ZS - NASDAQ
Zscaler, Inc.
ZS·NASDAQ
$134.37
-6.8%TechnologySoftware - Infrastructure
Zscaler, Inc. operates as a cloud security company worldwide. The company provides Zscaler Internet Access solution that provides users, servers, operational technology, Internet of Things device secure access to externally managed applications, including software-as-a-service (SaaS) applications and Internet destinations; and Zscaler Private Access solution, which is designed to provide access to managed applications hosted internally in data centers, and private or public clouds. It also offers Zscaler Digital Experience that measures end-to-end user experience across business applications, as well as provides an easy to understand digital experience score for each user, application, and location within an enterprise. In addition, the company provides workload segmentation solutions comprising Zscaler Cloud Security Posture Management that identifies and remediates application misconfigurations in SaaS, infrastructure as a service, and platform as a service to reduce risk and ensure compliance with industry and organizational benchmarks; and Zscaler Cloud Workload Segmentation, which is designed to secure application-to-application communications inside public clouds and data centers to stop lateral threat movement, as well as prevents application compromise and reduces the risk of data breaches. Its platform modules include Zscaler Central Authority, Zscaler Enforcement Node, and Zscaler Log Servers. It serves customers in airlines and transportation, conglomerates, consumer goods and retail, financial services, healthcare, manufacturing, media and communications, public sector and education, technology, and telecommunications services industries. The company was formerly known as SafeChannel, Inc., and changed its name to Zscaler, Inc. in August 2008. Zscaler, Inc. was incorporated in 2007 and is headquartered in San Jose, California.
At a Glance
Live SnapshotMarket Cap$21.73B
EPS-0.2700
P/E Ratio-497.67
Earnings Date06/04/2026
Earnings Call Transcript
ZS • 2026 • Q3
Operator
I would now like to hand the call over to Kim Watkins, SVP of Investor Relations. Please go ahead.
Kim Watkins
Good afternoon, and thank you for joining us today. Welcome to
Kim Watkins
Before we get started, I'd like to remind you that today's discussion will contain forward-looking statements, including, but not limited to, the company's anticipated future revenue, annual recurring revenue, net new annual recurring revenue, operating margin, gross margin, operating profit, net other income, earnings per share, and free cash flow margin, our customer response to our products, our expectations regarding AI and its impact on our business and customers, and our market share and market opportunity, and our objectives and outlook. These statements and other comments are not guarantees of future performance, but rather are subject to risk and uncertainty, some of which are beyond our control. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call.
Kim Watkins
For a more complete discussion of the risks and uncertainties, please see our filings with the SEC as well as in today's earnings release. I also want to inform you that we'll be attending the following conferences this quarter: the Baird Global Consumer Technology and Services Conference on June 2nd, the Bank of America Global Technology Conference on June 3rd, and the FBN Virtual Technology Conference on June 15th. With that, I'll turn the call over to Jay.
Jay Chaudhry
Thanks, Kim, and thanks to everyone for joining us today. We delivered strong Q3 results. ARR grew 25%, and non-GAAP operating margin hit an all-time high at 23%. AI is changing the nature of cybersecurity in real time.
Jay Chaudhry
Second, we eliminate lateral movement of attackers with our
Jay Chaudhry
This high-fidelity telemetry fuels our AI-powered security capabilities, continuously improving how we detect, prevent, and stop threats. These differentiators are especially important at a time when organizations are aggressively deploying AI applications and models with growing interest in AI agents at scale. We expect it won't be long before millions of AI agents have access to organizations' mission-critical applications and sensitive data. Today, users are the weakest link in cybersecurity. Soon, AI agents will be the weakest link because they operate at far greater speed and have far less oversight. Even a single compromised agent can move from discovery to data theft in minutes, inflicting catastrophic damage on enterprises. Making it even more challenging, new powerful frontier AI models like Mythos are finding security vulnerabilities in software at machine speed, significantly diminishing the effort, skill, and time needed to breach enterprises.
Jay Chaudhry
All enterprises already have thousands of known vulnerabilities that they haven't been able to patch. Frontier models are multiplying these unremediated vulnerabilities by as much as 10x, and even more powerful models that are currently being developed will undoubtedly make it worse. Enterprises don't have the capacity to patch and update existing vulnerabilities, so backlogs are piling up faster than organizations can address them. To tackle this challenge, the market needs to take a different approach. We provide the 2 most important defenses against these vulnerabilities. 1, hiding applications from attackers, and 2, eliminating lateral movement at scale. This validates the architecture we pioneered.
