive manufacturer. These areas are helping customers reduce operational complexity and legacy network costs.<\/p>\n Data security growth: The data security portfolio exceeded $500 million in annual recurring revenue, with notable expansion in federal and healthcare verticals. Customers are consolidating disparate data security products onto Zscaler\u2019s unified platform as sensitive information spreads across multiple environments.<\/p>\n Go-to-market and partnerships: Strategic investments in partnerships with global system integrators (GSIs) and a growing presence in cloud marketplaces have expanded Zscaler\u2019s reach. The new Project AI Guardian collaboration aims to deliver AI security services through key GSI partners.<\/p>\n Sales leadership turnover: The departure of two sales leaders was acknowledged as a near-term risk, with interim replacements in place. Management indicated that this transition could impact sales execution and is a key reason for its conservative guidance for the upcoming quarters.<\/p>\n Drivers of Future Performance <\/p>\n Zscaler\u2019s outlook for the remainder of the year is shaped by ongoing AI adoption, evolving sales capacity, and integration of recent acquisitions, alongside prudent management of operational risks.<\/p>\n AI security adoption: Management expects continued growth from organizations deploying AI tools, which increases the need for advanced cyber protections. The integration of Symmetry Systems\u2019 access graph technology is anticipated to enhance agentic security, helping address emerging vulnerabilities from AI agents and machine-to-machine interactions.<\/p>\n Salesforce stability and coverage: Leadership transitions within the sales team are expected to temporarily affect new customer acquisition, particularly in the lower end of the enterprise market. Zscaler is increasing sales coverage and channel incentives to address this gap, but flagged short-term disruption as a risk.<\/p>\n Red Canary and SecOps rollout: The integration of Red Canary\u2019s security operations portfolio is seen as a long-term growth lever, but management is taking a cautious approach on the pace of customer uptake. The company will phase out separate Red Canary reporting next year and focus on upselling integrated solutions to its existing base.<\/p>\n Catalysts in Upcoming Quarters <\/p>\n In the coming quarters, our analysts will be focused on (1) the pace of AI Protect and Zero Trust branch adoption across large enterprises, (2) stabilization and productivity gains within the sales organization following leadership changes, and (3) early signs of customer uptake for integrated Red Canary and Symmetry Systems solutions. Progress on new logo acquisition and expansion via channel partners will also be key metrics to watch.<\/p>\n Zscaler currently trades at $146.29, down from $185.70 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it\u2019s free for active Edge members)<\/a>.<\/p>\n Our Favorite Stocks Right Now <\/p>\n ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.<\/p>\n Find out which 5 stocks it’s flagging for this month – FREE. Get Our Top 5 Growth Stocks for Free HERE<\/a>.<\/p>\n