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Call sheet · Q1'26

Zscaler (ZS)

Q1'26 earnings call · held November 25, 2025 · compared with the Q4'25 call · management-credibility review
10/12
Disclosure score
2 medium, 4 low flags
Financial quality
Bottom line
The sleeper story is Z Flex becoming a platform adoption accelerator - 20% of bookings in just 4 months suggests this could reshape their entire go-to-market motion. Everyone will focus on the AI security target beat, but the real edge is in their 90 billion monthly AI transactions creating an unmatched data moat. However, Kevin's explicit guidance for high single-digit organic net new ARR growth signals deceleration ahead despite the strong Q1 beat. Jay's comment that Z Flex is 'exceeding my expectations' shows rare enthusiasm from typically measured management. My view changes if they can sustain Z Flex growth above 50% QoQ or if they start monetizing that AI transaction volume at meaningful rates.

The 30-second version

  • Z Flex program is quietly becoming their most potent growth engine
  • AI security already hit FY26 target with three quarters left
  • Zero Trust Everywhere crushed goals but growth rate guidance suggests deceleration ahead

What changed this quarter

MetricQ4'25Q1'26Change
Revenue$719M (+21% YoY in Q4)$788M (+26% YoY)+500 bps acceleration in growth rate
ARR$3.0B (+22% YoY)$3.2B+ (+26% YoY)+400 bps acceleration
RPO Growth+31% YoY in Q4+35% YoY+400 bps acceleration in bookings momentum
Rule of XRule of 50 (23% + 27%)Rule of 78 (26% + 52%)+28 point improvement driven by FCF surge
Free Cash Flow Margin24% in Q4, 27% FY2552% in Q1+25 point jump - unsustainably high
Gross Margin79.3% in Q479.9%+60 bps recovery but still sub-80%
Operating Margin22.1% in Q421.8%-30 bps sequential decline despite revenue beat
AI Security ARRNot disclosed in Q4$400M+ (already exceeded FY26 target)Target crushed 3 quarters early
Data Security ARR$425M in Q4$450M+$25M sequential growth maintained
Zero Trust Everywhere Customers350+ in Q4 (vs 390 target)450+ customers+100+ customers, smashed target

Accountability tracked

8 new promises made4 narrative shifts flagged8 prior promises scored
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
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Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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