Jay Chaudhry
Now we are expanding our exchange to secure AI agents. An important element of agentic security is to understand which agents, users, and other identities are communicating with which models, applications, and data sources. On May 21st, we announced our intent to acquire Symmetry Systems, a company that solved this difficult problem. Symmetry provides an access graph that maps how identities, applications, and other data sources connect across the enterprise. We are integrating its access graph technology with our
Jay Chaudhry
Against this backdrop, investors have asked us, where is the ideal place to guard against AI threats? We are in the enviable position of having strong visibility and control across three critical vantage points for superior security: network, cloud, and endpoint. This is indispensable in enforcing real-time policy decisions. It is a powerful advantage for our customers and an important differentiator for
Jay Chaudhry
GSIs will be able to leverage
Jay Chaudhry
In a seven-figure upsell deal, a Fortune 500 financial technology company chose
Jay Chaudhry
For customers building their own AI models and applications, our AI Red Teaming solution performs continuous security assessment. Our unified user interface and deep integration of multiple products is a key differentiator. Our AI Protect solution is resonating with customers, with bookings crossing $100 million over the past 12 months. We are seeing inbound requests from across our customer base, and our pipeline is robust and growing. In another customer example, we closed a seven-figure upsell with a federal agency that previously migrated from a legacy VPN architecture last year to
Jay Chaudhry
With this expansion, the customer is now using six of
Jay Chaudhry
With
Jay Chaudhry
The deal quickly grew into a comprehensive platform win, including
Jay Chaudhry
Our zero trust SASE solution enables us to hide applications and make them invisible to attackers while also eliminating lateral movement. These attributes, along with our scale, are true competitive differentiators for
Jay Chaudhry
Now, I'll hand it over to Kevin to walk through the financials.
Kevin Rubin
Thanks, Jay. We delivered strong Q3 2026 results, growing revenue 25% while investing with discipline. Year to date, with 26% revenue growth and a 29% free cash flow margin, we achieved Rule of 55 performance. Our Q3 2026 net new ARR was $166 million, up 24%, bringing total ARR to $3.5 billion, up 25% year-over-year. Net new ARR benefited from strength in the public sector vertical, which includes state, local, and federal government, and healthcare, including an approximate eight-digit upsell at a federal agency. Net new ARR also benefited from strength of large deals in APJ, where the deal value from $1 million-plus deals increased more than 150% year-over-year. Excluding the contribution from our acquisition of Red Canary, net new ARR was $153 million, up 14% year-over-year, and total ARR was also up 21%. Red Canary exited Q3 with $127 million of ARR.
Kevin Rubin
We have steadily expanded our zero trust platform beyond users to protect branches, workloads, AI applications, and now AI agents. We believe AI agents will drive a meaningful increase in machine-to-machine and agent-to-agent interactions over time. In Q3, our non-seat-based metered usage solutions delivered just over 30% of new ACV, and the ARR tied to those offerings grew more than 100% year-over-year. Revenue of $850 million grew 25% year-over-year and 4% sequentially, exceeding the high end of our guidance. We closed Q3 with 748 customers generating more than $1 million of ARR and 4,003 customers exceeding $100,000 of ARR, growing 18% and 19% year-over-year respectively. We also set a record $1 million-plus new ACV deals for a Q3. On a geographic basis, we saw strong growth from the Americas, which accounted for 56% of revenue, up approximately 31% year-over-year.
