Financial Performance - Zscaler's fourth-quarter calculated billings reached a record high [1] Product & Service - Growth is driven by sales of AI products [1]

Financial Performance - Zscaler's Annual Recurring Revenue (ARR) reached $3.015 billion, exceeding guidance[6,8] - Fiscal Year 2025 revenue totaled $2.673 billion, a 23% year-over-year increase[8] - Calculated billings for Fiscal Year 2025 were $3.246 billion, representing a 24% year-over-year growth[8] - The company achieved an operating margin of approximately 22% for Fiscal Year 2025[8] - Free cash flow margin for Fiscal Year 2025 was 27.2%, resulting in $727 million[8] - Q4'25 revenue was $719 million, a 21% year-over-year increase[6] Growth Vectors and Customer Adoption - Three Growth Vectors (Zero Trust Everywhere, Data Security Everywhere, and Agentic Operations) combined for over $1 billion in ARR, growing faster than the total ARR[11] - Data Security Everywhere ARR reached approximately $425 million[11] - The number of "Zero Trust Everywhere" enterprises exceeded 350, a 60%+ quarter-over-quarter increase[11] Future Outlook - Zscaler projects revenue between $3.265 billion and $3.284 billion for Fiscal Year 2026, including a $90 million contribution from the Red Canary acquisition[64] - The company anticipates ARR between $3.676 billion and $3.698 billion for Fiscal Year 2026, with a $95 million contribution from the Red Canary acquisition[64]

[Executive Summary](index=1&type=section&id=Executive%20Summary) [Introduction and CEO Commentary](index=1&type=section&id=Introduction%20and%20CEO%20Commentary) Zscaler reported strong Q4 and full-year FY2025 results, exceeding $3 billion in ARR and achieving record quarterly operating margin, driven by robust demand for zero trust and AI security solutions - Zscaler achieved a new milestone in Q4 FY2025 with **Annual Recurring Revenue (ARR) exceeding $3 billion**, alongside its highest operating margin for the quarter[4](index=4&type=chunk) - CEO Jay Chaudhry stated that Zscaler's zero trust and AI security solutions are crucial in today's world, driving strong market demand[4](index=4&type=chunk) - Zscaler recently launched AI Guardrails for public and private applications and is rapidly expanding its AI security portfolio to address emerging risks from AI models and applications[4](index=4&type=chunk) [About Zscaler](index=4&type=section&id=About%20Zscaler) Zscaler is a cloud security leader, accelerating customer digital transformation with its Zero Trust Exchange™ platform, the world's largest inline cloud security platform - Zscaler's Zero Trust Exchange™ platform protects customers from cyberattacks and data loss by securely connecting users, devices, and applications[21](index=21&type=chunk) - This SASE-based Zero Trust Exchange platform is deployed in over **160 data centers globally**, making it the world's largest inline cloud security platform[21](index=21&type=chunk) [Financial Performance](index=1&type=section&id=Financial%20Performance) [Fourth Quarter Fiscal 2025 Financial Highlights](index=1&type=section&id=Fourth%20Quarter%20Fiscal%202025%20Financial%20Highlights) Zscaler achieved strong Q4 FY2025 financial growth with revenue up 21% to $719.2 million and calculated billings increasing by 32% 2025 Fiscal Year Fourth Quarter Key Financial Data | Metric | Q4 FY2025 | Q4 FY2024 | YoY Change | | :-------------------------------- | :---------- | :---------- | :--------- | | Revenue | $719.2 million | $592.9 million | +21% | | Annual Recurring Revenue (ARR) | $3,015 million | $2,471 million | +22% | | Calculated Billings | $1,202.3 million | $910.8 million | +32% | | Deferred Revenue | $2,468.0 million | $1,894.9 million | +30% | | GAAP Net Loss | $(17.6) million | $(14.9) million | -18.1% | | Non-GAAP Net Income | $146.7 million | $115.8 million | +26.7% | | GAAP Net Loss per Share, Diluted | $(0.11) | $(0.10) | -10% | | Non-GAAP Net Income per Share, Diluted | $0.89 | $0.72 | +23.6% | | Cash Provided by Operations | $250.6 million | $203.6 million | +23.1% | | Free Cash Flow | $171.9 million | $136.3 million | +26.1% | - Cash, cash equivalents, and short-term investments