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Call sheet · Q2'26

Zscaler (ZS)

Q2'26 earnings call · held February 27, 2026 · compared with the Q1'26 call · management-credibility review
8/12
Disclosure score
1 high, 2 medium, 3 low flags
Financial quality
Bottom line
The sleeper story is traffic-based monetization hitting 25% of new ACV with 100%+ growth - this shifts Zscaler from a user seat model to an infrastructure consumption play as AI agents proliferate. Everyone will focus on the guidance raise, but the real signal is core ZIA/ZPA business quietly downshifting to mid-teens growth while Red Canary 'elevated churn' somehow drives a 37% guidance increase. The binding constraint is no longer customer adoption but their ability to monetize exponential traffic growth at scale. Jay's most telling quote: 'billions of autonomous agents' will drive traffic through their exchange - but they haven't proven they can capture that value yet. My view changes if they can show revenue per AI transaction metrics and explain the Red Canary churn/guidance math in Q3.

The 30-second version

  • The real AI story: Non-seat metered usage now 25% of new ACV, growing 100%+ YoY
  • Red Canary churn admission buried in guidance raise theater
  • Core ZIA/ZPA business quietly downshifted to 'mid-teens' growth

What changed this quarter

MetricQ1'26Q2'26Change
Revenue$788M (+20% YoY)$816M (+26% YoY)+600bps acceleration
Net New ARR$131M (+1% YoY)$156M (+19% YoY)+1800bps acceleration
Total ARR$3.2B (+26% YoY)$3.4B (+25% YoY)-100bps deceleration
Non-seat metered usage % of new ACVNot disclosedOver 25%New disclosure, massive
Non-seat metered ARR growthNot disclosed100%+ YoYNew disclosure
Operating Margin21.8% (+40bps YoY)22.2% (+50bps YoY)+40bps improvement
Free Cash Flow Margin52%20.7%-3130bps collapse
Zero Trust Everywhere customers450 (vs 130 year ago)550++100 customers, +22% sequential
AI Security ARR$400M (hit target early)Expected >$500M by FY end+$100M raise
Z-Flex TCV$175M (+70% QoQ)$290M (+65% QoQ)+$115M sequential growth

Accountability tracked

7 new promises made4 narrative shifts flagged6 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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