Zscaler, Inc.

Thank you for standing by and welcome to Zscaler's third quarter 2026 earnings conference call. Currently, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to Kim Watkins, SVP of Investor. Please go ahead.

Good afternoon and thank you for joining us today. Welcome to Zscaler's third quarter fiscal 2026 earnings conference call. On the call with me today are Jay Chowdhury, Chairman and CEO, and Kevin Rubin, CFO. Please note that we posted our earnings release, shareholder letter, and a supplemental financial schedule to our investor relations websites. Unless otherwise noted, all numbers we talk about today will be on an adjusted non-GAAP basis. You will find a reconciliation of GAAP to the non-GAAP financial measures in our earnings release. Before we get started, I'd like to remind you that today's discussion will contain forward-looking statements, including, but not limited to, the company's anticipated future revenue, annual recurring revenue, net new annual recurring revenue, operating margin, gross margin, operating profit, net other income, earnings per share, and free cash flow margin, our customer response to our products, our expectations regarding AI and its impact on our business and customers, and our market share and market opportunity, and our objectives and outlook. These statements and other comments are not guarantees of future performance, but rather are subject to risk and uncertainty, some of which are beyond our control. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. For a more complete discussion of the risks and uncertainties, please see our filings with the SEC as well as in today's earnings release. I also want to inform you that we'll be attending the following conferences this quarter. The Baird Global Consumer Technology and Services Conference on June 2nd, the Bank of America Global Technology Conference on June 3rd, and the FBN Virtual Technology Conference on June 15th. And with that, I'll turn the call over to Jay.

Thanks, Kim, and thanks to everyone for joining us today. We delivered strong Q3 results. ARR grew 25%, and non-GAAP operating margin hit an all-time high at 23%. AI is changing the nature of cybersecurity in real time, and Zscaler is the cybersecurity platform for the AI era. This is evident in our results and the reason we are so confident in our long-term potential. We offer the industry's only complete zero-trust SaaS solution, a singular zero-trust platform across users, across cloud workloads, and across branches. Our architecture is purpose-built, to address the limitations of firewall-based SASE solutions and has several key differentiators. First, we hide applications and data behind our zero trust exchange, making them invisible from the internet and eliminating the attack surface. An attacker can't breach what it can't reach. Hence, this architecture provides far superior cybersecurity protection for our customers. Second, we eliminate lateral movement of attackers with our zero-trust architecture. We only allow authorized users and workloads to access specific applications. This reduces the blast radius of a potential breach, providing better security to our customers. This stands in stark contrast to competitors with firewall-based SASE architecture that connect users to the corporate network. And once a malicious actor gains a foothold on the network, it can roam freely and systematically attempt to compromise critical applications or steal data. This is how most ransomware attacks happen. Finally, scale matters, and our cloud-native Zero Trust Exchange is the largest distributed inline security platform in the world that spans across 160 public exchanges. processing more than 500 billion transactions per day. This gives us the best quality and quantity of telemetry data. Simply put, no other cybersecurity vendor has access to data sets with comparable fidelity and breadth. This high fidelity telemetry fuels our AI-powered security capabilities, continuously improving how we detect, prevent, and stop threats. These differentiators are especially important at a time when organizations are aggressively deploying AI applications and models with growing interest in AI agents at scale. We expect it won't be long before millions of AI agents have access to organizations' mission-critical applications and sensitive data. Today, users are the weakest link in cybersecurity, but soon, AI agents will be the weakest link. because they operate at far greater speed and have far less oversight. Even a single compromised agent can move from discovery to data theft in minutes, inflicting catastrophic damage on enterprises. Making it even more challenging, new powerful frontier AI models like Mithos are finding security vulnerabilities in software at machine speed. significantly diminishing the effort, skill, and time needed to breach enterprises. All enterprises already have thousands of known vulnerabilities that they haven't been able to patch. Frontier models are