Zscaler Inc Q1 2026 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brad Zelnick - Deutsche Bank AG - Analyst : Excellent, thank you so much and congrats on such a strong start to the year, and hitting your Zero Trust Everywhere goal three quarters ahead is just amazing. Jay, I wanted to ask about Zero Trust Branch, which we continue to hear good things about. It's showing some nice early adoption, but as we look ahead, how much more work needs to be done on the product and or go-to-market fine-tuning to see real acceleration from here?

Question: Saket Kalia - Barclays Services Corp - Analyst : Okay, great. Hey guys, congrats on the strong start to the year. Thanks for taking my questions and congrats, Ashwin. Maybe a little bit of a joint question for you, Jay, and Kevin. The billion dollars in ARR that's coming from the three emerging areas is clearly outgrowing the rest of the business. In fact, I think you said it accelerated, and for good reason. But I was wondering if you could help us think about the other $2 billion in ARR and maybe specifically, is it fair to think about that other tranche as more of a la carte Zero Trust tools like ZIA and ZPA? And maybe relatedly, how do you think about the growth rate for that $2 billion versus an emerging bucket that's clearly growing faster than the rest of the business?

Question: Meta Marshall - Morgan Stanley & Co Ltd - Analyst : Maybe just wanted to ask a question about Red Canary and just how it's kind of performing towards expectations given that you guys have been looking at a fair amount of churn within your kind of assumptions for that business. Just any context around that performance would be helpful.

Question: Tal Liani - Bank of America - Analyst : Hi, guys. This quarter was stronger than actually we see because if I look at the year-over-year growth in dollars last year, first of all, first quarter last year was very strong. So you're growing 26% almost on a very strong quarter. And second, last year on a year-over-year basis, you added between $122 million to $130 million every quarter on a year-over-year basis. In this quarter, you're adding $160 million. So that means that the growth is strong, and I'm trying to understand if you can break down on revenue level, not on ARR level, what is driving the strength? I mean, the stock is down, but the trends beneath the surface seem very strong, and I'm trying to understand what is driving it and if you can break it down, even not in numbers, even if it's just qualitative to discuss what's happening in the core versus what are the key leading products that are driving this strength.

Question: Tal Liani - Bank of America - Analyst : And how is the core business? You have Cisco with a new product, Check Point with a new product, Palo talking about very strong growth. How's the competitive landscape when it comes to the core business?

Question: Joseph Gallo - Jefferies LLC - Analyst : Jay, I think when some look at the recent massive M&A in the space, they're fearful of the implications for underlying cyber growth. In your conversations with customers, how are they thinking about spending in calendar 2026, and what are the priority areas that they have as a part of that?

Question: Joseph Gallo - Jefferies LLC - Analyst : Yeah, just what's the -- how has the fundamental cyber growth been, how do you expect the next year, and what the priorities are?

Question: Mike Cikos - Needham & Company LLC - Analyst : I just wanted to come back to the SASE market specifically, and Jay, I know you're probably already cringing at the word SASE, but there was a lot of security vendor talk out there last week discussing some success in competitive displacements in the SASE market. I'd just love to get your feedback specifically on what you're seeing as far as trends from a competitive or pricing discipline standpoint. Appreciate it.

Question: Brian Essex - JPMorgan Chase & Co - Analyst : I guess, Kevin, for you, just I understand that you don't want to break out Red Canary, but can you give us a sense for organic net new ARR in the quarter? And then maybe one for Jay. With the acquisition of Red Canary and what you've done with Avalor and now SPLX, would love to get your sense of how you might align with the threat intelligence market and the value you might be able to add given the data visibility, potential for incremental add in terms of the quality of data that you might be ingesting on the platform and ability to provide better visibility for customers on the threat intelligence side.

Question: Shrenik Kothari - Robert W. Baird & Co Inc - Analyst : So Shrenik, on the AI Security tracking $400 million, and you mentioned traction across all the modules like AI Guard, AISPM, and red teaming, just can you help us unpack where there's more traction? What's currently driving in terms of use cases? Are most deployments at visibility and governance via AISPM, or are you seeing CISOs truly prioritizing all the runtime AI guardrails as well? And then I have a quick follow-up.

Question: Shrenik Kothari - Robert W. Baird & Co Inc - Analyst : Very helpful. So Kevin, on a quick follow-up on your comment around these modules ramping as Jay said, how are you thinking about the investment horizon overall and as you're scaling these compute-rich products like AI Guard? And how should we think about the margins here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2025 / 9:30PM, ZS.OQ - Q1 2026 Zscaler Inc Earnings Call

Question: Roger Boyd - UBS AG - Analyst : Jay, I just wanted to go back to Zero Trust Gateway, and I wonder if you could talk a little bit more about the demand you're seeing there. Is that product getting pulled along with increasing AI infrastructure? Some of the firewall vendors have talked about growth in software firewalls in this capacity, and how are you thinking about customer buying around this approach over that approach of deploying virtual firewalls?

Question: Fatima Boolani - Citi - Analyst : Jay, I wanted to go back to a very specific remark in your script earlier in the call. Just with respect to the migration of SAP from on-prem to SAP RISE being an opportunity that would be tantamount to the success and the tailwinds that you saw from Microsoft Exchange going to Microsoft 365. And so I wanted to take the opportunity to have you unpack some of that in terms of how will that manifest in your business across the product lines today? And then specifically, with a portfolio that is significantly larger today than you had when the initial Microsoft platform migration was happening. Where do you expect to see sort of -- I'll frame it as option value in some of your newer products that frankly didn't exist in the last sort of precedent example.

Question: Gray Powell - BTIG LLC - Analyst : So yes, it's really interesting this quarter. I mean I look at the numbers. And overall, everything looks good. I do think there's some confusion on just organic ARR. So I guess here's my question. You highlighted $175 million in Z-Flex bookings this quarter compared to RPO bookings at about $940 million. So basically, Z-Flex is now 20% of the mix had almost doubled versus last quarter. Where do you see that going longer term? And then as Z-Flex becomes a bigger component of bookings, does that give you a higher visibility on future period ARR because there's just inherently an installed ramp in those contracts as customers grow out?

Question: Jonathan Ruykhaver - Cantor Fitzgerald LP - Analyst : Jay, I'm curious to hear your thoughts on the synergies you see between Red Canary and the data security portfolio. It would seem that you have opportunities around remediation, a possible governance for DSP and DLP. Can you just provide an update on that integration strategy? And maybe just a little bit of color on how you see that driving differentiation relative to all the other vendors that are touting data security capabilities related to AI?

Question: Matthew Hedberg - RBC Capital Markets Inc - Analyst : I wanted to follow up on -- I think it was Gray's question on Z-Flex. It really does show up in checks. And I think Kevin, you mentioned reducing friction, additional consolidation opportunities. I realize it's difficult, but is there a way to think about what that average Z-Flex upsell looks like? And then maybe just a little bit more color on how do you think about the pipeline of Z-Flex deals for the rest of the fiscal year?