Zscaler shares fell 3.2% to $172.66 on Wednesday. The latest annual filing describes a company still adding customers and subscriptions at a brisk pace, but also spending heavily enough that its cash balance shrank sharply.
Revenue for the twelve months ended July 31 rose 25.4% to $3.4 billion. Gross profit kept pace, up 25.3% to $2.6 billion, while gross margin barely moved, slipping to 76.8%. Growth is intact. The question is what it is buying.
Zscaler generated $1.1 billion of operating cash, up 16.2%, but ended the year with $928.4 million in cash, down 61.1%. The company used $918.1 million on acquisitions, $2.3 billion on short-term investments, and $350.5 million on cloud-platform capital expenditures, according to its description of investing activity.
Management tied the operating-cash increase to the mechanics of a subscription business, including more customers and larger existing accounts. Those same mechanics also consumed cash through commissions and receivables.
"Net cash outflows from changes in operating assets and liabilities were primarily the result from increase of $312.2 million in deferred contract acquisition costs, as our sales commission payments increased due to the addition of new customers and expansion of our existing customer subscriptions, an increase of $140.0 million in accounts receivable primarily due to timing of billings and collections, a decrease of $67.6 million in operating lease liabilities primarily due to lease payments, an increase of $28.1 million in prepaid expenses, other current and noncurrent assets and a decrease of $10.6 million in accounts payable."
Zscaler 10-K, Sept. 3, 2026
In plain English, the sales engine is producing more business, but some of the cash arrives later and more of the cost of winning that business arrives now. Accounts receivable rose 15.8%, slower than revenue but still enough to be a meaningful use of cash.
The income statement carries a second version of the same tension. Zscaler's operating loss widened slightly to $133.3 million from $128.5 million, even as its operating margin improved to negative 4.0% from negative 4.8%. Net loss widened to $63.2 million, and diluted shares rose 3.8% to 160.2 million.
The company attributed the heavier expense load largely to headcount, including acquisitions and organic hiring. Stock-based compensation reached $821.9 million, up 24.3%. That is an accounting expense, not a cash payment, but it still matters to per-share math when the diluted share count rises.
"The change was driven primarily by an increase of $170.4 million in employee-related expenses, inclusive of an increase of $85.1 million in stock-based compensation expense, primarily due to an increase in headcount driven by acquisitions and organic headcount growth."
Zscaler 10-K, Sept. 3, 2026
Zscaler also says expanding use of its cloud platform, including AI agents and connected devices, will bring higher bandwidth and data-center costs. That is a durable operating exposure rather than a one-year accounting wrinkle: more platform usage can add revenue and add cost of revenue at the same time.
The company's annual history shows the business has been moving toward narrower operating losses as revenue scales. But the latest year adds a capital bill, acquisition-related hiring, higher commissions, and a lower cash balance to that progression. Zscaler's next annual report will make the comparison clearer through its cash balance, receivables, and capital spending after another year of integration and platform expansion.
The tension is simple: Zscaler is growing quickly, but growth is still asking for cash, people, and shares.