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Who's beating the market now? We've got ideas. You're listening to Motley Fool Money. Welcome, Fools! I'm your host, Tim Beyers, and with me are longtime Fools, Austin Sharma and David Meyer. Fellas, how are we doing? Both fully caffeinated, good weekends?
Doing good. I'm only half caffeinated right now.
Dave, you got just a few seconds. Quaff it down. You got to get fully caffeinated before we roll. I'm on it.
Half caffeinated is better than uncaffeinated. Let's just say that. All right. Today, we'll be talking about fiscal Q1 2026 earnings from Zscaler and Q3 2026 earnings from Workday, tickers ZS and WDAY, and predicting which of these two will be the better performer over the next decade. We'll also tackle some mindset questions and a potential new feature we're calling Mindset Monday.
We are going to ask for your feedback. We want to know if you want more mindset content. But we start with earnings, and let's quickly review what we saw last week starting with Zscaler. We had some good numbers, and I want you both to react to these. So Zscaler said they exceeded their expectations on both the top and bottom line. They say they blew past what they call rule of 78.
They're just making stuff up here. There's a rule of 40 number that is very common, which is growth compared to margins. If the growth is materially above 40 over the margin, that's a good sign for the company. They say, forget about 40, we're at 78. I think that's a little nonsensical, but revenue did grow 26% year-over-year. Annual recurring revenue was up 26% year-over-year.
Their backlog now is $3.2 billion in annual recurring revenue, $1 billion of that are some very high-growth initiatives, including what they are calling AI security. They say their AI security ARR surpassed their fiscal year 2026 target of $400 million three-quarters early, and now they are anticipating they'll hit half a billion before fiscal 2026. More AI,
more need for security, zero trust, lots of companies in the market for this, 450 enterprises. Dave, let me start with you here. Would you make it these Zscaler results and does anything give you pause?
Nothing gives me pause. This is a company that, in my opinion, is doing very well. They're in a market that needs its technology prowess, that needs its products. We always have to remember, in the cybersecurity market,
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