Kevin Rubin
EMEA accounted for 28% of revenue, up approximately 16%, and APJ for 16%, up approximately 23%. Remaining performance obligation, or RPO, of approximately $6.5 billion grew approximately 30%, including approximately 46% classified as current RPO. Our go-to-market strategy is a key growth lever enabling us to deepen customer relationships, accelerate platform adoption, and expand multi-year engagements. Building on Jay's earlier comments on enhancements to our go-to-market engine, we are continuing to strengthen our position as a long-term strategic partner and driving deeper customer adoption over time through our account-centric sales motion. We saw strong momentum this quarter with
Kevin Rubin
In Q3,
Kevin Rubin
Turning to operating performance, non-GAAP gross margin was 80.7%, compared to 80.3% a year ago. Non-GAAP operating income of $196 million grew $49 million, or 34%, as compared to $147 million last year. Non-GAAP operating margin of 23% increased 140 basis points year-over-year, demonstrating leverage on sales and marketing. Turning to the balance sheet, we ended the quarter with $3.5 billion in cash equivalents, and short-term investments, and $1.7 billion of debt. In Q3, we generated $198 million in operating cash flow, and CapEx was $42 million or 5% of revenue. This equates to a free cash flow margin of 16% this quarter, down from 18% last year, reflecting the timing of cash collections and a free cash flow margin of 29% year to date. Looking ahead, I'd like to spend a minute and provide an update on increasing memory, storage, and processor prices and availability.
Kevin Rubin
As a reminder, we purchase equipment for our data center and
Kevin Rubin
Looking ahead to fiscal 2027, based on higher prices we see in the market today, we expect CapEx as a percentage of revenue to increase up to 200 basis points compared to fiscal 2026 levels. We'll continue to monitor our costs and share regular updates about the impact. Turning to guidance. At the end of the third quarter, two sales leaders departed the company. We already appointed a replacement for one of these leaders, and we are in the late stages of hiring a leader for the other role. However, we are taking a prudent approach to our guidance during this transition. Let me provide our outlook for Q4 and full year fiscal 2026. As a reminder, these numbers are all on a non-GAAP basis. For the fourth quarter, we expect revenue of $875 million-$878 million, reflecting approximately 22% year-over-year growth. Gross margin of approximately 80%.
Kevin Rubin
Operating profit of $206 million-$208 million, up to approximately 30%-31% year-over-year. Net other income of approximately $24.5 million. Earnings per share of approximately $1.08-$1.09 per share, assuming a 21% tax rate and 168 million fully diluted shares. For the full year fiscal 2026, we expect ARR of $3.740 billion-$3.749 billion, or year-over-year growth of approximately 24%. This guidance implies net new ARR growth excluding Red Canary of approximately 9.5%. For Red Canary, we expect ARR of approximately $137 million in fiscal 2026, up from our prior guidance of $130 million, with net new ARR of approximately $10 million in Q4. This includes all the business expected in each period, including fiscal 2026 renewals, upsells, and new logos. Revenue of $3.3295 billion-$3.3325 billion, reflecting year-over-year growth of 24.6%-24.7%.
Kevin Rubin
We expect Red Canary revenue of approximately $137 million in fiscal 2026, up from our prior guidance of $125 million. Operating profit of $755 million-$757 million, up approximately 30% year-over-year, up from our prior guidance of $742 million-$748 million. Earnings per share of $4.10-$4.11, assuming a 21% tax rate and approximately 168 million fully diluted shares. Free cash flow margin of approximately 22.8%-23.3%, down from our prior expectations of 26.5%-27%, reflecting CapEx in the high single digits as a percentage of revenue. Looking to fiscal 2027, I'd like to provide some early perspectives to better align expectations heading into our second year with ARR as our primary growth metric and following the acquisition of Red Canary. Sitting here today, our view is for total ARR and revenue growth for fiscal 2027 of 16%-17%.
Kevin Rubin
Looking ahead, we are excited by the opportunities we see to continue scaling our rapidly expanding AI security portfolio, accelerating
Operator
Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again. Please limit yourself to one question, then return to the queue. Please stand by while we compile the Q&A roster. Our first question comes from the line of Brad
Brad Zelnick
Great. Thank you so much. A lot of strong proof points in these results. Maybe a compound question since you're limiting me to one for both Jay and Kevin. I'm just trying to better understand the sales leadership turnover that you highlighted. Jay, if you can comment at all whether these positions, the turnover was voluntary or involuntary, how senior they were, and why this could have an impact when you have such a mature and resilient sales organization. Maybe for Kevin, on the same topic, is the pipeline there and you're just assuming a lower close rate? What would your guidance have been if these leaders were still in place? Thanks so much.
Jay Chaudhry
Okay. Hi, Brad. Thank you. Regarding the sales leadership changes, these two leaders were part of our CRO, Mike Rich' team. It is true that Mike has built a strong bench. He has built a strong sales engine. We just want to be prudent that as these changes are made, it could have impact in the short term, and that's what we're keeping in mind. Kevin?