increased to **$3.5724 billion** as of July 31, 2025, an increase of **$1.1628 billion** from July 31, 2024, partly due to the issuance of **$1.725 billion** in 2028 convertible senior notes and the repayment of **$1.15 billion** in 2025 notes[8](index=8&type=chunk) [Full Year Fiscal 2025 Financial Highlights](index=1&type=section&id=Full%20Year%20Fiscal%202025%20Financial%20Highlights) For full-year FY2025, Zscaler reported 23% revenue growth to $2.6731 billion, with strong non-GAAP profitability and cash generation 2025 Fiscal Year Full Year Key Financial Data | Metric | FY2025 | FY2024 | YoY Change | | :-------------------------------- | :---------- | :---------- | :--------- | | Revenue | $2,673.1 million | $2,167.8 million | +23% | | GAAP Loss from Operations | $(128.5) million | $(121.5) million | -5.8% | | Non-GAAP Income from Operations | $580.1 million | $442.2 million | +31.2% | | GAAP Net Loss | $(41.5) million | $(57.7) million | +28.1% | | Non-GAAP Net Income | $534.8 million | $414.6 million | +29.0% | | GAAP Net Loss per Share, Diluted | $(0.27) | $(0.39) | +30.8% | | Non-GAAP Net Income per Share, Diluted | $3.28 | $2.60 | +26.2% | | Cash Provided by Operations | $972.5 million | $779.8 million | +24.7% | | Free Cash Flow | $726.7 million | $585.0 million | +24.2% | - Full-year FY2025 revenue reached **$2.6731 billion**, representing a **23% year-over-year increase**[6](index=6&type=chunk) [Business Developments and Future Outlook](index=2&type=section&id=Business%20Developments%20and%20Future%20Outlook) [Recent Business Highlights](index=2&type=section&id=Recent%20Business%20Highlights) Zscaler made strategic advancements in AI-driven security and zero trust, including the acquisition of Red Canary and the launch of AI Guard and Zscaler Cellular - Acquisition of Red Canary aims to redefine security operations through proxy-AI-driven threat intelligence and automation, enhancing customer cyber risk management[10](index=10&type=chunk) - Introduction of AI-driven security innovations, including Zscaler AI Guard, to block attacks, protect sensitive data, and ensure compliance, enabling enterprises to safely adopt AI[10](index=10&type=chunk) - Launch of Zscaler Cellular, the industry's first SIM-only zero trust solution for IoT/OT connectivity, eliminating VPNs and ensuring resilient global communication[10](index=10&type=chunk) - Expansion of the "Zero Trust Everywhere" suite with new advanced solutions, enabling enterprises to secure data across branch offices, multi-cloud, and remote environments with seamless end-to-end segmentation and scalability[10](index=10&type=chunk) - Achieved U.S. Department of Defense CMMC Level 2 certification and became the first independent software vendor (ISV) to earn AWS ISV Competency in Healthcare, Education, and all relaunched Government capability subcategories[10](index=10&type=chunk) - A new report utilizing Marsh McLennan's cyber loss dataset indicates that zero trust architecture can reduce cyber incident claims by **31%**, potentially saving **$465 billion annually**[10](index=10&type=chunk) [Financial Outlook](index=2&type=section&id=Financial%20Outlook) Zscaler provides optimistic financial guidance for Q1 and full-year FY2026, projecting continued revenue growth and enhanced non-GAAP profitability [First Quarter Fiscal 2026 Outlook](index=2&type=section&id=First%20Quarter%20Fiscal%202026%20Outlook) Zscaler forecasts Q1 FY2026 revenue between $772 million and $774 million, with non-GAAP operating income of $166 million to $168 million 2026 Fiscal Year First Quarter Financial Guidance | Metric | Q1 FY2026 Guidance | | :----------------------------- | :----------------- | | Revenue | $772 million to $774 million | | Non-GAAP Income from Operations | $166 million to $168 million | | Non-GAAP Net Income per Share | $0.85 to $0.86 | | Fully Diluted Shares Outstanding | ~167 million | | Non-GAAP Tax Rate | 23% | [Full Year Fiscal 2026 Outlook](index=3&type=section&id=Full%20Year%20Fiscal%202026%20Outlook) Zscaler projects full-year FY2026 Annual Recurring Revenue (ARR) between $3.676 billion and $3.698 billion, with total revenue from $3.265 