multiplying these unremediated vulnerabilities by as much as 10x, and even more powerful models that are currently being developed will undoubtedly make it worse. Enterprises don't have the capacity to patch and update existing vulnerabilities, so backlogs are piling up faster than organizations can address them. To tackle this challenge, the market needs to take a different approach. We provide the two most important defenses against these vulnerabilities. One, hiding applications from attackers. And two, eliminating lateral movement at scale. This validates the architecture we pioneered. Zscaler was built for this moment. We started with zero trust security for users so users can safely access applications from anywhere. Then we expanded our exchange to provide zero trust security to branches, workloads, and connected IoT devices. Now we are expanding our exchange to secure AI agents. An important element of agentic security is to understand which agents, users, and other identities are communicating with which models, applications, and data sources. On May 21st, we announced our intent to acquire Symmetry Systems, a company that solved this difficult problem. Symmetry provides an access graph that maps how identities, applications, and other data sources connect across the enterprise. We are integrating its AccessGraph technology with our Zero Trust Exchange. We are excited to share more about this at our Zenith Live user conference in Las Vegas next month. We are also partnering with Entropic on Project GlassWing and with OpenAI as part of its Daybreak program, formerly known as Trusted Access for Cyber, or TAC. which allows us to access frontier models to proactively harden our systems and deliver better security and resilience to our customers. Against this backdrop, investors have asked us, where is the ideal place to guard against AI threats? We are in the enviable position of having strong visibility and control across three critical vantage points for superior security, network, cloud, and endpoints. This is indispensable in enforcing real-time policy decisions. It is a powerful advantage for our customers and an important differentiator for Zscaler. We are enhancing our go-to-market engine across multiple dimensions to help highlight this differentiated approach. For example, we continue to deepen our partnership with Global System Integrators, or GSIs, who play a meaningful role in expanding the reach of the Zscaler platform. We're seeing strong growth in bookings through our GSI partners. We recently announced the launch of Project AI Guardian, a strategic collaboration with key GSI partners, which will help our partners extend the Zero Trust architecture to AI assets, including AI agents. GSIs will be able to leverage Zscaler's AI Protect portfolio to build specialized AI discovery and risk mitigation services. We are also continuing to expand our cloud marketplace motion. For fiscal 2026 year-to-date, we transacted approximately $900 million in TCV to our cloud marketplaces, which more than doubled year-over-year. This is becoming a more important route to market. as cloud marketplaces simplify procurement, align well with enterprise cloud commitments, and increasingly support larger strategic engagements. These investments are helping expand our reach, and Zscaler's unique architecture and approach for safe adoption of AI is resonating. This is evident in my conversations with customers and partners and why I believe AI is a catalyst for our business. Let me illustrate our progress with a few customer examples. In a seven-figure upsell deal, a Fortune 500 financial technology company chose Zscaler to secure rapid enterprise adoption of AI with our AI Protect solution, which we introduced in January. AI Protect includes AI asset discovery, AI guardrails, and continuous red teaming. Zscaler AI Protect provides this customer a single integrated way to discover and manage all AI assets, including shadow AI uses, enforcing safe access to approved apps, and inspecting every prompt and response in real time to stop data leaks and attacks like prompt injection. This customer faced a complex challenge of securing both employee interactions with public AI apps and their own suite of custom-built AI solutions. With our AI red teaming and AI guard capabilities, the customer moved from a manual reactive effort to an automated proactive approach to harden the growing number of AI applications. For customers building their own AI models and applications, our AI red teaming solution performs continuous security assessment. Our unified user interface and deep integration of multiple products is a key differentiator. Our AI Protect solution is resonating with customers with bookings crossing $100 million over the past 12 months. We are seeing inbound requests from across our customer base and our pipeline is robust and growing. In another customer example, we closed a seven-figure upsell with a federal agency that previously migrated from a