Kevin Rubin
Yeah. Thanks, Jay, and thanks, Brad. I don't have much more to offer other than we are taking a prudent approach. We do recognize when leaders of this nature change, that it can have some disruptive nature to those organizations. I'm just taking a prudent approach to how we think about those changes. Thanks, Brad.
Jay Chaudhry
The only other thing I'll add, Brad, is that there will be changes in leadership from time to time. Regarding these two, we have already appointed an internal replacement for one of these. The second one, we are making progress, and we expect to close that in the near future as well.
Brad Zelnick
That's helpful. Thanks so much for taking the question.
Operator
Thank you. Our next question comes from the line of Saket Kalia of Barclays. Your line is open, Saket.
Saket Kalia
Okay, great. Hey, guys, thanks for taking my question here. Kevin, maybe for you, can we just speak to how big the eight-figure federal deal was here in Q3? I guess, the question is, if we exclude that deal, how do we maybe feel about the underlying flow business, right? Whether it's new or renewals, again, excluding that large deal, which was great to see. I'm just curious how you look at the business if we exclude it, if we could size that.
Kevin Rubin
Yeah, thanks, Saket. Look, at the highest of levels, we delivered a strong Q3. I think we're very pleased with the results of the business. As it relates to the eight-figure upsell that I called out, keep in mind that these contract wins, as you see them get reported, first of all, it is TCV. Second, that along with the upsell was also a large part of that deal was renewals. That's already preexisting in ARR as you think about that particular deal that you're querying.
Jay Chaudhry
Saket, if I may add, you've seen in the past, if deals are unusually large, we point them out. Nothing unusual about this.
Kevin Rubin
Yeah.
Saket Kalia
Very helpful. Thank you.
Kevin Rubin
Thanks, Saket.
Operator
Thank you. Our next question comes from the line of Joshua Tilton of Wolfe Research. Please go ahead, Joshua.
Joshua Tilton
Hey, guys. Thanks for sneaking me in here. Appreciate the early look for the numbers next year. When you look at the growth and what it implies for net new ARR, you guys are calling flat on an organic basis from the guide for this year. Can you help us maybe think about the moving pieces between where that's coming from, whether that's the traditional
Kevin Rubin
Yeah, I'll go ahead and start, and Jay can append. I just want to call out, we don't typically provide this type of guidance this early in the year going into the following, but we thought it was important to give you an understanding of what we're seeing. First of all, we have a pretty strong track record of upsells, and I expect that that is going to continue into 2027. You may recall that we shared we had a net retention of 115% in Q1, and that has been fairly stable the last several quarters. The area that we haven't been performing as well as we'd like is new logo.
Kevin Rubin
It certainly is a large priority for us, but I did take a tempered view of new logos going into 2027. Lastly, as we think about Red Canary and its contributions, we will be rolling out the integrated SecOps solution that will be available, we would expect, in 2027. What I don't know is the pace of uptake amongst the existing customers for that. As a result, as we think about Red Canary, we are expecting Red Canary's net new ARR to grow at a slower rate than the overall business in 2027 as you think about modeling. Also keep in mind that Red Canary will be included in our results going into next year as it'll be fully baked into 2026, so we will not be providing a separate disclosure of Red Canary in 2027.
Jay Chaudhry
If I may add, look, we already covered the fact that sales leadership position has been part of our thinking to make sure you understand that it may have some impact. If you look at the overall market opportunity, Mythos has shed some more light on it. Every CIO, every CISO I talk to is talking about protecting his Mythos. An interesting part is, while Mythos is about finding new software vulnerabilities and fixing them, enterprise already have tons of vulnerabilities. The number one protection they're looking at doing is finding their attack surface. Number two, they're trying to do is
Joshua Tilton
Super helpful, guys. Thank you.
Jay Chaudhry
Thank you.
Operator
Thank you. Our next question comes from the line of Gregg Moskowitz of Mizuho. Please go ahead, Greg.
Gregg Moskowitz
Greg, thank you very much for taking the question. You did very well this quarter in the Americas and APJ, although growth in Europe slowed. What are you guys seeing in Europe? Then just wondering if you had any commentary on the competitive environment, both in the Americas and in Europe. Thank you.
