Core Insights - The cybersecurity market is projected to grow at an annual rate of 12%, driven by increased spending on integrated security solutions as companies face more complex environments and tighter budgets [4][7]. Group 1: Market Trends - The cybersecurity market is expected to reach $270 billion, with firms planning to increase spending on cybersecurity products by 50% compared to general software products in the coming years [4]. - A trend towards "platformization" in cybersecurity products is emerging, as companies seek to integrate and simplify their cyber-defense structures [2][3]. Group 2: Company Performance - Palo Alto Networks is projected to have a revenue growth of 13.6% for the next year and a free cash flow margin of 38.3%, leading to an "Overweight" rating from Morgan Stanley [6][8]. - CrowdStrike is expected to achieve a revenue growth of 21.5% and a free cash flow margin of 31%, with an "Equal Weight" rating and a potential upside of 9% in the base case and 30% in the bull case [8]. Group 3: Investment Opportunities - Morgan Stanley identifies Palo Alto Networks, CrowdStrike, and Zscaler as key players poised for growth due to their comprehensive solutions across various security domains [1][2]. - The median projected revenue growth for the 15 software stocks to watch is 11.8%, with a median projected free cash flow margin of 26.6% [5].

Core Thesis - Zscaler's stock has rebounded significantly, currently priced at $270, reflecting a 50% year-to-date increase, driven by AI demand and improved margins [2] - The company reported $2.67 billion in revenue for fiscal 2025, a 23% year-over-year increase, with projections of $3.3 billion for fiscal 2026 [3] - Zscaler is trading at approximately 15–16x forward sales, which is lower than competitors like CrowdStrike and Cloudflare, suggesting potential for stock price to reach $550 [3][4] Key Growth Drivers - The transition to cloud and hybrid models is increasing demand for Zero Trust and secure access solutions, positioning Zscaler favorably in the market [5] - Adjusted EPS grew by 23% in fiscal 2025, with annual recurring revenue exceeding $3 billion, indicating improving profitability [5] - New AI-enhanced security capabilities and strategic acquisitions are broadening Zscaler's market reach and growth prospects [5] - Collaborations with hyperscalers and channel partners are enhancing customer retention and upsell opportunities [5] - Zscaler has a net retention rate of 115% and is winning larger deals, indicating strong customer momentum [5] Valuation and Market Position - At $275 per share, Zscaler is trading at premium valuations, but strong growth visibility supports a potential price of $550 if revenues and margins improve [6] - The company represents a high-risk, high-reward scenario, with its future closely tied to execution and competitive positioning in the cloud security space [6] Risks and Challenges - Despite improved non-GAAP profitability, GAAP losses may deter some institutional investors [8] - Operating expenses consume nearly 60% of revenue, necessitating efficient execution [8] - A forward sales multiple around 16x reflects growth expectations, and any slowdown in billings could negatively impact the stock [8] - Competition from firms like Palo Alto Networks, CrowdStrike, and Cloudflare is intensifying, putting pressure on pricing and innovation [8]

Core Insights - Zscaler's stock experienced a 4% decline after reporting strong fiscal Q4 results, but remains up approximately 50% year-to-date [1][2] - The company operates in the zero trust security niche, which is gaining importance in the cybersecurity sector [3] - Zscaler's revenue for the quarter increased by 21% year-over-year to $719.2 million, surpassing management's guidance [5] Financial Performance - Adjusted earnings per share (EPS) rose to $0.89 from $0.72 year-over-year, exceeding the forecast of $0.79 to $0.80 [5] - Operating cash flow was $250.6 million, and free cash flow was $171.9 million, with a cash and short-term investments balance of $3.6 billion [6] - Calculated billings surged by 32% year-over-year to $1.2 billion, while deferred revenue increased by 30% to $2.47 billion, indicating potential revenue growth acceleration [8] Future Guidance - Management forecasts fiscal 2026 revenue between $3.265 billion and $3.284 billion, representing growth of approximately 22% to 23% [9] - For Q1 of fiscal 2026, Zscaler anticipates revenue between $772 million and $774 million, with adjusted EPS between $0.85 and $0.86 [10][11] - The introduction of the Z-Flex payment program has led to a 50% increase in flex billings in fiscal Q4, which could drive further growth [14] Market Position and Strategy - Zscaler is focusing on new growth areas such as AI Security and Zero Trust Everywhere, which contributed to exceeding $1 billion in annual recurring revenue [4] - The company is adapting its strategy by implementing flexible payment options, similar to competitors, to enhance customer engagement [13] - Zscaler's forward price-to-sales multiple is approximately 13, reflecting a fair valuation given its expected revenue growth of around 25% [15]

