Investors are awaiting Zscaler fiscal Q3 2026 results after a volatile six-month period and a May rebound. Shares dropped sharply from the November filing level to late February, then rallied about 28% over the past month while remaining down year to date. Q2 results included revenue growth, non-GAAP EPS outperformance, and ARR reaching $3.36B, alongside three acquisitions and raised full-year guidance, but cash declined due to deal funding. Key expectations center on organic ARR growth excluding acquisition contributions, maintaining strong non-GAAP operating margins despite acquisitions, and evidence that AI Security positioning is translating into revenue. Free cash flow fell from Q1 to Q2, increasing sensitivity to margin and cash flow updates.
"Shares fell from $266.90 at the November filing to $151.50 by late February, even as Zscaler beat on both lines. The stock has since rallied, climbing 27.84% over the past month to $188.82, though it remains down 18.92% year to date."
"Q2 set a high bar. Revenue of $815.75M grew 25.9%, non-GAAP EPS of $1.01 beat by 12.56%, and ARR hit $3.36B. Management closed three acquisitions (Red Canary, SPLXAI, SquareX) and raised the full-year guide, but cash dropped from $2.389B to $1.203B to fund the deals."
"Tonight, I'll be watching Zscaler's organic ARR growth first. The headline 25% figure looks healthy, but organic ARR grew 21% excluding Red Canary's $114M contribution. Investors want to see that gap narrow, or at least hold steady, before crediting management with the full 24% FY26 ARR guide."
"Margins are the second pillar. Non-GAAP operating margin hit 22%, an all-time high, in Q2. Holding that line while absorbing three acquisitions would validate the case that scale is finally flowing through. Any slippage tonight could get punished, especially after free cash flow fell from $413.3M in Q1 to $169.1M in Q2."
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