billion to $3.284 billion 2026 Fiscal Year Full Year Financial Guidance | Metric | FY2026 Guidance | | :----------------------------- | :----------------- | | Annual Recurring Revenue (ARR) | $3.676 billion to $3.698 billion | | Revenue | $3.265 billion to $3.284 billion | | Non-GAAP Income from Operations | $728 million to $736 million | | Non-GAAP Net Income per Share | $3.64 to $3.68 | | Fully Diluted Shares Outstanding | ~169 million | | Non-GAAP Tax Rate | 23% | [GAAP Financial Statements](index=6&type=section&id=GAAP%20Financial%20Statements) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements of operations detail Zscaler's GAAP financial performance for Q4 and full-year FY2025, including revenue, expenses, and net loss Condensed Consolidated Statements of Operations (GAAP, in thousands) | Metric (in thousands) | Q4 FY2025 | Q4 FY2024 | FY2025 | FY2024 | | :-------------------------------- | :-------- | :-------- | :------- | :------- | | Revenue | $719,226 | $592,868 | $2,673,115 | $2,167,771 | | Cost of Revenue | $172,240 | $130,205 | $618,178 | $477,129 | | Gross Profit | $546,986 | $462,663 | $2,054,937 | $1,690,642 | | Sales and Marketing | $330,594 | $294,200 | $1,259,158 | $1,100,239 | | Research and Development | $177,606 | $139,150 | $672,485 | $499,828 | | General and Administrative | $71,028 | $56,263 | $251,754 | $212,052 | | Total Operating Expenses | $579,228 | $489,613 | $2,183,397 | $1,812,119 | | Loss from Operations | $(32,242) | $(26,950) | $(128,460) | $(121,477) | | Net Loss | $(17,578) | $(14,878) | $(41,478) | $(57,706) | | Net Loss per Share, Basic and Diluted | $(0.11) | $(0.10) | $(0.27) | $(0.39) | - Stock-based compensation expense and related employer payroll taxes were **$180.8 million** in Q4 FY2025 and **$685.5 million** for the full FY2025[25](index=25&type=chunk) [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Zscaler's total assets increased to $6.42 billion as of July 31, 2025, driven by higher cash and investments, with liabilities also rising due to convertible notes Condensed Consolidated Balance Sheets (GAAP, in thousands) | Metric (in thousands) | July 31, 2025 | July 31, 2024 | YoY Change | | :-------------------------------- | :------------ | :------------ | :--------- | | Total Assets | $6,419,888 | $4,704,968 | +36.4% | | Cash and Cash Equivalents | $2,389,023 | $1,423,080 | +67.9% | | Short-term Investments | $1,183,386 | $986,574 | +19.9% | | Accounts Receivable, net | $992,181 | $736,529 | +34.7% | | Deferred Revenue (Current) | $2,054,417 | $1,643,919 | +25.0% | | Convertible Senior Notes (Current) | $0 | $1,142,275 | -100% | | Convertible Senior Notes (Noncurrent) | $1,700,727 | $0 | N/A | | Total Liabilities | $4,620,615 | $3,430,866 | +34.7% | | Total Stockholders' Equity | $1,799,273 | $1,274,102 | +41.2% | - The company issued **$1.725 billion** in 2028 convertible senior notes and fully repaid **$1.15 billion** in 2025 convertible senior notes with cash, impacting both current and noncurrent liabilities[8](index=8&type=chunk)[27](index=27&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Zscaler's FY2025 cash flow statement shows a 24.7% increase in net cash from operating activities to $972.5 million, with significant financing activity from convertible notes Condensed Consolidated Statements of Cash Flows (GAAP, in thousands) | Metric (in thousands) | FY2025 | FY2024 | YoY Change | | :-------------------------------- | :------- | :------- | :--------- | | Net Cash Provided by Operating Activities | $972,453 | $779,846 | +24.7% | | Net Cash Used in Investing Activities | $(427,022) | $(683,180) | +37.5% | | Net Cash Provided by Financing Activities | $420,512 | $64,208 | +554.9% | | Net Increase in Cash and Cash Equivalents | $965,943 | $160,874 | +500.0% | | Cash and Cash Equivalents at End of Period | $2,389,023 | $1,423,080 | +67.9% | - Financing activities were significantly impacted by the issuance of **$1.725 billion** in 2028 convertible senior notes and the cash settlement of **$1.15 billion** in 2025 convertible senior notes[8](index=8&type=chunk)[30](index=30&type=chunk) [Non-GAAP Financial