Core Viewpoint - Zscaler is experiencing a strong recovery in its stock performance, with analysts showing a bullish consensus and the potential for reaching record highs for the first time since 2021 [1][2][12]. Company Performance - Zscaler reported $2.67 billion in revenue for fiscal 2025, marking a 23% increase from the previous year and exceeding management's forecast of $2.66 billion [9]. - The company managed to reduce its GAAP loss to $41.4 million, a 28% improvement from the prior year, while achieving a non-GAAP profit of $535.8 million, up 29% year-over-year [10][11]. Analyst Ratings - Among 49 analysts covering Zscaler, 30 have assigned a buy rating, with none recommending a sell, indicating strong market confidence [12]. - The average price target for Zscaler stock is $318.26, suggesting a potential upside of 13% over the next 12 to 18 months, with a Street-high target of $385 indicating a possible 37% upside [13]. Market Position and Strategy - Zscaler is a leader in zero-trust cybersecurity, addressing vulnerabilities created by the shift to online operations and remote work [4][5]. - The company aims to convince 390 organizations to adopt its Zero Trust Everywhere approach by the end of fiscal 2026, having already secured over 350 by the end of fiscal 2025 [8]. Valuation Metrics - Zscaler's price-to-sales (P/S) ratio has decreased to 16.5 from a peak of over 60 in 2021, positioning it competitively between rivals Palo Alto Networks and CrowdStrike [14]. - The company estimates its addressable market at $96 billion, indicating significant growth potential based on its fiscal 2025 revenue [16].

Core Insights - Zscaler, Inc. is a prominent player in the cloud security sector, providing solutions that facilitate secure connections between users and applications [1][2] - The company is positioned in a competitive landscape, contending with major firms like Palo Alto Networks and Fortinet [1] - A recent analysis set a price target of $340 for Zscaler, indicating a potential upside of 25.66% from its trading price of $270.58 [1] Market Performance - Zscaler participated in Citi's 2025 Global Technology, Media, and Telecommunications Conference, showcasing its strategic initiatives [2] - The company's market capitalization is approximately $41.77 billion, with a trading volume of 2,084,784 shares on NASDAQ [2] - Zscaler's stock has experienced significant volatility over the past year, with a high of $318.46 and a low of $153.45 [2] Investor Interest - The ongoing engagement in industry events and analyst attention positions Zscaler as a focal point for investors interested in the growth of cloud security solutions [3]

PresentationFatima BoolaniDirector & Co-Head of Software Research Welcome to Day 2 of Citi's Global TMT Conference. Very delighted to have you all here. I'm Fatima Boolani. I jointly head up our software equity research effort here at Citi, and I am so thrilled to be kicking off day 2 with the management team at Zscaler. So to my left is Founder, CEO, Jay Chaudhry; and to his left is brand new CFO, just coming to the seat, Kevin Rubin. Thank you so much. I think this is one of your first tours of duty as CF ...

Core Insights - Zscaler, Inc. (NASDAQ: ZS) reported a strong close to FY25 with a "Rule Of" 51%, indicating robust revenue growth and free cash flow margin [1] Company Performance - The company is experiencing a growing opportunity for Zero Trust Everywhere, which is a significant trend in cybersecurity [1] Analyst Background - Michael Del Monte, an analyst with over 5 years of experience, emphasizes that investment recommendations should consider the entire investment ecosystem rather than evaluating a company in isolation [1]