Jay Chaudhry
If you think of the overall competitive environment, I don't think things are very different in Europe than the rest of the world. You have seen us that from time to time, geo A may do better in a given quarter, and geo B may do better. I think we know some of the areas of execution we need to improve. We are focused on it, and I'm pretty sure that we'll turn around and make EMEA again a high-growth area.
Gregg Moskowitz
Okay. Thank you.
Operator
Thank you. Our next question comes from the line of Gabriela Borges of Goldman Sachs. Your line is open. Please go ahead, Gabriela.
Gabriela Borges
Hi. Good afternoon. Thanks for the question. Kevin, you mentioned something interesting there when you were talking about the outlook for next year, which is that new logo growth may be tempered. Either for yourself or for Jay, maybe just give us a sense when you dig beneath what's going on with the sales relationships, with the customer pipeline, why do you think new logo growth is tempering? Thank you very much.
Kevin Rubin
Yeah. Thanks, Gabriela. Just to clarify, I was not trying to suggest that new logo growth is tempering. What I was intending to convey is that my expectations relative to the early look for next year took a tempered approach to how we thought about the contributions of new logos. New logos is a strategic focus of ours, and as we go into 2027, it will continue to be so. Again, I'm providing an early look here far earlier than we would normally do. As I looked at what we had in front of us in terms of the different components of the business, that was one area where I think we can do better.
Jay Chaudhry
If I may add, there's a sizable.
Gabriela Borges
Thank you. Yeah, please
Jay Chaudhry
new logo opportunity for us. We have 4,500 enterprises as our customers, and those enterprises are customers with over 2,000 user seats. Out of the 20,000 4,500 customers, that's what, 23%. That means a sizable market for us to go after.
Gabriela Borges
Thank you for the color.
Operator
Thank you. Our next question comes from the line of Brian Essex of JPMorgan. Your line is open, Brian.
Brian Essex
Great. Good afternoon. Thank you for taking the question. Jay, if I could maybe ask you to peel back the layers a little bit on the impact of Mythos and OpenAI models. What we're hearing from maybe some of the channel providers is that the C-suite executives at enterprises are, maybe to use their words, freaking out over the emergence of these models and the realization of how robust they are. When you comment about some of the tailwinds in your business on the back of the emergence of these foundation models, how do you see that materializing in your pipeline?
Brian Essex
It sounds like the consultants are very busy right now, but given the typical sales cycles that you have and maybe the architectural decisions that are involved with adopting your zero trust platform, when might we expect to see some kind of impact to pipeline revenue billings and so forth? How is this materializing with your conversations and how your pipeline might be materializing? Thank you.
Jay Chaudhry
It's a very important question, Brian. We've never seen so many inbound calls come in so quickly. I got so many calls that I decided to say we will reach out to them and figure out a programmatic way of engaging with them. I don't need to dig into the detail of their concern. We all know they're very concerned, and they're looking for help. Indeed, it is interesting that most of the customers and vendors are taking the approach that, let me help you find more and more vulnerabilities and try to patch them. While patching is a reasonable approach, we do not think the primary focus needs to be patching because you will never be done patching. Our recommendations are very clean. Finding your applications that I talked about
Jay Chaudhry
Those are fundamental things that need to be done, and that's what we're helping our customers with. We also know that this is an area where we need to help our customers and not do ambulance chasing. Okay. We're not rushing to create opportunities. We are actually engaging with our customers in a consultative fashion to help them get out of the tough situations so they can really keep the board and CEOs apprised of what's going on. Obviously, there are areas these customers need to worry about. We aren't really factoring in any meaningful impact of the new opportunities for Q4, but I do believe it'll have impact in fiscal 2027. The short-term impact, if I were to give you a couple of specifics, number one, many customers have
Jay Chaudhry
Now they want
Brian Essex
Helpful color. Thank you.
Operator
Thank you. Our next question comes from the line of Meta Marshall of Morgan Stanley. Please go ahead, Meta.
Meta Marshall
Great, thanks. Maybe building on a couple of the questions. Just as we think about kind of signposts that you guys are looking at for improvements on the new logo side, will that come from some of the GSI channel outreach expansion that you guys are doing? Will that come with some of the new leadership, flexible pricing? Just trying to get a sense of what you think is kind of the most incremental to improve, of the measures that you laid out, to improve the new logos. Thanks.