Measures](index=10&type=section&id=Non-GAAP%20Financial%20Measures) [Reconciliation of GAAP to Non-GAAP Financial Measures](index=10&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section provides detailed reconciliations of Zscaler's GAAP to non-GAAP financial metrics, including gross profit, operating income, and diluted net income per share [Non-GAAP Gross Profit and Operating Income Reconciliation](index=10&type=section&id=Non-GAAP%20Gross%20Profit%20and%20Operating%20Income%20Reconciliation) Zscaler's FY2025 non-GAAP gross profit reached $2.141 billion with an 80% margin, and non-GAAP operating income increased to $580.1 million with a 22% margin Non-GAAP Gross Profit and Operating Income Reconciliation (in thousands) | Metric (in thousands) | Q4 FY2025 | Q4 FY2024 | FY2025 | FY2024 | | :-------------------------------- | :-------- | :-------- | :------- | :------- | | GAAP Gross Profit | $546,986 | $462,663 | $2,054,937 | $1,690,642 | | Non-GAAP Gross Profit | $570,103 | $481,036 | $2,141,048 | $1,756,287 | | GAAP Gross Margin | 76% | 78% | 77% | 78% | | Non-GAAP Gross Margin | 79% | 81% | 80% | 81% | | GAAP Loss from Operations | $(32,242) | $(26,950) | $(128,460) | $(121,477) | | Non-GAAP Income from Operations | $158,870 | $127,544 | $580,131 | $442,247 | | GAAP Operating Margin | (4)% | (5)% | (5)% | (6)% | | Non-GAAP Operating Margin | 22% | 22% | 22% | 20% | [Non-GAAP Net Income per Share Reconciliation](index=11&type=section&id=Non-GAAP%20Net%20Income%20per%20Share%20Reconciliation) Zscaler's FY2025 non-GAAP net income was $534.8 million, resulting in diluted non-GAAP net income per share of $3.28, up from $2.60 in FY2024 Non-GAAP Net Income per Share Reconciliation (in thousands, except per share) | Metric (in thousands, except per share) | Q4 FY2025 | Q4 FY2024 | FY2025 | FY2024 | | :-------------------------------------- | :-------- | :-------- | :------- | :------- | | GAAP Net Loss | $(17,578) | $(14,878) | $(41,478) | $(57,706) | | Non-GAAP Net Income | $146,725 | $115,785 | $534,836 | $414,575 | | GAAP Net Loss per Share, Diluted | $(0.11) | $(0.10) | $(0.27) | $(0.39) | | Non-GAAP Net Income per Share, Diluted | $0.89 | $0.72 | $3.28 | $2.60 | | Weighted-average shares used in computing non-GAAP net income per share, diluted | 165,584 | 160,497 | 163,412 | 159,817 | - Effective August 1, 2024 (the start of FY2025), Zscaler adopted a **23% long-term projected non-GAAP tax rate** for determining non-GAAP net income and net income per share, with prior period data restated[35](index=35&type=chunk)[42](index=42&type=chunk) [Calculated Billings and Free Cash Flow Reconciliation](index=13&type=section&id=Calculated%20Billings%20and%20Free%20Cash%20Flow%20Reconciliation) Zscaler's FY2025 calculated billings grew 23.8% to $3.2462 billion, with free cash flow reaching $726.7 million and a 27% margin Calculated Billings and Free Cash Flow Reconciliation (in thousands, except percentages) | Metric (in thousands, except percentages) | Q4 FY2025 | Q4 FY2024 | FY2025 | FY2024 | | :---------------------------------------- | :-------- | :-------- | :------- | :------- | | Calculated Billings | $1,202,267 | $910,828 | $3,246,167 | $2,623,069 | | Net Cash Provided by Operating Activities | $250,604 | $203,557 | $972,453 | $779,846 | | Free Cash Flow | $171,921 | $136,318 | $726,693 | $584,950 | | Free Cash Flow Margin | 24% | 23% | 27% | 27% | [Explanation of Non-GAAP Financial Measures](index=14&type=section&id=Explanation%20of%20Non-GAAP%20Financial%20Measures) This section explains the rationale for using non-GAAP financial measures, detailing specific exclusions and defining key non-GAAP metrics for consistent performance evaluation - Non-GAAP financial information is provided to offer supplementary insights, aiding management and investors in assessing financial and business trends and ensuring consistency and comparability with past financial performance[40](index=40&type=chunk) - Expenses excluded from non-GAAP measures primarily include stock-based compensation expense and related employer payroll taxes, amortization of acquired intangible assets, amortization of debt issuance costs, acquisition-related