Zscaler, Inc.

Good day and thank you for standing by. Welcome to the Zscaler fourth quarter 2026 earnings call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. I would now like to hand the conference over to your speaker today, Kim Watkins, SVP Investor Relations and Strategic Finance.

Good afternoon and thank you for joining us today. Welcome to Zscaler's fourth quarter fiscal 2026 earnings conference call. On the call with me today are Jay Chaudhry, 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 website. 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. City2026 Global TMT Conference on September 9th Goldman Sachs Communicopia and Technology Conference on September 9th Wolf Research TMT Conference 2026 on September 9th and JPMorgan2026 Software Forum on October 1st And with that, I'll turn the call over to Jay Thank you, Kim.

Good afternoon, everyone We delivered a strong finish to the fiscal year with 25% ARR growth and a non-GAAP operating margin of 24%. We are seeing significant positive trends in net new ARR with growth excluding Red Canary accelerating to 17% in Q4. These results reflect increasing market adoption of our Zero Trust platform. AI is quickly becoming the largest tailwind we have ever seen driving demand for our zero trust everywhere data security and security for AI solutions. Our customers are relying on us to both combat the threats created by agentic AI and safely deploy AI agents and models at scale. Since our last earnings call, new AI models have become more powerful, more autonomous, and more dangerous from a cybersecurity perspective. The ability of these new frontier AI and open-weight models to uncover previously unknown vulnerabilities at a rapid pace has become even more apparent. Organizations simply do not have enough time or resources to fix the unprecedented number of software vulnerabilities that are being discovered. The time between Vulnerability is being discovered and exploited is also shrinking. You cannot win a patching race against AI. This is leaving organizations exposed and likely leads to more breaches. Over the past few months, our team has conducted hundreds of frontier AI risk assessments for global enterprises to help them assess their cyber resilience posture to minimize potential breaches. The takeaways have been incredibly revealing. Over 90% of organizations had AI applications, models, and other servers exposed to the internet. And more than one-third had known exploitable vulnerabilities. At the same time, the threat landscape has been compounded by the ability of new AI models to power ungoverned autonomous agents. We are now seeing the impact of fully autonomous AI attacks. There have already been multiple high-profile incidents from three leading frontier model companies where agents went rogue and took unauthorized actions. This includes the recent Hugging Face incident where a swarm of agents went to extreme lengths to break out of a sandbox training environment, get onto the corporate network, and move laterally to conduct a sophisticated attack. This is driving urgency at the highest levels and Zscaler is uniquely equipped to meet the moment. CEOs and boards are looking to us as their trusted partner to address three essential business challenges. First, how do we secure our environment when we can't patch security vulnerabilities fast enough? Our zero trust exchange makes applications, AI models, and Data Invisible. An attacker, human or agent, cannot breach what it cannot reach. Second, how do we minimize the impact of a potential breach? Our Zero Trust Exchange connects users, workloads, branches and agents directly to the applications they need without placing them on the network. This eliminates lateral threat movement. containing the impact of a breach. Third, how do we take advantage of all the benefits of AI without introducing significant new risks? Zscaler has a full portfolio of data security and security for AI solutions that prevents data exfiltration, provides guardrails to prevent abuse or misuse of AI applications, and enables secure agentic communication. Because of these advantages, customers trust us to secure their business-critical environments. We are also differentiated by our scale, operating the world's largest distributed inline security cloud, processing more than 750 billion transactions per day. This scale provides unmatched high-fidelity telemetry that continuously improves our AI-powered security capability. In the AI era, zero trust is now an imperative, and we're not alone in this belief. Anthropic published a white paper in late May encouraging adoption of a zero trust architecture for AI agents, emphasizing the importance of treating every agent like an untrusted entity and making sure it only has access to authorized data and applications. This is why customers are expanding their investments with us to secure their agentic infrastructure and why we are confident our platform is uniquely equipped to address the risks companies face in this new world. In addition to protecting companies from the threats created by agentic AI, we are also enabling organizations to safely deploy AI agents and models. Our AI solutions are key to providing enterprise visibility governing what data and applications agents can access and what actions they're permitted to perform. We are often asked why our solutions are needed alongside identity for AI security. While identity solutions answer who is requesting access, our inline exchange determines What that user or agent should be allowed to do and enforces that policy in real time. But simply, identity is only the starting point for securing AI. Greater visibility and control is needed for organizations to trust agents accessing sensitive data, interacting with applications, and taking action on behalf of users. Earlier this year, we introduced the industry's most comprehensive security for AI solutions designed for exactly that reason. We're seeing strong proactive inbound interest from both new and existing customers, and we have seen no budget constraints. Security for AI bookings increased more than 50% sequentially in Q4 on top of a strong Q3. Our Security for AI solution provides new logo opportunities by offering organizations an integrated way to secure AI use at scale. At our Zenith Live conference in June, we unveiled the latest additions to our Security for AI lineup, including our Zero Trust Exchange for Agents and Endpoint AI Security, both of which we expect to scale in the second half of fiscal 2027. Both products are in early access, and we're seeing tremendous interest from customers. These new solutions will provide organizations the ability to enforce AI policy, both at our exchange and the endpoint, enabling policy enforcement at the optimal location. We continue to innovate in this area at a rapid pace. Next week, we are announcing the next major innovation on our platform with our new agentic SecOps solution. Just as AI is increasing the threat surface, it is