Zscaler 4Q earnings beat on Cloud and AI solutions growth

Zscaler Inc. (ZS) reported better-than-expected Q4 2025 results, with adjusted earnings of $0.89 per share and revenue of $719.2 million, both surpassing consensus forecasts, driven by strong demand for its Cloud and AI solutions. The cloud security provider also issued an optimistic fiscal 2026 revenue guidance of $3.265 billion to $3.284 billion, exceeding Wall Street estimates, and highlighted its Agentic AI strategy, bolstered by the Red Canary acquisition, as a key growth driver, with its Agentic Operations portfolio projected to reach over $400 million in ARR by FY26. Despite analysts calling the outlook "robust" due to AI tailwinds, ZS shares edged 0.8% lower in late-morning trading.

Analysis

Zscaler, Inc. (ZS) delivered a robust fourth-quarter 2025 performance, exceeding analyst expectations on key metrics. The company reported a 21% year-over-year revenue increase to $719.2 million, surpassing the $706.9 million consensus, and adjusted earnings of $0.89 per share, which beat the forecast of $0.80. This outperformance was attributed to strong demand for its Cloud and AI solutions. Looking ahead, Zscaler issued fiscal 2026 revenue guidance of $3.265 billion to $3.284 billion, which is above the Wall Street estimate of $3.202 billion, although its earnings guidance was in line with consensus. The company is strategically positioning itself to capitalize on AI-driven security, reinforced by its acquisition of Red Canary. Management provided a tangible growth metric, projecting its Agentic Operations portfolio will exceed $400 million in annual recurring revenue by the end of fiscal 2026. Despite Wedbush analysts labeling the results "robust" and maintaining an 'Outperform' rating with a $330 price target, the company's shares experienced a minor 0.8% decline in trading, suggesting a potential "sell the news" reaction or that high expectations were already priced into the stock.

Key Decisions for Investors

• The strong Q4 earnings beat and above-consensus FY26 revenue guidance validate the company's growth narrative, particularly its successful pivot towards Cloud and AI-driven security solutions, reinforcing the bull case for existing investors.
• Investors should monitor the growth of the Agentic Operations portfolio as a key performance indicator, as achieving the projected $400 million in ARR by FY26 will be critical evidence of the company's AI strategy execution.
• The modest share price decline despite the positive news and analyst commentary suggests high expectations are already embedded in the valuation, warranting caution for new investors considering entry at current levels.