Zscaler, Inc. Financial Report Analysis: Q4 2025 Review

Recommendation: Buy Zscaler, Inc. (NASDAQ: ZS) is currently positioned for growth, with significant revenue increases and strategic acquisitions indicating a robust future. While the company has experienced net losses, the trend shows improvement, and investments in key areas of cybersecurity are likely to enhance long-term profitability.

Snapshot of Key Financial Metrics

• Total Revenue (2025): $2.67 billion
• Net Loss (2025): $(41.5 million)
• Total Assets: $633.15 million
• Stock-Based Compensation: $685.5 million
• Cash and Cash Equivalents: $2.73 billion
• Total Contractual Obligations: $607.9 million

Revenue Growth and Performance Metrics

Zscaler reported impressive revenue growth for the fiscal year ending July 31, 2025, with total revenues reaching $2.67 billion, compared to $2.17 billion in 2024, representing a 24% year-over-year increase. This growth can be attributed to the escalating demand for cloud security solutions amidst a rapidly evolving threat landscape.

The company’s revenue is primarily derived from subscription services, which accounted for approximately 98% of total revenue, reflecting a strong and recurring revenue model. The increase in revenue also signals successful customer retention and acquisition strategies, with total deferred revenue growing to $2.47 billion as of July 31, 2025, indicating a healthy pipeline for future revenue recognition.

Profitability and Financial Position

Despite the revenue growth, Zscaler reported a net loss of $(41.48 million) for the fiscal year, an improvement from the $(57.7 million) loss in 2024 and $(202.3 million) in 2023. This narrowing of losses suggests effective cost management strategies and operational efficiencies beginning to take hold.

Key Financial Highlights:

• EBITDA: While specific EBITDA figures are not detailed, the reduction in net losses alongside increased revenue suggest positive operational leverage.
• Stock-Based Compensation: The company recognized a high stock-based compensation expense of $685.5 million, which reflects its strategy to attract and retain top talent in a competitive market.
• Cash Position: Zscaler holds a strong liquidity position with $2.73 billion in cash and short-term investments, providing ample resources for continued investments and operational flexibility.

Strategic Acquisitions and Expansion

Zscaler has strategically positioned itself for growth through acquisitions. Notably, the company completed the acquisition of Red Canary, Inc. for $675 million in cash in August 2025, aimed at enhancing its security operations. This acquisition is expected to bolster Zscaler’s capabilities in threat detection and response, aligning with the company’s focus on Zero Trust security architecture.

Stock-Based Compensation and Future Commitments

The company’s stock-based compensation plan has resulted in significant expenses but is indicative of Zscaler's commitment to incentivizing its workforce. As of the latest report, total contractual obligations are estimated at $607.9 million over the next several years, which includes operating lease commitments and other operational expenses.

Risks and Considerations

1. Market Competition: Zscaler operates in a highly competitive landscape, with numerous players offering similar cybersecurity solutions. Maintaining a technological edge will be crucial for continued success.
   
2. Profitability Pressure: While the company is growing, the substantial stock-based compensation expenses may pressure profitability if not matched by revenue growth.
3. Regulatory Environment: As a cloud security provider, Zscaler must navigate a complex regulatory landscape, which may impact operational costs and compliance.

Macro Environment and Future Outlook

The macroeconomic environment remains favorable for cybersecurity investments, especially as businesses increasingly migrate to cloud-based solutions. The ongoing digital transformation and the rising number of cyber threats are propelling demand for Zscaler’s services.

Analysts expect Zscaler to continue leveraging its strong cash position to invest in research and development, further enhancing its product offerings. The anticipated growth in revenue, combined with strategic acquisitions, positions the company well for future profitability.

Conclusion

Zscaler, Inc. presents a compelling investment opportunity as it navigates the challenges of the cybersecurity landscape. With robust revenue growth, a strategic acquisition strategy, and a strong cash position, the company is well-equipped for future success. Investors should consider Zscaler as a potential buy, anticipating further improvements in operational performance and market position.

This financial report analysis aims to provide a comprehensive understanding of Zscaler's current financial health and future prospects, catering to both seasoned investors and newcomers seeking insights into the company’s operations and market potential.