Jay Chaudhry
Yeah. Meta, thank you. We have pretty specific plans we are formulating, and they'll be important part of our fiscal 2027 plan. Number one, we have had limited coverage in the lower end of the market. When I say lower end of the enterprise market, it's generally between 2,000 and 10,000 users. As you know, the high end, our coverage is pretty strong. Adding more salespeople in that part of the market where coverage is less, number one. Number two, the channel, especially the VAR channel, plays an important role in the lower end of the market. We are creating specific programs and incentives for new logo in that area. Number three, on the GSIs having good partners. GSI is a generally good partners for large enterprises, we are teaming with them for this area.
Jay Chaudhry
You heard about AI Guardian program we launched with them. That's a natural extension of the work we are doing. Number 4, we have a program for major accounts. We're going to make sure we do some more focus on those teams to get new logos in addition to working on upsell. A little bit more incentive to new logo versus we haven't done a whole lot in the past. This will probably make a difference.
Meta Marshall
Great, thanks.
Operator
Thank you. Our next question comes from the line of Ittai Kidron of Oppenheimer & Co.. Your line is open, Ittai.
Ittai Kidron
Thanks. I appreciate it. Hi, guys. Kevin, I just want to make sure I get my bearings right around the ARR and the commentary there. Taking into account your revised guidance for the year and your preliminary view into next year, it looks like your fourth Q net new ARR again is decelerating quite substantially, and it's probably also into going back to mid-single digit growth only into next year. Another deceleration. I just want to get my hands around, outside of the new sales leadership that you've talked about, are there any other elements to take into account here with respect to this? You guys have made a lot of work over the last couple of years, kind of turning around the sales force. I understand that when two leaders leave, clearly some disruption can happen.
Ittai Kidron
I'm just wondering if that is the only element impacting the net new ARR here, or there are other things to take into account. Thank you.
Kevin Rubin
Yeah. Thanks for the question. I mean, look, the two factors that I think are important, you certainly mentioned one, in terms of the two leaders under Mike that we commented on. It's just a reality when you have leaders that do depart, that you may see some disruption, and so I'm just taking a prudent approach to that potential disruption. The other thing that I commented on is just the pace of uptake with the integrated SecOps products. As we think about how that rolls out and what that pace of uptake is, I'm also taking a prudent approach there. As it relates to Q4, so the guide implies 9.5% net new ARR growth on an organic basis, excluding Red Canary. Just keep in mind, that's still an acceleration over what we put up last year, so keeping everything in perspective. Appreciate it.
Operator
Thank you. Our next question comes from the line of Erik Suppiger of B. Riley Securities. Your line is open, Erik.
Erik Suppiger
Yeah. Thanks for taking the question. On that outlook for fiscal 2027, I think you had commented last quarter that the
Kevin Rubin
Yeah. Thanks for the question. It's a little bit early, and that's a fairly granular element. What I can say is that we've continued to see consistent performance this year within the
Jay Chaudhry
If I may add, quite often questions get asked about core products versus non-core products as if they're two separate buckets altogether. I think as we have been saying, our customers are asking for
Erik Suppiger
Thank you.
Operator
Thank you. Our next question comes from the line of Adam Borg of Stifel. Please go ahead, Adam.
Adam Borg
Awesome, thanks for taking the question. Maybe just on Symmetry Systems, I would love to learn a little bit more about what that brings to you that you couldn't do previously around securing AI agents and, given their access graph technology, how you're thinking about the move into identity security more broadly. Maybe just as a quick follow-up, any color on Symmetry and even SquareX in terms of contribution to revenue and ARR. Thanks.
Jay Chaudhry
First of all, Symmetry has built very innovative technology. What's the problem statement? It's not really basic identity. We believe the identity of agents will really come from companies such like hyperscalers or large software companies who are actually providing platform to build agents. They're the natural place to build identity. Trying to be an identity company for agents for someone outside these big guys will be a hard thing. We have always taken the approach of being a Switzerland, where we will take identity from different partners. What's Symmetry? Symmetry pioneered identity mapping to data sources. Think of this way. In a large enterprise, all these identities, maybe users, workloads, maybe other machines, they access data sources that may be sitting out there somewhere. How do you know who is accessing what, when, where? Information sits in each application logs.