expenses, and restructuring and other charges[41](index=41&type=chunk) - Key non-GAAP metrics are defined as follows: - **Non-GAAP Gross Profit and Non-GAAP Gross Margin**: GAAP gross profit adjusted for stock-based compensation expense and related employer payroll taxes and amortization of acquired intangible assets[43](index=43&type=chunk) - **Non-GAAP Income from Operations and Non-GAAP Operating Margin**: GAAP loss from operations adjusted for stock-based compensation expense and related employer payroll taxes, amortization of acquired intangible assets, restructuring and other charges, and acquisition-related expenses[44](index=44&type=chunk) - **Non-GAAP Net Income per Share, Diluted**: GAAP net loss adjusted for various non-GAAP items and non-GAAP income tax provision, divided by diluted weighted-average shares[45](index=45&type=chunk) - **Calculated Billings**: Revenue plus the change in deferred revenue, reflecting amounts invoiced for subscriptions and related support services[46](index=46&type=chunk) - **Annual Recurring Revenue (ARR)**: The revenue from subscription contracts over the next 12 months as of the measurement date[47](index=47&type=chunk) - **Free Cash Flow and Free Cash Flow Margin**: Net cash provided by operating activities less purchases of property, equipment, and other assets and capitalized internal-use software[48](index=48&type=chunk) [Corporate Information and Disclosures](index=3&type=section&id=Corporate%20Information%20and%20Disclosures) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section provides a cautionary note on forward-looking statements, highlighting that actual results may differ significantly due to various risks and uncertainties - This press release contains forward-looking statements regarding future financial and operating performance, including the financial outlook for Q1 and full-year FY2026, and the anticipated impact of the Red Canary acquisition[18](index=18&type=chunk) - Actual results may differ materially due to factors such as macroeconomic impacts and instability, geopolitical events, risks from AI platform use, execution challenges, managing rapid growth, limited experience with new product and subscription introductions, technological developments, length of sales cycles, and general market, political, economic, and business conditions[18](index=18&type=chunk) - Investors should not place undue reliance on these forward-looking statements and should consult additional risks and uncertainties listed in the company's periodic reports filed with the SEC, such as Form 10-Q[19](index=19&type=chunk) [Conference Call and Investor Information](index=3&type=section&id=Conference%20Call%20and%20Investor%20Information) Zscaler announced details for its Q4 FY2025 earnings conference call on September 2, 2025, and listed upcoming investor conference participations - Zscaler held a conference call on September 2, 2025, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss Q4 FY2025 results and the outlook for Q1 and full-year FY2026[14](index=14&type=chunk)[15](index=15&type=chunk) - The company plans to participate in a series of investor conferences during Q1 FY2026, including the Citi 2025 Global TMT Conference, the 2025 Truist Securities Technology Symposium, Goldman Sachs Communacopia + Technology 2025, and the Wolfe Research TMT 2025 Conference[17](index=17&type=chunk) [Investor Relations Contacts](index=4&type=section&id=Investor%20Relations%20Contacts) Contact information for Zscaler's investor relations and media relations is provided for inquiries - Ashwin Kesireddy, VP of Investor Relations, can be reached at (415) 798-1475 or ir@zscaler.com[23](index=23&type=chunk) - Pavel Radda, Media Relations contact, can be reached at press@zscaler.com[23](index=23&type=chunk)

