Zscaler (ZS) Q4 2025: ARR Surpasses $3B as Zero Trust Everywhere Adoption Accelerates

September 2, 2025 | By EarningsIQ Research

Zscaler’s Q4 2025 marked a pivotal step up, crossing $3 billion in ARR as enterprise demand for its Zero Trust and AI security platforms continues to intensify. Platform breadth, rapid innovation in AI and data security, and the expanding ZFlex program are reshaping customer adoption patterns. Guidance signals a continued shift toward larger multi-year deals and deeper platform penetration, with management emphasizing aggressive investment and operational leverage into fiscal 2026.

Summary

• Zero Trust and AI Security Tailwind: Customer adoption is accelerating across all three core platform pillars, fueling record ARR milestones.
• ZFlex and Platform Expansion: Flexible multi-module deals are driving larger commitments and deeper customer integration.
• Operational Leverage Maintained: Margin discipline and cash flow strength support continued investment in product innovation and go-to-market scale.

Performance Analysis

Zscaler delivered a robust Q4, with revenue growth of 21% year-over-year and ARR exceeding $3 billion, cementing its status as one of the only two pure-play SaaS security vendors at this scale. The Americas remained the largest contributor at 55% of revenue, while EMEA and APJ accounted for 29% and 16%, respectively. The company closed the year with over 9,400 customers, including 664 generating more than $1 million in ARR—a critical indicator of deep enterprise penetration. Remaining performance obligations (RPO) grew 31% year-over-year to $5.8 billion, providing strong visibility into future revenue streams.

Margin dynamics reflected both scale and strategic investment. Gross margin dipped to 79.3% due to a one-time government deployment, but is expected to revert to the historical 80% target next quarter. Operating margin reached a record 22.1%, and free cash flow margin for the year stood at 27%, underscoring Zscaler’s ability to balance growth and profitability. Notably, the ZFlex program drove over $100 million in total contract value (TCV) bookings in Q4, up more than 50% sequentially, highlighting a shift toward multi-year, multi-module commitments.

• Enterprise Penetration Deepens: Nearly 40% of the Global 2000 and 45% of the Fortune 500 now rely on Zscaler, signaling mainstream adoption of its platform approach.
• Growth Vectors Scale: AI Security, Zero Trust Everywhere, and Data Security Everywhere each surpassed $1 billion in ARR collectively, with Data Security ARR alone reaching $425 million.
• Platform Upsell Momentum: Larger deals and multi-module expansion, enabled by ZFlex, are increasingly driving ARR growth and net retention.

Looking ahead, Zscaler’s focus on platform breadth, rapid product innovation, and operational scale positions it to capitalize on ongoing secular shifts in enterprise security architectures.

Executive Commentary

Strategic Positioning

1. AI Security: Platform Differentiation and Growth

Zscaler is leaning heavily into AI security as a core growth pillar, with new offerings like AI Guard and agentic operations targeting both security for AI applications and AI-powered security operations (SecOps). The company is integrating Red Canary’s agentic technology to build a next-generation, outcome-based SOC (Security Operations Center) platform. Management expects the agentic operations portfolio to surpass $400 million in ARR in fiscal 2026, reflecting the urgency enterprises face in securing proliferating AI workloads and agent-to-agent communications.

2. Zero Trust Everywhere: Displacing Legacy Network Security

The Zero Trust Everywhere initiative is rapidly converting traditional firewall and SD-WAN architectures to Zscaler’s cloud-native model. With over 350 customers now classified as “Zero Trust Everywhere” enterprises, Zscaler is ahead of its own adoption targets. The Zero Trust Branch offering is particularly disruptive, enabling customers to eliminate legacy firewalls and SD-WAN, delivering both security and cost savings (often exceeding 60%). The company’s largest-ever branch deal in Q4 underscores the scale and cross-vertical appeal, with retail, manufacturing, and education highlighted as high-potential segments.

3. Data Security Everywhere: Platform Consolidation Play

Data Security Everywhere is driving both standalone and bundled adoption, as customers consolidate multiple point products into Zscaler’s integrated platform. Only 30% of data security customers currently use three or more modules, and just 10% use four or more, indicating significant upsell runway. The suite’s comprehensive features—ranging from data discovery to GenAI security—position Zscaler to capture wallet share as data protection becomes central to enterprise security strategies.

