Zscaler Inc Q4 2025 Earnings Call Transcript

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

Question: Saket Kalia - Barclays Services Corp - Analyst : Okay. Great. Hey Jay, hey Kevin, thanks for taking my question here and nice finish to the year. Jay, maybe for you, there were times when SASE was a healthy space in the past despite firewalls being healthy as well. But now it seems like firewall appliance growth is starting to slow. And you touched on this a little bit in your prepared remarks. But to what extent do you think SASE is replacing firewall appliances? I think we all know that it's replacing secure web gateway points. But what does the velocity look like on firewall appliances?

Question: Brad Zelnick - Deutsche Bank AG - Analyst : Excellent. Thank you so much for taking my question and Jay, Kevin, unbelievable. Congrats on a strong close to the year and a very healthy outlook for fiscal '26. Jay, I wanted to ask about Z-Flex. 50% sequential growth in TCV bookings, clearly a vehicle for getting more strategic with your customers. Can you talk about how your sales force will use Flex to exceed their goals in fiscal '26? Is it available broadly to everybody in the field? And maybe more generally, what's Mike Rich's playbook coming out of sales kickoff this year?

Question: Mike Cikos - Needham & Company LLC - Analyst : Hey guys, thanks for taking the questions here and I'll echo my congrats on the quarter. I wanted to circle back to the Zero Trust Everywhere stat that we have around customer growth. And Jay, I think you're going to need to update that 390-plus target pretty soon. But wanted to get a sense first, can you help us think about -- I know you've given some customer examples, but what does the average customer look like when they are deemed a Zero Trust Everywhere customer? How does spend materially change? What is the number of modules they're taking on versus the remaining cohort of customers? And then secondly, do sales reps have quota set against the Zero Trust Everywhere metric? Or is this more just -- the market is coming to Zscaler in this fashion? I would just like to parse out those different elements.

Question: Meta Marshall - Morgan Stanley - Analyst : A question for you on the AI Security front. When customers start looking towards the AI Security product adoption, just where are they looking for first? Kind of the security for AI with some of the Data Security or agentic solutions, or that AI for security kind of on the security ops side?

Question: Andrew Nowinski - Wells Fargo Securities LLC - Analyst : Okay. Congratulations on a strong finish to fiscal '25. I wanted to ask you guys about the Data Security portfolio. I know $425 million was pretty impressive from an ARR perspective. I think you added about $75 million this quarter alone. And I know that's a standalone suite of solutions, but it seems like those products go hand in hand with the Zero Trust Everywhere solution. So I'm just wondering if you're seeing customers possibly buying both solutions or if they will, maybe you'll see more of that trend this coming year?

Question: Fatima Boolani - Citibank Cameroon SA - Analyst : Kevin, this one is for you. It's a little bit more tactical with respect to Z-Flex. So about 4, 4.5 months of learning under your belt. But could you clarify for us if this is a vehicle or a conduit for attracting new customers? Or is it principally being pitched to existing customers? Whereby, if you can sort of talk to us about what the downstream impact on some of your KPIs would necessarily or hypothetically be, say from a net retention rate perspective, from a billings perspective. So anything you can help us there with regards to Z-Flex's impact on the financial model, whether it's through new customers or existing customers porting over to the Z-Flex program?

Question: Gray Powell - BTIG LLC - Analyst : Great. Congratulations on the good results. So yeah, I want to follow up on the earlier questions on Zero Trust Everywhere. If I just look at like the components of that pillar, so there's Zero Trust for users and cloud. Those are more mature components. I would guess they are like the larger part of it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 02, 2025 / 8:30PM, ZS.OQ - Q4 2025 Zscaler Inc Earnings Call And then there's Zero Trust Branch, which is new. It sounds like it's getting a lot of traction. So just like how exciting can we get on the potential there? And then is that demand -- is it being driven more by like SD-WAN replacement? Is it the segmentation piece or just is it something else? I just want to make sure I'm thinking about that correctly.

Question: Joseph Gallo - Jefferies LLC - Analyst : I wanted to follow up on Josh's earlier question. Kevin, I appreciate all the guidance color given this is your first fiscal year guidance, can you just talk through your methodology maybe relative to Zscaler's historical approach? Any changes to process? And then just any considerations for macro or Fed in your guidance?

Question: Brian Essex - JPMorgan Chase & Co - Analyst : Jay, I appreciate the comments on Agentic SecOps and Agentic IT Ops. I would love if you could maybe peel back a layer and help us understand some of the conversations that you're having with customers particularly from the perspective of are they primarily focused on what you've done combining like Avalor and Red Canary for more of a streaming-based analytics platform, particularly on the SecOps side. Or are they leveraging that to address AI? Or are they leveraging that to target more kind of like legacy SIEM business? I know everyone's kind of pointing their fingers displacing Splunk and QRadar type business. Would love to hear a little bit more about your conversations and how you're leveraging into that space.

Question: Shrenik Kothari - Robert W. Baird & Co Inc - Analyst : Again, congrats on the great execution. So Jay, just to double click on to AI security, right? You mentioned, of course, cloud are key focus areas, securing agentless workloads and user to agent. Again, that's quite distinct from the legacy posture. Since AI is evolving fast and the new $1 billion opportunity, just how -- can you elaborate how that plays into the new logo focus now, right, that you highlighted, seen it live. And now in light of this new AI security opportunity, just can you elaborate on how are you adjusting go-to-market as well across new logo and platform?

Question: Todd Weller - Stephens Inc - Analyst : Yes, good afternoon. Thanks for taking the question. Jay, just to follow up on the SecOps piece of Agentic Operations, when do you anticipate kind of having that full-fledged next-gen SOC platform available? And then what's your take on filtering pipeline capabilities at Zenith One of your SI partners did a presentation where they combined Data Fabric with Cribl to upgrade a customer to a next-gen platform. And obviously, CrowdStrike just made a move there, so curious to your thoughts on that.

Question: Adam Borg - Stifel, Nicolaus & Company Inc - Analyst : Maybe just building off the last question on Red Canary. So obviously, great to see the acquisition close, big part of the Agentic Operations opportunity. Maybe you could just remind us of the top R&D and sales and marketing priorities as we play out this year.

Question: Adam Borg - Stifel, Nicolaus & Company Inc - Analyst : Sure. Just the top R&D and sales and marketing priorities for fiscal '26.

Question: Adam Borg - Stifel, Nicolaus & Company Inc - Analyst : Specifically for Red Canary.

Question: Andrew DeGasperi - Exane Bnp Paribas - Analyst : And congrats on the $3 billion milestone that's something to be proud of. One question I had is on the guidance for Red Canary contribution for this year. I think on the last earnings call, you said that were contributed about half of the $140 million of ARR. I think now you're saying it's about $95 million. I'm just wondering, is that 35% increase driven by anything or is that what the asset is growing at? Or are you doing something different based on the -- to the last question you just made.