Core Insights - Zscaler achieved a significant milestone with over $3 billion in Annual Recurring Revenue (ARR) and the highest operating margin in a quarter, driven by demand for its Zero Trust and AI security solutions [3][6][11] - The company reported a 21% year-over-year revenue growth to $719.2 million for Q4 fiscal 2025, with a 22% increase in ARR to $3.015 billion [6][7] - Zscaler's calculated billings grew by 32% year-over-year to $1.202 billion, and deferred revenue increased by 30% to $2.468 billion [6][7] Financial Highlights for Q4 Fiscal 2025 - Revenue reached $719.2 million, a 21% increase from the previous year [6][7] - GAAP net loss was $17.6 million, compared to a loss of $14.9 million in Q4 fiscal 2024, while non-GAAP net income was $146.7 million, up from $115.8 million [6][7] - Cash provided by operations was $250.6 million, representing 35% of revenue, with free cash flow of $171.9 million, or 24% of revenue [7][8] Full Year Fiscal 2025 Financial Highlights - Total revenue for the fiscal year was $2.673 billion, a 23% increase year-over-year [6][8] - GAAP net loss for the year was $41.5 million, an improvement from a loss of $57.7 million in fiscal 2024, while non-GAAP net income rose to $534.8 million from $414.6 million [6][8] - Cash provided by operations for the year was $972.5 million, or 36% of revenue, with free cash flow of $726.7 million, also 27% of revenue [8] Recent Business Developments - Zscaler acquired Red Canary to enhance its AI-driven threat intelligence and automation capabilities, aiming to improve cyber risk management [11] - The company launched AI-powered security innovations, including Zscaler AI Guard, to protect sensitive data and ensure regulatory compliance [11] - Zscaler published a report indicating a 146% increase in ransomware attacks, highlighting the need for a comprehensive Zero Trust strategy [11] Financial Outlook - For Q1 fiscal 2026, Zscaler expects revenue between $772 million and $774 million, with non-GAAP income from operations projected at $166 million to $168 million [10] - For the full year fiscal 2026, revenue is anticipated to be approximately $3.265 billion to $3.284 billion, with non-GAAP income from operations expected to be between $728 million and $736 million [10]

Group 1 - The REIT Forum offers exclusive investment ideas and access to subscriber-only portfolios [1] - Amrita leads a family office fund in Vancouver, focusing on sustainable, growth-driven companies to maximize shareholder equity [2] - The Pragmatic Optimist newsletter, co-founded by Amrita, emphasizes portfolio strategy, valuation, and macroeconomics [2] Group 2 - Amrita has experience in high-growth supply-chain start-ups and has worked with venture capital firms to enhance user acquisition [2] - The newsletter has been recognized as a top finance newsletter and aims to simplify financial literacy and macroeconomic concepts [2]

Core Insights - The article emphasizes the importance of understanding macro trends and their influence on asset prices and investor behavior [1] - It highlights the author's extensive experience in asset management, particularly in equity analysis and research [1] - The goal of sharing insights is to empower investors and promote confidence in long-term investing [1] Company and Industry Analysis - The author has a background in both institutional and private client asset management, focusing on multi-asset strategies with an emphasis on equities and derivatives [1] - The analysis includes close monitoring of EU and US central bank policies, sector rotation, and sentiment dynamics [1] - The author encourages collaboration among investors to enhance investment strategies and decision-making [1]

Core Insights - Zscaler is set to report its fourth-quarter fiscal 2025 results on September 2, 2025, with anticipated revenues between $705 million and $707 million, reflecting a year-over-year growth of 19.1% [1][9] - The company expects non-GAAP earnings per share in the range of 79-80 cents, indicating a year-over-year decline of 9% [2][9] - Zscaler has consistently beaten earnings estimates in the past four quarters, with an average surprise of 18.7% [3][9] Revenue and Earnings Expectations - The Zacks Consensus Estimate for Zscaler's fiscal fourth-quarter revenues is $706.2 million [1] - The earnings per share estimate has remained unchanged at 80 cents over the past 60 days [2] Growth Drivers - The expected revenue growth is attributed to Zscaler's security and networking