Zscaler Q2 ARR Grows 25% with Record $1M Deals, Guidance Raised
Zscaler delivered 25% year-over-year ARR growth in Q2 2026, driven by record number of $1 million-plus deals and momentum from its ZFlex upsell program. The company raised full-year guidance on a strong second-half pipeline, but free cash flow margin dipped to 20.7% and churn rose after the Red Canary acquisition.
1. Q2 ARR Growth and Million-Dollar Deals
Zscaler reported 25% year-over-year growth in Annual Recurring Revenue for Q2 2026, fueled by a record number of $1 million-plus deals. The ZFlex program accelerated upsells and shortened sales cycles, driving significant increases in Total Contract Value.
2. AI Security Expansion and Zero Trust Adoption
The company’s AI security solutions saw rapid adoption among enterprise customers, leveraging its Zero Trust architecture as a competitive advantage. This expansion positions Zscaler to capture a larger share of the growing AI-driven security market.
3. Acquisition Impact and Financial Metrics
Integration of the Red Canary acquisition remains in progress, contributing to elevated churn rates above typical levels. Free cash flow margin declined to 20.7% from 22.1% year-over-year, while rising memory and processor costs pose additional margin pressures.
4. Raised Guidance and Outlook
Management raised its full-year guidance based on a robust second-half pipeline and seasonal strength, excluding Red Canary contributions. Confidence stems from record pipeline conversion rates and continued large-deal momentum heading into the latter half of 2026.