Company Overview - Zscaler, Inc. is experiencing a strong demand for cybersecurity solutions, with a shift towards software-focused network security [2]. Industry Insights - Cybersecurity is becoming a priority for various executives beyond just the Chief Information Security Officer (CISO), including CIOs, CFOs, CEOs, and Board members, driven by increasing ransomware attacks [2]. - There is a growing recognition that traditional approaches, such as adding more firewalls and VPNs after a breach, are ineffective; instead, a shift towards a more efficient architecture is necessary [2]. - Customers are seeking solutions that provide zero trust architecture while also reducing costs, indicating a dual focus on security and financial efficiency [2][3].

Core Insights - Zscaler's stock experienced a 7% increase following the release of its Q2 fiscal 2025 earnings report, which exceeded market expectations [1] Financial Performance - Zscaler reported adjusted earnings per share (EPS) of $0.78 on sales of $647.9 million for the quarter, surpassing analyst estimates of $0.69 EPS and $635.45 million in sales [2] - Year-over-year sales growth was 23.4%, with deferred revenue reaching approximately $1.88 billion, a 25% increase compared to the same quarter last year [2] - Adjusted EPS increased by 23.8% year over year [2] Future Guidance - For the fiscal third quarter, Zscaler anticipates sales between $665 million and $667 million, slightly below the average analyst estimate of $667.25 million, but adjusted EPS guidance of $0.75 to $0.76 exceeds the forecast of $0.74 [3] - The company's full-year sales guidance is between $2.64 billion and $2.654 billion, which is better than the consensus forecast of $2.64 billion [4] - Zscaler's earnings outlook for the full year is between $3.04 and $3.09 EPS, surpassing Wall Street's expectation of $2.99 [4]

Core Viewpoint - Zscaler (ZS) has received an upgrade to a Zacks Rank 2 (Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Movement - Changes in a company's future earnings potential, as indicated by earnings estimate revisions, are strongly correlated with near-term stock price movements [3]. - Institutional investors often rely on earnings estimates to determine the fair value of a company's shares, leading to buying or selling actions that affect stock prices [3]. Zscaler's Earnings Outlook - The recent upgrade for Zscaler reflects an improvement in the company's underlying business, which is expected to positively influence its stock price [4]. - Zscaler is projected to earn $2.99 per share for the fiscal year ending July 2025, representing a year-over-year change of -6.3% [7]. - Over the past three months, the Zacks Consensus Estimate for Zscaler has increased by 56.6%, indicating a positive trend in earnings estimates [7]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks, which have generated an average annual return of +25% since 1988 [6]. - The upgrade of Zscaler to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting a strong potential for market-beating returns in the near term [9].

Core Insights - Zscaler reported strong second-quarter fiscal 2025 results, with non-GAAP earnings of 78 cents per share, exceeding the Zacks Consensus Estimate by 13% and reflecting a year-over-year increase of 23.8% driven by revenue growth and cost management [1][2] - The company’s revenues for the second quarter reached $647.9 million, surpassing the Zacks Consensus Estimate by 2.2% and management's guidance of $633-$635 million, marking a year-over-year growth of 23.4% [2][3] - Following the positive results, Zscaler raised its fiscal 2025 guidance, projecting revenues between $2.64 billion and $2.654 billion, an increase from the previous forecast of $2.623 billion to $2.643 billion [9] Financial Performance - Zscaler's calculated billings increased by 18% year over year to $742.7 million, with the Americas contributing 54% of revenues, EMEA 30%, and Asia Pacific and Japan 16% [4] - The non-GAAP gross profit rose by 22.9% year over year to $520.8 million, while the non-GAAP gross margin contracted by 100 basis points to 80% [7] - Total non-GAAP operating expenses increased by 18.6% year over year to $380.4 million, accounting for 58.7% of revenues, resulting in a non-GAAP operating income of $140.5 million, up from $134.1 million in the prior year [7] Customer Metrics - Zscaler added multiple large customers across its offerings, achieving a net 12-month trailing dollar-based retention rate of 115% due to larger bundle sales and strong upsells [5] - The company had 620 customers with annualized recurring revenues (ARR) of $1 million or more, and 3,291 customers with ARR exceeding $100,000 at the end of the second quarter [6] Cash Flow and Balance Sheet - As of January 31, 2025, Zscaler reported $2.88 billion in cash, cash equivalents, and short-term investments, an increase from $2.71 billion as of October 31, 2024 [8] - The company generated operating cash flow of $179.4 million and free cash flow of $143.4 million during the second quarter, compared to $142 million and $100.8 million, respectively, in the year-ago quarter [8] Future Guidance - For fiscal 2025, Zscaler expects non-GAAP earnings per share in the range of $3.04 to $3.09, up from the previous guidance of $2.94 to $2.99, with the consensus estimate remaining at $2.99 [10] - For the third quarter of fiscal 2025, Zscaler projects revenues between $665 million and $667 million, indicating a year-over-year growth of 20.1% [10][11]