solutions, particularly in the context of the expanding global security market [6] - Strong momentum with Global 2000 and Fortune 500 customers, driven by digital transformation and hybrid work trends, is likely to be a key catalyst [7] - The adoption of Software-Defined Wide Area Network (SD-WAN) solutions is projected to contribute significantly, with the market expected to grow from $5.36 billion in 2024 to $80.91 billion by 2034, at a CAGR of 31.6% [8] Customer Retention and Product Performance - Zscaler's core products, including Zscaler Internet Access and Zscaler Private Access, have been crucial for customer retention [10] - Other offerings such as Cloud Access Security Broker and Cloud Security Posture Management are also expected to enhance customer acquisition [10] Competitive Landscape - Zscaler faces intense competition from established players like Palo Alto Networks, CyberArk, and CrowdStrike, particularly in areas like Agentic Operations and Zero Trust Strategy [16][17] - The company is increasing investments in sales and marketing, as well as research and development, to maintain its competitive edge [18] Stock Performance and Valuation - Zscaler's shares have increased by 55.4% year-to-date, outperforming the Zacks Security industry's growth of 11.5% [12] - The stock is currently trading at a forward 12-month price-to-sales ratio of 13.51X, compared to the industry's 12.39X [13] Long-term Outlook - The demand for cybersecurity solutions across various industries positions Zscaler favorably for long-term growth [15] - However, near-term challenges related to profit growth suggest a cautious approach for new investments, while existing shareholders may consider holding [19]

Group 1 - Recent months have seen a significant increase in cyberattacks, with ransomware attempts more than doubling [1] - The rise in cyber threats is attributed to the growing reliance on artificial intelligence, cloud computing, and data centers, which expands the attack surface for potential breaches [1] Group 2 - The article emphasizes the importance of understanding the implications of these cyber threats on companies and industries, particularly in terms of investment opportunities and risks [1]

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Zscaler (ZS), and emphasizes the importance of using these recommendations in conjunction with other analytical tools for investment decisions [1][5]. Brokerage Recommendations for Zscaler - Zscaler has an average brokerage recommendation (ABR) of 1.52, indicating a consensus between Strong Buy and Buy, based on 42 brokerage firms [2]. - Out of the 42 recommendations, 30 are classified as Strong Buy, accounting for 71.4%, while 2 are classified as Buy, making up 4.8% of the total recommendations [2]. Limitations of Brokerage Recommendations - The article highlights that brokerage recommendations may not be reliable indicators of stock performance due to analysts' biases stemming from their firms' vested interests [6][10]. - Research indicates that for every "Strong Sell" recommendation, there are five "Strong Buy" recommendations, suggesting a tendency for analysts to issue overly optimistic ratings [6]. Comparison with Zacks Rank - The Zacks Rank, which is based on earnings estimate revisions, is presented as a more reliable indicator of near-term stock performance compared to ABR [8][11]. - The Zacks Rank is a quantitative model that maintains a balance among its five ranks and is updated more frequently than ABR, which may not reflect the most current information [9][12]. Current Earnings Estimates for Zscaler - The Zacks Consensus Estimate for Zscaler's earnings for the current year remains unchanged at $3.19, indicating steady analyst views on the company's earnings prospects [13]. - Due to the unchanged consensus estimate and other factors, Zscaler holds a Zacks Rank of 3 (Hold), suggesting caution despite the favorable ABR [14].

Anand Chokkavelu, CFA has no position in any of the stocks mentioned. Jason Hall has no position in any of the stocks mentioned. Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zscaler. The Motley Fool has a disclosure policy. ...