Zscaler (NASDAQ:ZS) Beats Q4 CY2025 Sales Expectations But Stock Drops -

Cloud security platform Zscaler (NASDAQ:ZS) reported Q4 CY2025 results topping the market’s revenue expectations , with sales up 25.9% year on year to $815.8 million. The company expects next quarter’s revenue to be around $835 million, close to analysts’ estimates. Its non-GAAP profit of $1.01 per share was 12.6% above analysts’ consensus estimates.

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Revenue: $815.8 million vs analyst estimates of $798.8 million (25.9% year-on-year growth, 2.1% beat)
Adjusted EPS: $1.01 vs analyst estimates of $0.90 (12.6% beat)
Adjusted Operating Income: $181 million vs analyst estimates of $174.6 million (22.2% margin, 3.7% beat)
The company slightly lifted its revenue guidance for the full year to $3.32 billion at the midpoint from $3.29 billion
Management raised its full-year Adjusted EPS guidance to $4.01 at the midpoint, a 5.4% increase
Operating Margin: -6.3%, in line with the same quarter last year
Free Cash Flow Margin: 20.7%, down from 52.4% in the previous quarter
Market Capitalization: $24.83 billion

“We believe Zscaler is the cybersecurity platform for the AI age – our in-line Zero Trust platform is uniquely architected to secure the unprecedented speed and scale of AI and agentic workflows. Organizations racing to adopt AI are looking to us to provide the security solution they trust, and we’re just scratching the surface of this massive future growth opportunity,” said Jay Chaudhry, CEO, Chairman and Founder of Zscaler.

Pioneering the “zero trust” approach that has fundamentally changed enterprise network security, Zscaler (NASDAQ:ZS) provides a cloud-based security platform that connects users, devices, and applications securely without traditional network-based security hardware.

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Zscaler grew its sales at an incredible 41.1% compounded annual growth rate. Its growth surpassed the average software company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Zscaler’s annualized revenue growth of 25.8% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Zscaler reported robust year-on-year revenue growth of 25.9%, and its $815.8 million of revenue topped Wall Street estimates by 2.1%. Company management is currently guiding for a 23.2% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 20.2% over the next 12 months, a deceleration versus the last two years. Still, this projection is commendable and suggests the market is forecasting success for its products and services.

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The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.

Zscaler is quite efficient at acquiring new customers, and its CAC payback period checked in at 35 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a strong brand reputation, giving it more resources pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.

We were impressed by Zscaler’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also glad its full-year EPS guidance trumped Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The market seemed to be hoping for more, and the stock traded down 8.1% to $153.85 immediately after reporting.

Big picture, is Zscaler a buy here and now? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.

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