Zscaler Inc ZS stock gained after the company reported better-than-expected second-quarter financial results and issued third-quarter adjusted EPS guidance above estimates.Zscaler reported quarterly earnings of 78 cents per share, which beat the analyst consensus estimate of 69 cents. Quarterly revenue was $647.9 million (up from $525 million a year ago), which beat the analyst consensus estimate of $635.56 million.Also Read: ChatGPT Parent OpenAI’s Specialized AI Agents Could Cost Up To $20 Thousand Per Mo ...

Group 1 - Zscaler Inc's stock increased by 5.2% to $206.63 after reporting better-than-expected fiscal second-quarter results and raising its full-year outlook [1] - Rosenblatt Securities upgraded Zscaler's stock from "neutral" to "buy" and raised its price target from $190 to $235, with 11 other firms also increasing their price objectives [1] - There is potential for further upgrades as 12 out of 39 firms currently rate Zscaler as "hold" or worse, indicating room for improvement [2] Group 2 - Zscaler is on track for its third consecutive daily gain and has achieved a 25% increase over the past six months, with shares bouncing off the $185 level [3] - The stock is approaching its 60-day moving average, which has previously acted as resistance [3] - The options market shows a strong bullish sentiment, with a 50-day call/put volume ratio of 2.99, ranking higher than 96% of annual readings [4] Group 3 - A significant volume of options trading has occurred, with 18,000 calls and 11,000 puts exchanged, which is five times the intraday average volume [4] - The most popular contract being traded is the weekly 3/7 210-strike call, indicating strong interest in bullish positions [4]

Here's our initial take on Zscaler's (ZS 1.36%) fiscal 2025 second-quarter financial report.Key MetricsMetricQ2 2024Q2 2025Changevs. ExpectationsRevenue$525.0 million$647.9 million+23%BeatAdjusted earnings per share$0.63$0.78+24%BeatFree cash flow$100.8 million$143.4 million+42%n/aCalculated billings$627.6 million$742.7 million+18%n/aZero Trust and AIZscaler beat expectations in the second quarter of fiscal 2025, reporting 23% revenue growth. The company's Zero Trust platform continued to win over customers ...

Zscaler (ZS) Q2 2025 Earnings Call March 06, 2025 02:07 AM ET Company Participants Ashwin Kesireddy - Vice President of Investor Relations & Strategic FinanceJay Chaudhry - Chairman and CEORemo Canessa - CFOSaket Kalia - Managing DirectorBrad Zelnick - Managing DirectorRoger Boyd - Executive DirectorBrian Essex - Executive DirectorFatima Boolani - Managing Director, Co-Head US Software Equity ResearchJoseph Gallo - Senior Vice PresidentMatthew Hedberg - Managing Director, Software ResearchJoshua Tilton - Di ...