Summary of Zscaler (ZS) 2025 Conference Call Company Overview - **Company**: Zscaler (ZS) - **Event**: Citi's Global TMT Conference - **Date**: September 04, 2025 Key Points Financial Performance - Zscaler achieved a significant milestone by crossing **$3 billion** in Annual Recurring Revenue (ARR), becoming one of only two pure-play SaaS security companies to do so [5][6] - The company reported **22% ARR growth**, **32% billings growth**, and **27% cash flow growth** for the fourth fiscal quarter [5][6] - The guidance for fiscal 2026 is set at **22% to 23% growth**, which includes the recent acquisition of Red Canary contributing approximately **$95 million** or **2.5%** to growth [18][19] Shift in Metrics - Zscaler has shifted its growth metric focus from billings to ARR, aligning management compensation with ARR growth rather than billings [12][13] - The new definition of ARR reflects the next twelve months of revenue, which is more aligned with revenue recognition practices [14][16] - The company reported a **114% net retention rate** for Q4 but does not intend to use this metric going forward, emphasizing ARR growth as a more representative metric [27] Market Dynamics - The market for Zscaler's services is still considered to be in early stages, with significant opportunities for growth in the zero trust security space [34][42] - Zscaler has expanded its offerings from secure web gateways to a comprehensive zero trust architecture, which includes zero trust for users, branches, and cloud workloads [35][40] - The company has captured **45%** of the Fortune 500 companies, indicating substantial upsell opportunities [42] Data Security and AI Integration - Zscaler's data security business is projected to reach **$400 million** in ARR, with a focus on inline cloud data loss prevention (DLP) [48] - The acquisition of Red Canary aims to enhance Zscaler's capabilities in AI-driven security operations, providing managed services and technology solutions [66][68] - Zscaler's approach to data security is evolving to include data security posture management (DSPM) and endpoint DLP, creating a comprehensive solution for customers [54][56] ZFlex Initiative - ZFlex, introduced recently, generated over **$100 million** in bookings in Q4 and is designed to facilitate customer flexibility in consuming Zscaler's modules [75][76] - The initiative aims to reduce friction in the buying process and support ARR growth, although it is not a consumption-oriented model [80] Capital Allocation and M&A Strategy - Zscaler maintains a focus on innovation and efficient financial models, continuing to invest in engineering and product development [84][85] - The company is selective in its M&A strategy, seeking disruptive technologies that can enhance its platform rather than acquiring for revenue [85][87] Additional Insights - The competitive landscape is evolving, with Zscaler positioned to lead in the AI SecOps movement due to its extensive data capabilities and innovative architecture [71][72] - The company emphasizes the importance of understanding customer needs and providing comprehensive solutions rather than relying on traditional metrics like customer count [24][25] This summary encapsulates the key discussions and insights from the Zscaler conference call, highlighting the company's financial performance, strategic shifts, market opportunities, and future growth prospects.

Core Insights - Zscaler Inc. (ZS) experienced a significant trading signal known as Power Inflow at a price of $263.74, indicating a potential uptrend and a possible entry point for traders [1][4] - The Power Inflow is interpreted as a bullish signal by active traders, suggesting that institutional activity is influencing the stock's direction [2][3] Trading Signals - The Power Inflow typically occurs within the first two hours of market open and helps gauge the stock's overall direction for the remainder of the day [3] - Following the Power Inflow, Zscaler's stock reached a high price of $274.50, resulting in returns of 4.1%, and a close price of $270.58, yielding returns of 2.6% [6] Order Flow Analytics - Order flow analytics involves analyzing the flow of buy and sell orders to gain insights and make informed trading decisions, separating retail and institutional volume rates [2][5] - Incorporating order flow analytics can help market participants identify trading opportunities and improve trading performance [5]

Core Insights - The market has high expectations for cybersecurity companies, but Zscaler's solid fourth-quarter earnings did not meet these expectations, resulting in a 1.4% decline in share price despite a positive S&P 500 performance [1] Financial Performance - Zscaler reported a 21% year-over-year revenue growth, reaching slightly over $719 million, supported by a 22% increase in annual recurring revenue (ARR) to nearly $3.02 billion [2] - Non-GAAP adjusted net income rose by 27% to nearly $147 million, equating to $0.89 per share, surpassing analyst estimates of $707 million in revenue and $0.80 per share adjusted profitability [4] Market Dynamics - The company attributes its growth to rising concerns about cybersecurity threats and increased adoption of cybersecurity solutions, particularly as clients scale up with artificial intelligence (AI) [5] - The current environment is favorable for cybersecurity companies that embrace AI, which may have led to inflated expectations for Zscaler's fourth-quarter results [5] Future Guidance - Zscaler's guidance for fiscal year 2026 anticipates ARR to be between almost $3.68 billion and almost $3.70 billion [6] - Revenue is expected to be just under $3.27 billion to a bit over $3.28 billion, with adjusted net income forecasted at $3.64 to $3.68 per share for the year [7]