Zscaler, Inc.
CEO : Mr. Jagtar Singh Chaudhry
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2025 Q1 | 26.4% YoY | -33.4% | -65.7% | 2024-12-02 |
Jay Chaudhry says,
Financial Performance and Guidance
- Revenue growth of 26% year-over-year, driven by strong customer commitments and growing interest in AI solutions.
- Bookings growth accelerated to over 30%, highlighting increasing market share in cybersecurity.
- Billings growth of 13%, significantly outperforming the legacy network security vendors’ average growth rate.
- Operating profit increased by 50% year-over-year, achieving an operating margin of 21% and free cash flow margin of 46%.
- Full-year billings and revenue guidance increased due to continued strong demand.
AI Innovations and Customer Wins
- Expansion in AI portfolio focusing on three areas: secure AI application use, AI-powered digital experience, and AI-powered security products.
- Global 2000 technology services customer adopted AI-powered data protection, accounting for 50% of a seven-figure ACV deal.
- Significant deal with a healthcare provider doubling their ZIA subscription to 60,000 seats with ZDX Advanced Plus.
- Introduction of AI-powered solutions like breach prediction, threat hunting, and unified vulnerability management.
Strategic Customer Acquisitions and Partnerships
- Strong customer acquisition with over 35% of Global 2000 and about 45% of Fortune 500 utilizing Zscaler’s platform.
- New large customers include Fortune 500 insurance expanding user subscription and Global 2000 aerospace adopting cloud-first architecture.
- Significant upsell opportunities in ZPA expected to be a major growth driver in fiscal 2025.
- Strategic shift towards account-centric selling showing results in stronger customer engagements and higher-quality pipelines.
Channel and Market Expansion
- Expansion in federal vertical with 14 of 15 cabinet-level agencies adopting Zscaler’s platform.
- International growth opportunities as multiple governments plan to adopt Zero Trust architecture.
- Partnerships with GSIs and hyperscalers to enhance value realization for customers.
- Increasing joint partner offerings with a focus on emerging products beyond ZIA, CPA, and ZDX.
Operational and Sales Strategy Enhancements
- Successful hiring and low attrition contributing to strengthened sales capacity.
- Shift to account-centric sales motion resulting in over 20% growth in unscheduled billings year-over-year.
- Growth in high-value customers, with the number of $1 million-plus ARR customers increasing by 25% year-over-year.
- Focus on reaching the next milestone of $5 billion in ARR through enhanced go-to-market strategies and partnerships.
Remo Canessa says,
Q1 2025 Financial Performance
- Revenue was reported at $628 million, marking an increase of 26% year-over-year and a 6% sequential rise.
- Total calculated billings for Q1 grew by 13% year-over-year, reaching $517 million.
- Remaining Performance Obligations (RPO) grew 26% to $4.411 billion, with current RPO representing roughly 49% of total RPO.
- The company reported a free cash flow margin of 46%, with data center capital expenditure at approximately 3% of revenue.
- Gross margin stood at 80.6%, slightly down from 80.7% in the previous year.
Customer Engagement and Retention
- The number of customers with over $1 million in ARR reached 585.
- There were 3,165 customers with over $100,000 in ARR.
- 12-month trailing dollar-based net retention rate was reported at 114%, although there is potential for variability in this metric due to bundling and upsell strategies.
Guidance for Q2 and Fiscal Year 2025
- Projected Q2 revenue is between $633 million and $635 million, reflecting a year-over-year growth of approximately 21%.
- Operating profit for Q2 is anticipated to range from $126 million to $128 million, with earnings per share expected to be between $0.68 and $0.69.
- Full-year fiscal 2025 billings are estimated between $3.124 billion and $3.149 billion, representing a 19% to 20% growth year-over-year.
- Annual revenue guidance is set between $2.623 billion and $2.643 billion, reflecting 21% to 22% growth.
Strategic Investments and Financial Optimization
- New products are prioritized for faster go-to-market strategies, which initially impacts gross margins but are expected to be optimized over time.
- Data center CapEx as a percentage of revenue will be approximately three points higher than fiscal 2024, driven by investments in cloud and AI infrastructure.
- Free cash flow margin for the fiscal year is forecasted to be approximately 23.5% to 24%.
Leadership Transition
- The CFO announced his retirement after eight years, having significantly contributed to the company’s growth from less than $250 million to over $2.5 billion in ARR.
- The retiring CFO expressed confidence in Zscaler’s ongoing influence in the cybersecurity space, specifically through its Zero Trust Exchange platform.
Q & A sessions,
Integration with Microsoft and AI-Powered Data Protection
- Zscaler has leveraged years of integration work with Microsoft, particularly with Office 365 services like OneDrive and SharePoint.
- The company reported a significant deal with a G2000 company focused on securing Microsoft Copilot, highlighting a new seven-figure revenue opportunity.
- Zscaler’s AI-powered data protection solution is a key differentiator, providing data access management for Microsoft Copilot users.
Expansion in Zero Trust and VPN Replacement
- The Zero Trust solution is structured into three phases: VPN replacement, inbound DMZ, and segmentation with Zero Trust.
- Zscaler Private Access (ZPA) has shown remarkable growth, now accounting for over 40% of new and upsell business combined with Zscaler Internet Access (ZIA).
- The company believes that eventually all customers will adopt ZIA, ZPA, and Zscaler Digital Experience (ZDX) for every employee.
Growth in Emerging Products and Cloud Workload Protection
- Emerging Product ARR is growing at twice the rate of core products, driven by deals like a seven-figure ACV for Zero Trust SD-WAN across 45 branches.
- Significant seven-figure deals in cloud workload protection are expanding existing customer footprints.
- Zero Trust workload segmentation represents the next growth opportunity.
SecOps Market Disruption and Avalor Acquisition
- The Avalor acquisition has enabled Zscaler to develop a comprehensive data fabric for unified vulnerability management and digital experience improvements.
- New SecOps products like breach prediction and threat hunting are in early design stages with promising results.
- Increased investment in SecOps aims to leverage private enterprise data for customer-specific benefits.
Focus on Growth through GSI Partnerships
- Global System Integrators (GSIs) are increasingly contributing to Zscaler’s large account sales.
- Recent key deals include Zero Trust segmentation and branch solutions for an auto parts company and a G2000 services company.
- GSIs are helping standardize Zscaler solutions, including emerging products, across customer bases.
- This strategic focus is expected to eliminate legacy products such as firewalls, VPNs, and SD-WAN, offering new service opportunities for GSI partners.
No bad stock 