Financial Data and Key Metrics Changes - Revenue for Q2 was $648 million, representing a 23% year-over-year increase and a 3% sequential increase [39] - Annual recurring revenue (ARR) grew 23% year-over-year to over $2.7 billion, with a net retention rate (NRR) improving to 115% [8][39] - Total calculated billings increased 18% year-over-year to $743 million, with unscheduled billings growing over 25% year-over-year [40] - Operating profit grew by 36%, leading to a 2 percentage point improvement in operating margin to nearly 22% [9][39] - Free cash flow margin reached a record of 22% [9] Business Line Data and Key Metrics Changes - The Zero Trust Branch solution saw significant customer interest, with 57% of customers being new logo customers [17] - Data protection solutions experienced over 40% year-over-year growth in net new annual contract value (ACV) [19] - The number of customers with over $1 million in ARR grew by 25% year-over-year [17][41] Market Data and Key Metrics Changes - Geographic revenue distribution: Americas accounted for 54%, EMEA for 30%, and APJ for 16% [39] - The company ended Q2 with 620 customers generating over $1 million in ARR and 3,291 customers generating over $100,000 in ARR [41] Company Strategy and Development Direction - The company is focusing on the "Zero Trust Everywhere" initiative, aiming to triple the number of enterprises adopting this model within 18 months [14][36] - The strategy includes targeted campaigns to educate customers on transitioning from legacy security stacks to Zero Trust solutions [13][36] - The company is leveraging the upcoming hardware refresh cycle to promote its solutions, emphasizing cost savings and improved security [13][104] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is ongoing scrutiny of large deals, the demand for cybersecurity solutions remains strong [104][110] - The company expects to achieve $3 billion or more in ARR by the end of the fiscal year, driven by strong demand and sales productivity [8][37] - Management highlighted the importance of partnerships with global system integrators (GSIs) in driving growth and closing deals [32][66] Other Important Information - The company is investing in AI solutions, with AI analytics driving strong growth and nearly doubling year-over-year [28][27] - The company has hired a new EVP of AI innovations to accelerate the development of AI solutions [29] Q&A Session Summary Question: How much of the business is coming from ZIA and Secure Web Gateway replacements versus broader platform products? - Management indicated that ZIA is often a starting point, but many customers are now adopting a broader platform that includes ZIA, ZPA, and CDx [52] Question: What proves that the go-to-market changes are making a difference? - Management cited the strength of the pipeline, double-digit growth in new ACV, and increased engagement with C-level executives as indicators of success [58] Question: Can you provide insight into the NRR improving to 115%? - Management noted that larger deals and upsells are contributing to the NRR, with expectations of continued growth in this area [75][76] Question: Can you elaborate on the 8-figure APAC government deal? - Management described it as a landmark deal focused on cybersecurity rather than ROI, with significant upsell opportunities in the government sector [81][83] Question: How is the company addressing the need for data classification? - Management explained that AI is being utilized for data classification, and the platform can work alongside other providers' classifications for policy enforcement [90][92] Question: What is the competitive landscape for Zero Trust solutions? - Management stated that competition primarily comes from legacy firewall vendors and that Zero Trust solutions eliminate the need for traditional security appliances [146]

Group 1: Earnings Performance - Zscaler reported quarterly earnings of $0.78 per share, exceeding the Zacks Consensus Estimate of $0.69 per share, and showing an increase from $0.76 per share a year ago, representing an earnings surprise of 13.04% [1] - The company posted revenues of $647.9 million for the quarter ended January 2025, surpassing the Zacks Consensus Estimate by 2.18%, and up from $525 million in the previous year [2] - Over the last four quarters, Zscaler has consistently surpassed consensus EPS estimates and revenue estimates [2] Group 2: Stock Performance and Outlook - Zscaler shares have increased approximately 7.4% since the beginning of the year, contrasting with the S&P 500's decline of -1.8% [3] - The future performance of Zscaler's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is $0.73 on revenues of $664.5 million, and for the current fiscal year, it is $2.99 on revenues of $2.64 billion [7] Group 3: Industry Context - The Zacks Security industry, to which Zscaler belongs, is currently ranked in the top 18% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - The performance of Zscaler's stock may also be influenced by the overall industry outlook and trends in earnings estimate revisions [5][8]