also stressing a human-driven traditional SOC approach where remediation can take days or weeks. In contrast, our AI-first approach brings together our proprietary telemetry and Red Canary's decades-plus of experience in Managed Detection and Response, or MDR. Our agentic SecOps solution enables security teams to prioritize real threats and leverage specialized AI agents to detect, investigate, and respond to threats at machine speed. We're driving closed-loop remediation in real time by integrating our agentic SecOps with our Zero Trust Exchange, enabling customers to move with speed as the time between detection and exploitation has decreased from months to minutes. We will be launching our new agentic SecOps solution with a webcast on September 9th, which will be streamed on our website. Our approach for securing users and non-users and ensuring safe adoption of AI is resonating. This is increasingly evident in my conversations with customers and partners and is illustrated with a few customer examples. First, we had a notable seven-figure upsell Z-Flex win with a Fortune 500 transportation customer who deployed our Security for AI portfolio to secure their full AI lifecycle. Our Security for AI solution provides an integrated approach to secure AI use at scale. This includes discovery and management of all AI assets, including shadow AI and enforcement of safe access to approved apps. It also includes real-time prompt and response inspection to stop data leaks and threats like prompt injections and continuous red teaming assessments. This customer selected our security for AI solution over two major platform competitors and with this win, the customer's ARR grew to nearly $10 million. In another seven-figure ZFLEX upsell, a Fortune 500 semiconductor manufacturer expanded its adoption of the Zscaler platform to secure a company-wide rollout of cloud co-work. After assessing several vendors, this client determined Zscaler's security for AI was the only solution capable of securing the customer's AI adoption, including its endpoints, secure agent-to-agent communication, and model usage in private and public environments. This is a great example of how our customers are expanding the use of Zero Trust Exchange to safely deploy AI agents and models, as well as combat the threats created by agentic AI. While we are in the early innings of security for AI, these deals give us tremendous confidence in our ability to expand this offering significantly over time. Next, our leadership in data security is a powerful tailwind for our security for AI business. As enterprises embrace GenAI and agentic AI, they are confronting a new wave of data exfiltration risks, including data abuse and over privileged access to data. Our inline architecture coupled with our endpoint DLP and no endpoint AI security enhances our ability to enforce data loss prevention in the cloud as well as on the endpoint. Securing data and AI go hand in hand as evidenced by the fact that 70% of our security for AI deals is core, included our data security solution. In Q4, we also closed a seven-figure ZFLEX upsell win with a large global asset management firm. The customer selected Zscaler's data security posture management solution over a privately held DSPM vendor. This customer chose Zscaler to address gaps related to sensor data discovery across its multi-cloud environment and data governance. With this upsell, the annual spend of this customer increased by nearly 40%, reaching an ARR of $5 million plus. We're also seeing continued traction across our Zero Trust SASE solutions, including customers expanding their Zero Trust SASE deployments. For example, this quarter, we signed a seven-figure ZFlex upsell with a global 2,000 financial services customers. who upgraded to Zscaler Private Access with AI-powered app segmentation for 120,000 users, increasing their ARR by nearly 50%. We are also driving new logos. We closed the seven-figure new logo ZFlexWin with a Fortune 500 life sciences company that is deploying our Zero Trust SASE and Security for AI platform across 75,000 users and displacing a legacy firewall-based SASE platform. This customer, led by a newly appointed CISO, who is a three-time repeat Zscaler customer, chose us for our ability to deliver unified visibility and control across both enterprise security and Gen AI. This is a great example of a new logo purchasing the entire Zscaler platform. Customers are also increasingly starting the Zero Trust journey by securing non-user environments. For example, we closed a seven-figure new logo win with a global 2,000 healthcare equipment manufacturer to deploy our Zero Trust branch solution across the critical production sites to secure its DOTI environment, displacing an existing long-time legacy vent. This is an example of a sizable opportunity Zscaler has within factories and warehouses to secure IoT and provide Zero Trust device segmentation. Zero Trust Branch simplifies customers' branch deployments by eliminating traditional branch firewalls, SD-WAN, and MPLS networks, reducing operational complexity. It also minimizes the impact from an infected machine in a branch or a manufacturing plant by limiting lateral movement across the environment and therefore containing the breach. In another known user deal win, we closed a seven-figure upsell with a Fortune 500 Aerospace customer. This customer was going through a divestiture and expanded its Zero Trust Cloud deployment between its on-prem and public cloud environments to securely migrate workloads. With this deal, the ARR of this customer grew by more than 30% to over $5 million. We're seeing tremendous momentum with Zero Trust Cloud. This quarter, we extended the solution by offering a managed service through Google Cloud, which can be configured in under 10 minutes reducing the deployment time and operational costs significantly. This expands on our existing offering for AWS and enables multi-cloud flexibility. The strength we're seeing in Zero Trust Branch and in Zero Trust Cloud is translating to meaningful momentum with Zero Trust Everywhere Enterprises, those that have purchased Zero Trust Users, Zero Trust Branch, and Zero Trust Cloud. We exited Q4 with more than 950 zero trust everywhere enterprises versus over 700 in Q3 and over 350 at the end of fiscal 2025. To summarize, AI represents one of the most significant opportunities in Zscaler's history. Our platform was built for this moment. Zscaler has always secured interactions between every user and applications, and now Zscaler secures interaction between every user, every agent, and every AI model. We have a large and growing market. Adoption of our platform is expanding, and we are continuing to innovate across zero-trust SASE, agentic SecOps, data security, and security for AI. We are well positioned to extend our leadership as the cybersecurity platform for the AI era. Drive durable growth and create long-term shareholder value. Now, I will hand it over to Kevin to walk through the financials.