Zscaler, Inc.ZS
Zscaler, Inc. Fair Value Disclosure
Fair Value Measurements
Fair value is defined as the exchange price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We measure our financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
•Level I - Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities;
•Level II - Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments; and
•Level III - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs are based on our own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.
Our money market funds are classified within Level I due to the highly liquid nature of these assets and have quoted prices in active markets. Certain of our investments in available-for-sale securities (i.e., U.S. treasury securities, U.S. government agency securities, certificates of deposit and corporate debt securities), as well as our assets and liabilities arising from our foreign currency forward contracts and our interest rate swap contracts, are classified within Level II. The fair value of our Level II financial assets and liabilities is determined by using inputs based on non-binding market consensus prices that are primarily corroborated by observable market data or quoted market prices for similar instruments, for substantially the full term of the financial assets and liabilities.
Assets and liabilities that are measured at fair value on a recurring basis consisted of the following as of July 31, 2025:
| Level I | Level II | Level III | |||||||||||||||||||||
| Fair Value | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | 1,403,678 | $ | 1,403,678 | $ | — | $ | — | |||||||||||||||
| Corporate debt securities | 8,468 | — | 8,468 | — | |||||||||||||||||||
| Certificates of deposit | 131,463 | — | 131,463 | — | |||||||||||||||||||
| Total cash equivalents | $ | 1,543,609 | $ | 1,403,678 | $ | 139,931 | $ | — | |||||||||||||||
| Short-term investments: | |||||||||||||||||||||||
| U.S. treasury securities | $ | 230,999 | $ | — | $ | 230,999 | $ | — | |||||||||||||||
| U.S. government agency securities | 74,992 | — | 74,992 | — | |||||||||||||||||||
| Corporate debt securities | 877,395 | — | 877,395 | — | |||||||||||||||||||
| Total short-term investments | $ | 1,183,386 | $ | — | $ | 1,183,386 | $ | — | |||||||||||||||
| Total cash equivalents and short-term investments | $ | 2,726,995 | $ | 1,403,678 | $ | 1,323,317 | $ | — | |||||||||||||||
| Designated derivative instruments: | |||||||||||||||||||||||
Foreign currency contracts assets-current (1) | $ | 10,713 | $ | — | $ | 10,713 | $ | — | |||||||||||||||
Foreign currency contracts assets-noncurrent (2) | $ | 3,705 | $ | — | $ | 3,705 | $ | — | |||||||||||||||
Foreign currency contracts liabilities-current (3) | $ | 4,006 | $ | — | $ | 4,006 | $ | — | |||||||||||||||
Foreign currency contracts liabilities-noncurrent (4) | $ | 1,319 | $ | — | $ | 1,319 | $ | — | |||||||||||||||
| Non-designated derivative instruments: | |||||||||||||||||||||||
Foreign currency contracts assets-current (1) | $ | 5,115 | $ | — | $ | 5,115 | $ | — | |||||||||||||||
Foreign currency contracts liabilities-current (3) | $ | 3,956 | $ | — | $ | 3,956 | $ | — | |||||||||||||||
(1) Included within prepaid expenses and other current assets in the consolidated balance sheets.
(2) Included within other noncurrent assets in the consolidated balance sheets.
(3) Included within accrued expenses and other current liabilities in the consolidated balance sheets.
(4) Included within other noncurrent liabilities in the consolidated balance sheets.
Assets that are measured at fair value on a recurring basis consisted of the following as of July 31, 2024:
| Level I | Level II | Level III | |||||||||||||||||||||
| Fair Value | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | 956,932 | $ | 956,932 | $ | — | $ | — | |||||||||||||||
| U.S. treasury securities | 178,173 | — | 178,173 | — | |||||||||||||||||||
| U.S. government agency securities | 57,549 | — | 57,549 | — | |||||||||||||||||||
| Certificates of deposit | 80,940 | — | 80,940 | — | |||||||||||||||||||
| Total cash equivalents | $ | 1,273,594 | $ | 956,932 | $ | 316,662 | $ | — | |||||||||||||||
| Short-term investments: | |||||||||||||||||||||||
| U.S. treasury securities | $ | 257,021 | $ | — | $ | 257,021 | $ | — | |||||||||||||||
| U.S. government agency securities | 160,075 | — | 160,075 | — | |||||||||||||||||||
| Corporate debt securities | 569,478 | — | 569,478 | — | |||||||||||||||||||
| Total short-term investments | $ | 986,574 | $ | — | $ | 986,574 | $ | — | |||||||||||||||
| Total cash equivalents and short-term investments | $ | 2,260,168 | $ | 956,932 | $ | 1,303,236 | $ | — | |||||||||||||||
| Designated derivative instruments: | |||||||||||||||||||||||
Foreign currency contracts assets-current (1) | $ | 2,541 | $ | — | $ | 2,541 | $ | — | |||||||||||||||
Foreign currency contracts assets-noncurrent (2) | $ | 800 | $ | — | $ | 800 | $ | — | |||||||||||||||
Foreign currency contracts liabilities-current (3) | $ | 3,731 | $ | — | $ | 3,731 | $ | — | |||||||||||||||
Foreign currency contracts liabilities-noncurrent (4) | $ | 844 | $ | — | $ | 844 | $ | — | |||||||||||||||
Interest rate contracts liabilities-current (3) | $ | 3,829 | $ | — | $ | 3,829 | $ | — | |||||||||||||||
| Non-designated derivative instruments: | |||||||||||||||||||||||
Foreign currency contracts assets-current (1) | $ | 2,132 | $ | — | $ | 2,132 | $ | — | |||||||||||||||
Foreign currency contracts liabilities-current (3) | $ | 1,748 | $ | — | $ | 1,748 | $ | — | |||||||||||||||
(1) Included within prepaid expenses and other current assets in the consolidated balance sheets.
(2) Included within other noncurrent assets in the consolidated balance sheets.
(3) Included within accrued expenses and other current liabilities in the consolidated balance sheets.
(4) Included within other noncurrent liabilities in the consolidated balance sheets.
We did not have transfers between levels of the fair value hierarchy of assets measured at fair value during the periods presented.
Refer to Note 10, Convertible Senior Notes, for the carrying amount and estimated fair value of our convertible senior notes as of July 31, 2025 and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Sep 11, 2025 | Showing above |
| 2024 | Sep 12, 2024 | |
| 2023 | Sep 14, 2023 | |
| 2022 | Sep 15, 2022 | |
| 2021 | Sep 16, 2021 | |
| 2020 | Sep 17, 2020 | |
| 2019 | Sep 18, 2019 | |
| 2018 | Sep 13, 2018 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.