Zscaler reported Q3 2025 revenue of $678.0 million, up 22.6% year over year and 4.6% quarter over quarter, with gross profit of $522.1 million and a robust gross margin of approximately 77%. Despite top-line growth, operating income remained negative at -$25.4 million (margin -3.74%), reflecting ongoing investments in go-to-market and R&D as the company scales. EBITDA stood at $39.0 million (margin ~5.75%), and net income was a small loss of -$4.13 million (EPS -$0.03). Free cash flow reached $119.5 million, supported by operating cash flow of $211.1 million and capital expenditures of $91.6 million. The balance sheet remains highly liquid, with cash and cash equivalents of $1.99 billion and total cash and short-term investments of $3.01 billion, producing a net cash position of approximately -$762 million (net debt). These dynamics underscore a growth-at-scale profile: strong revenue momentum and cash generation, offset by margin compression from continued investment and non-operational tax effects.
Management commentary in QQ3 2025 highlighted sustained demand for cloud-native security, expanding enterprise footprint, and continued focus on operating leverage to improve profitability over time. While the quarter benefited from positive pre-tax income of $4.56 million, taxes contributed to a net loss of $4.13 million, illustrating a common mix in high-growth software where near-term profitability can be influenced by tax timing and non-operating items. Sequential improvements in operating margins suggest early leverage as the business scales, but margin expansion remains a work in progress as Zscaler investments persist.
Looking ahead, management did not provide formal quantitative guidance in QQ3 2025. The investment thesis remains centered on ARR growth, customer expansion, and geographic diversification, with a continued emphasis on free cash flow generation and balance-sheet strength to fund growth initiatives and potential strategic opportunities. Investors should monitor ARR trajectory, gross and operating margins, and the pace of profitability improvement, alongside macro and FX considerations that could influence demand and profitability.