Zscaler’s Q2 Revenue Up 26% and Record 22.2% Margin, Guidance Raised
Zscaler reported Q2 FY2026 revenue of $815.8 million, up 26% year-over-year, annual recurring revenue of $3.36 billion and record non-GAAP operating margin of 22.2%, with EPS beating estimates by more than 13%. Management raised full-year ARR guidance to $3.73–3.74 billion and revenue guidance to $3.31–3.32 billion, sparking a 30% rally.
1. Q2 Financial Results
Zscaler reported Q2 FY2026 revenue of $815.8 million, up 26% year-over-year, with annual recurring revenue at $3.36 billion and non-GAAP operating margin reaching a record 22.2%. EPS of $1.01 topped estimates by over 13% and free cash flow totaled $169 million, delivering a Rule of 62 score of 62 for the first half.
2. Guidance Raise and Rally
Management raised full-year guidance, boosting ARR forecast to $3.73–3.74 billion and revenue to $3.31–3.32 billion. The stock surged about 30% from late April lows as investors reacted to the stronger outlook and robust peer performance in the cybersecurity sector.
3. Industry Recognition
The company won Google Cloud’s 2026 Partner of the Year Award for Security, reinforcing its role in securing AI workloads and strengthening its position in the SASE market. This accolade highlights Zscaler’s expanding capabilities in next-generation cybersecurity solutions.
4. Risks and Competitive Landscape
Despite operational gains, Zscaler remained unprofitable on a GAAP basis with a Q2 net loss of $34 million, and net new ARR growth slowed to 7%. Competition intensifies from Palo Alto Networks and CrowdStrike, both aggressively expanding into zero trust and SASE offerings.