Zscaler Joins Coverage: Thirteen GAAP Losses in Fourteen Quarters and No P/E to Print.

Zscaler joins the tracked set today, three days before it reports the July quarter that closes its fiscal 2026 — after the close on 3 September.

Fourteen stored quarters, and the Rule of 40 score clears the line in every one of them. That is the whole bull case in one column, and it is a real one.

Quarters are Zscaler's fiscal ones — the year ends 31 July, so "2026 Q3" is the three months to 30 April 2026. The cash flow is violently seasonal: the October quarter collects the renewals, which is why 2026 Q1 scores 77.9 and the two quarters either side of it score in the forties. On a trailing-four-quarter basis the score is 52.7 — $3.17 billion of revenue growing 24.6% against a 28.1% free-cash-flow margin — and that is the number to hold on to.

The reacceleration was bought

Growth decayed for nine straight quarters, from 51.7% to 21.3%, and then turned back up to 25.4%. The turn is not organic. Zscaler completed its acquisition of managed-detection firm Red Canary on 1 August 2025, the first day of fiscal 2026. Management gave the split in the Q3 release: annual recurring revenue of $3,525 million, up 25%, of which $127 million came from Red Canary. Strip it out and ARR grew 21% and net new ARR grew 14% rather than the headline. The organic line is still decaying; the acquisition papered one year over it.

Nothing to divide by

The P/E chart for this ticker is empty, and that is the correct rendering rather than a gap in the data. Zscaler has lost money on a GAAP basis in thirteen of the fourteen quarters stored here — the single exception is the April 2024 quarter at $0.12 a share. Trailing four-quarter GAAP diluted EPS is minus $0.48. There is no denominator, so the site prints n/m.

The gap is the whole argument about this company. Non-GAAP net income in the April quarter was $177.9 million against a GAAP net loss of $13.9 million — a $191.8 million bridge, almost all of it stock compensation and the payroll tax on it. The diluted share count went from 144.5 million to 160.7 million over these fourteen quarters, up 11.2%, which is what that bridge costs in dilution rather than in cash. Every EPS figure in the series here is GAAP; the non-GAAP figures appear only in the table above, labelled.

The free-cash-flow margin is being spent down

The line that moved most this year is not revenue. In the Q3 release management cut the fiscal 2026 free-cash-flow margin guide to 22.8–23.3%, from 26.5–27% three months earlier, and named the cause: capital expenditure running in the high single digits as a percentage of revenue. It already is. In the April quarter the two lines Zscaler deducts to reach free cash flow — purchases of property and equipment plus capitalised internal-use software — came to $62.1 million on $850.5 million of revenue, 7.3%, against 4.3% in the January quarter and 4.4% in the October one.

That is three points of free-cash-flow margin going into infrastructure inside two quarters. Whether it comes back depends on what the spend is for, and the company has been explicit that it is AI: AI Guardrails, AI Broker, Endpoint AI Security and the AI Access Graph, plus an announced intent to acquire Symmetry Systems for access-graph technology that maps how human and non-human identities reach data.

The balance sheet can carry it. Total assets were $7.10 billion at 30 April against $1.70 billion of convertible notes — the 2028 notes issued in July 2025, whose $1.725 billion of proceeds repaid the $1.15 billion 2025 notes in cash and settled the premium in stock.

What the 3 September print has to answer

1. Whether the Q4 guide holds. Management guided to $875–878 million of revenue, about 22% growth, and $1.08–1.09 of non-GAAP EPS on roughly 168 million fully diluted shares. The full-year guide is $3.3295–3.3325 billion of revenue and ARR of $3.740–3.749 billion.
2. Whether the free-cash-flow margin lands inside the cut guide. Nine months in, free cash flow is $718.4 million on $2.454 billion of revenue — 29.3%. Hitting the full-year 22.8–23.3% requires a July quarter at 4.6-6.6% of revenue, which would be the weakest cash quarter in the entire series. That guide is doing a lot of work.
3. What ARR does without Red Canary. The acquisition closed on the first day of fiscal 2026, so from the October 2026 quarter it stops being a growth contribution and becomes part of the base. The organic 21% is the number that has to hold.

Revenue, cost of revenue, GAAP diluted EPS, operating cash flow, capital expenditure, total assets and debt are taken from Zscaler's own filings via the SEC XBRL company-facts API (CIK 0001713683). Fourth-quarter figures are derived as the fiscal year less the first three quarters, and the three derived Q4 EPS figures are the ones printed in the corresponding fiscal-year press releases (-$0.21, -$0.10, -$0.11). Free cash flow follows Zscaler's own definition — operating cash flow less purchases of property and equipment and less capitalised internal-use software — and reproduces the figures in the releases exactly ($171.9M for the July 2025 quarter, $136.0M for April 2026); the stored capex series carries the property-and-equipment line alone, which is the cross-ticker convention here, so it is smaller than the deduction used in the free-cash-flow line. Total debt is convertible notes, current plus long-term. ARR, guidance, the Red Canary contribution and the non-GAAP figures are from the 8-K Exhibit 99.1 filed 26 May 2026.