4. ZFlex Program: Deal Structure Innovation

ZFlex, a flexible multi-module, multi-year contracting model, is becoming a preferred route for strategic customers. It allows for phased adoption of modules and budget alignment, resulting in larger TCV and ARR per deal. While still early, ZFlex is expanding from large enterprise pilots to broader customer and partner segments, supporting both new logo acquisition and upsell to existing customers.

Key Considerations

The strategic context for Q4 is defined by platform breadth, rapid product innovation, and a customer base increasingly opting for integrated, multi-year commitments. Zscaler’s go-to-market and product development are tightly aligned to these secular shifts.

Key Considerations:

• AI Adoption Drives Security Complexity: Explosive growth in AI/ML traffic (up 3,500% YoY) is fueling demand for new security paradigms, with Zscaler positioned as an enabler of safe AI adoption.
• Legacy Firewall Displacement Accelerates: Zero Trust Branch and Cloud are catalyzing the migration from legacy appliances, with retail and branch-heavy verticals entering upgrade cycles.
• Platform Upsell and Module Expansion: ZFlex is structurally increasing deal sizes and net retention, while the low module penetration in data security signals further expansion potential.
• Operational Scale and Profitability: Margin discipline and strong cash generation provide flexibility to invest aggressively in R&D and go-to-market without sacrificing profitability.

Risks

Single-digit net new ARR growth guidance (organic) for fiscal 2026 signals potential deceleration as the business scales, and integration of Red Canary introduces new churn risk given the higher historic volatility in MDR (Managed Detection and Response) contracts. Competitive dynamics in SASE and AI security remain intense, and gross margin could be pressured by new product launches optimized for speed rather than margin in the near term. Macroeconomic assumptions remain unchanged, but any deterioration could impact large deal velocity.

Forward Outlook

For Q1 2026, Zscaler guided to:

• Revenue of $772 million to $774 million (23% YoY growth)
• Gross margin returning to ~80%
• Operating profit of $166 million to $168 million
• EPS of $0.85 to $0.86

For full-year 2026, management guided to:

• ARR of $3.676 billion to $3.698 billion (21.9% to 22.7% YoY growth)
• Revenue of $3.265 billion to $3.284 billion (22% to 23% YoY growth)
• Operating profit of $728 million to $736 million
• Free cash flow margin of 26% to 26.5%

Management emphasized that net new ARR will remain weighted toward the second half of the year and that Red Canary is expected to contribute $95 million in ARR, with prudent churn assumptions. No material macro improvement is assumed in the outlook.

Takeaways

Zscaler’s Q4 and fiscal 2025 results highlight the company’s ability to drive platform adoption at scale, with deepening enterprise penetration and growing multi-product commitments.

• Platform Approach Validated: ARR and RPO strength, alongside rapid ZFlex adoption, reinforce the shift toward integrated security architectures and larger, longer-term customer relationships.
• Innovation as a Growth Lever: AI security and agentic operations are emerging as high-growth vectors, with the Red Canary integration expanding the addressable opportunity.
• Watch for Net New ARR Trajectory: Investors should monitor net new ARR growth and module expansion rates as indicators of sustained momentum and upsell potential in fiscal 2026.

Conclusion

Zscaler’s Q4 2025 performance underscores its expanding role as a platform provider in cloud security, with secular tailwinds in Zero Trust and AI adoption driving both scale and profitability. Execution on innovation, customer expansion, and operational leverage will be critical as the company navigates a more mature growth phase in fiscal 2026.

Industry Read-Through

Zscaler’s results offer a clear signal that the shift from legacy network security appliances to cloud-native, zero trust platforms is accelerating across global enterprises. The strong adoption of multi-module, multi-year deal structures and the rapid growth in AI and data security workloads reflect broader trends in security consolidation and digital transformation. Vendors in SASE, MDR, and AI-driven security will face intensifying platform competition, with customers increasingly seeking integrated, outcome-based solutions. The displacement cycle for legacy firewalls and SD-WAN is likely to pick up pace, especially in verticals with distributed branch networks such as retail, healthcare, and manufacturing.

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