Jay Chaudhry
Symmetry pulls that information and creates a very cool visual access graph. This was a hard problem to solve. This was solved by a bunch of PhDs. Once you understand who talks to who, this thing can be used to enforce policy by agentic exchange that we're building. It's very complementary forward-looking technology. This is the kind of stuff most companies aren't thinking about.
Adam Borg
That's really helpful. Just, Kevin, maybe any color just on?
Kevin Rubin
Yep
Adam Borg
top line for Symmetry and SquareX. Thanks again.
Kevin Rubin
Yeah. Of course. As Jay mentioned, just to level set, Symmetry is a technology and talent acquisition. The ARR is immaterial and is in the low single digits. I think you also asked about Square X. That was also incredibly immaterial.
Adam Borg
Really appreciate the color. Thanks again.
Kevin Rubin
Yeah. Thank you.
Operator
Thank you. Our next question comes from the line of Fatima Boolani of Citi. Please go ahead, Fatima.
Fatima Boolani
Thank you for taking my question. Kevin, just on some of the commentary with respect to the opportunities to step on the gas pedal vis-à-vis new logo acquisition. In the context of the sales leadership transitions, can you give us a quantification of sales productivity this year and some of your expectations as you think about the complexion of the 16%-17% guide, again, largely tied to some of your comments earlier around building out more of a capacity presence with the lower end of the enterprise. Would love a little bit more quantitative color on some of the sales productivity/sales attrition and sales hiring quantum that you're thinking about in terms of pipeline build and conversion and productivity assumptions. Thank you.
Kevin Rubin
Thank you for the question. For Q3, this was our sixth straight quarter of sales productivity growth, even on the back of some tough compares. I think we're very pleased with the level of productivity that we've seen, continued improvement that we've seen. I would expect going forward into fiscal 2027 that we'll continue to see success in driving productivity and capacity. I just caution that it's a bit early to provide quantification of how that rolls into an early look for 2027.
Fatima Boolani
Thank you.
Operator
Thank you. Our next question comes from the line of Gray Powell of BTIG. Please go ahead, Gray.
Gray Powell
Great. Thanks for taking the question. Maybe just one on the competitive front. Just from a technology perspective, how are you staying ahead of the firewall vendors who are increasingly trying to upsell secure service edge into your install base? When you do have displacements of legacy vendors, is there a common driver? Is it a particular set of features, or is it just the overall platform and just that your technology is better? Anything you could say on that front would be helpful.
Jay Chaudhry
This is pretty simple. If you care about real cyber protection, you know that you need
Gray Powell
Okay. Thank you very much.
Operator
Thank you. Our next question comes from the line of Andrew DeCaspery of BNP Paribas. Your line is open, Andrew.
Andrew DeGasperi
Thanks for taking my question. I wanted to ask about the comments on the CapEx guide. Really what I wanted to touch on is, given you've put together a price increase earlier this year, and now these costs have gone even higher, are you considering potentially doing the same, maybe at the same time next year?
Kevin Rubin
Yeah. Thanks for the question. I'll start. Look, we are constantly looking at the balance between pricing, margin, and market prices, and feel pretty good at where we are. We did push through a price increase earlier this year and have not seen any implications of that. I think the world is recognizing that hardware costs have gone up. We do periodically review pricing and where we have opportunity to increase. We do take advantage of that. I don't know that I would want to sit here today and say at this time next year there will be another price change. It is something we look at more dynamically than that.
Jay Chaudhry
This situation you're talking about is fairly unique. It's created by all these AI data centers that's causing such a shortage of so many parts. As Kevin said, we'll look at it from time to time. This became a special factor that all of us recognize and adjusting accordingly for it.
Andrew DeGasperi
Thank you.
Operator
I would now like to turn the conference back to Jay Chaudhry for closing remarks. Sir?
Jay Chaudhry
Thank you for joining us for our earnings call. We look forward to seeing you at one of the upcoming investor conferences. Thank you again.
Transcript from May 26, 2026
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1
Snapshot
Start with context, operating signals, and key market metrics.
2
Value Model
Stress test fair value across bear, base, and bull assumptions.
3
Statements
Validate revenue quality, margins, and balance sheet durability.
4
Earnings Call
Read management commentary and compare it with reported outcomes.
5
Dividends
Check payout sustainability and long-term distribution behavior.
6
Analyst Expectations
Review consensus spread and where estimate risk is concentrated.