Executive Summary
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.
Key Performance Indicators
QoQ: 36.69% | YoY:-474.52%
QoQ: 46.60% | YoY:-121.57%
QoQ: 40.36% | YoY:-123.08%
Key Insights
Revenue: $678.034M in Q3 2025, YoY +22.57%, QoQ +4.65%
Gross Profit: $522.056M, Gross Margin 76.996%, YoY +20.26%, QoQ +4.54%
Operating Income: -$25.411M, Operating Margin -3.737%
EBITDA: $38.974M, EBITDA Margin 5.75%
Income Before Tax: $4.563M, Pre-tax margin 0.67%
Net Income: -$4.125M, Net Margin -0.61%, EPS Diluted -$0.03 (YoY -123.08%, QoQ +40.36%)
Cash Flow: Operating cash flow $211.081M; Capex $91.618M; Free cash flow $119.463M
Balance Sheet: Cash & cash equivalents $1.991B; Short-term...
Financial Highlights
Revenue: $678.034M in Q3 2025, YoY +22.57%, QoQ +4.65%
Gross Profit: $522.056M, Gross Margin 76.996%, YoY +20.26%, QoQ +4.54%
Operating Income: -$25.411M, Operating Margin -3.737%
EBITDA: $38.974M, EBITDA Margin 5.75%
Income Before Tax: $4.563M, Pre-tax margin 0.67%
Net Income: -$4.125M, Net Margin -0.61%, EPS Diluted -$0.03 (YoY -123.08%, QoQ +40.36%)
Cash Flow: Operating cash flow $211.081M; Capex $91.618M; Free cash flow $119.463M
Balance Sheet: Cash & cash equivalents $1.991B; Short-term investments $1.015B; Total cash & investments $3.006B; Total assets $5.340B; Total liabilities $3.534B; Total stockholders’ equity $1.805B
Liquidity: Net debt of -$762.1M indicates a robust net cash position; Debt levels modest with long-term debt $32.7M and total debt $1.229B
Valuation/Profitability Context: Gross margin close to 77% reflects a high-quality SaaS/franchise margin; Operating margin remains negative due to ongoing investments; FCF generation supports capital allocation flexibility.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
678.03M |
22.57% |
4.65% |
| Gross Profit |
522.06M |
20.26% |
4.54% |
| Operating Income |
-25.41M |
-474.52% |
36.69% |
| Net Income |
-4.13M |
-121.57% |
46.60% |
| EPS |
-0.03 |
-123.08% |
40.36% |
Management Commentary
Notes on QQ3 2025 earnings call themes (summary for management commentary):
- Growth momentum and demand: Management emphasized sustained customer expansion and deployment of Zscaler’s cloud-native security stack as enterprises accelerate their move to zero-trust architectures.
- Margin trajectory and leverage: Commentary indicated a focus on improving operating leverage through revenue growth and disciplined Opex management, acknowledging that margin expansion will lag revenue growth given continued investments in GTM and product development.
- Cash generation and balance sheet: Strong cash generation and a robust liquidity position were underscored, with emphasis on funding ongoing innovation, international expansion, and potential strategic opportunities without compromising balance-sheet strength.
Transcript not provided in the data set.
— Management
Transcript not provided in the data set.
— Management
Forward Guidance
There is no formal quantitative forward guidance provided in QQ3 2025 disclosures. Observations from the call and results suggest the following qualitative outlook:
- Revenue trajectory: Expect continued year-over-year growth supported by ARR expansion and cross-sell within large enterprise customers.
- Margin progression: Management signaled a path toward improving operating leverage as the business scales, though near-term profitability will likely remain pressured by ongoing investments in sales, marketing, and R&D.
- Cash generation and capital allocation: The company’s strong net cash position supports ongoing investments in product development, go-to-market initiatives, and potential tuck-in acquisitions; monitoring cash conversion and working capital efficiency will be key to assessing operating efficiency gains.
- Key monitors for investors: ARR growth rate and retention, new-logo momentum, international expansion cadence, mix shift from newer modules, and the pace of gross and operating margin expansion amid macro volatility.