legacy VPN architecture last year to Zscaler's Zero Trust platform. This agency is deploying Zscaler to modernize and unify its data security strategy, gaining broad coverage without the overhead of managing additional endpoint agents or the operational complexity of stitching together various data security products. With this expansion, The customer is now using six of Zscaler's eight data security modules across data classification, email DLP, endpoint DLP, and inline DLP, along with our GenAI security solution. The expansion underscores a broader momentum in data security, which crossed $500 million ARR up over 30% year over year. As AI adoption accelerates and sensitive data increasingly resides across multiple locations, customers are reducing cost and complexity by consolidating onto our data security solution. Turning to another customer example, during Q3, we signed the largest branch deal in Zscaler history. An eight-figure upsell with a leading healthcare system to deploy our unified Zero Trust Branch solution across 2,000 sites. Zero Trust Branch disrupts branch firewalls, software-defined Wide Area Networks, or SD-WAN, and MPLS networks. With this win, we're displacing both a major firewall incumbent and a legacy VPN incumbent. With Zscaler, the customer is eliminating lateral threat movement in their health clinics at roughly half the cost of its prior legacy solution. We are seeing particular momentum with Zerotus branch, where ARR has approximately tripled year over year. The next customer I'll highlight is a seven-figure new logo win with the leading healthcare technology company for a platform-wide adoption. This deal illustrates why customers choose Zscaler over incumbent firewall vendors the stickiness of our Zero Trust approach with CIOs and CISOs and our ability to convert a limited initial request into a comprehensive platform win. We received an inbound request for this particular customer after a senior technology leader joined from another customer where he had a great experience deploying Zscaler. He fully understood the difference between Zero Trust SASE and firewall-based SASE. While the initial discussion started around securing users, the company's top priority quickly became securing cloud workloads. The deal quickly grew into a comprehensive platform win, including Zero Trust Cloud, Zero Trust Branch, and four data security modules. The last customer win I'll highlight is a large automotive manufacturer that adopted our Zero Trust Cloud solution in a seven-figure upsell deal. This is a longtime Zscaler customer whose ARR is up tenfold in the last seven years. This quarter, the customer extended its existing Zscaler Zero Trust SASE footprint by expanding its deployment of Zero Trust Cloud, improving its security posture, and securing its massive multi-cloud environment. The customer can now inspect encrypted traffic and enforce granular security policies across hundreds of previously ungoverned cloud workloads. The deal also highlights the benefits of a Zero Trust Cloud solution, which was configured in under 10 minutes during the customer's proof of concept. Zero Trust Cloud eliminates virtual firewalls in data centers and cloud environments, reducing cost and operational complexity. The strength we're seeing in Zero Trust Cloud and Zero Trust Branch is driving the growth of our Zero Trust Everywhere enterprises that purchase each of our Zero Trust users, Zero Trust Branch, and Zero Trust Cloud. We exited Q3 with more than 700 Zero Trust Everywhere enterprises versus over 550 in Q2. Customers are recognizing that it is no longer enough to just secure their users, and our platform is the industry's only complete zero-trust SaaS solution across users, across cloud workloads, and across branches. In summary, we are confident Zscaler is the cybersecurity platform for the AI era. We expect AI and mythos like frontier models to be one of the strongest tailwinds our business has ever seen. Our zero trust SASE solution enables us to hide applications and make them invisible to attackers while also eliminating lateral movement. These attributes, along with our scale, are true comparative differentiators for Zscaler. With frontier models uncovering vulnerabilities at unfathomable speeds and AI agents becoming the weakest link in cybersecurity, These differentiators have never been more important than they are today. Our approach is resonating and helping to drive significant wins that demonstrate our ability to attract new customers and further penetrate our installed base of more than 9,400 customers. Among those, we serve just 4,500 enterprises out of a potential 20,000 enterprises in our primary target market. We are confident that our innovative approach to staying ahead of threat actors will help to drive further share gains. With the significant long-term growth potential, we are well positioned to continue creating significant value for shareholders. Now, I'll hand it over to Kevin to walk through the financials.