Core Insights - Zscaler, Inc. (ZS) shares have increased by 46% over the past three months, significantly outperforming the Zacks Security industry's return of 10.7% and its peers like CyberArk Software, Palo Alto Networks, and CrowdStrike [1][7] Company Growth and Developments - Zscaler has launched the Asset Exposure Management solution to improve asset risk management and partnered with SAP to integrate its Zero Trust Network Access service within SAP's RISE framework, facilitating cloud migrations and compliance with regulations [2] - The company has expanded its capabilities through the acquisition of Red Canary, enhancing its Managed Detection and Response solutions to address rising cyber threats [3] - Zscaler is integrating artificial intelligence into its products by partnering with NVIDIA and CrowdStrike, enhancing its Zero Trust Security model with advanced AI technologies [4] Financial Performance - In Q3 of fiscal 2025, Zscaler achieved a 12-month trailing dollar-based retention rate of 114%, driven by larger bundle sales and robust upsells [5] - Remaining Performance Obligations increased by 30% year-over-year, with 642 customers generating $1 million or more in annual recurring revenues (ARR) and 3,363 customers with ARR exceeding $100,000 [8] Government Sector Expansion - Zscaler is enhancing its GovCloud solutions to comply with government security standards, serving 14 out of 15 U.S. cabinet-level agencies, which could provide a stable growth stream [9][10] Competitive Landscape - Zscaler faces intense competition from established cybersecurity players like Palo Alto Networks, CyberArk, and CrowdStrike, particularly in its Internet Access and Private Access offerings [11] - The company is investing heavily in sales and marketing to broaden its capabilities, which may impact near-term profitability [12] Earnings Outlook - Zscaler expects non-GAAP earnings per share for fiscal 2025 to be in the range of $3.18-$3.19, with the Zacks Consensus Estimate at $3.06, reflecting a 4% year-over-year decline [13] Valuation Concerns - Zscaler holds a premium valuation with a Forward 12-month P/S ratio of 13.92X, significantly higher than the sector average of 5.54X, indicating potential valuation concerns [15] Investment Recommendation - Despite challenges related to rising costs and premium valuation, Zscaler's investments in AI, innovative cybersecurity capabilities, and strong customer retention make the stock worth holding for now [16]

Core Insights - Zscaler's international operations are crucial for understanding its financial resilience and growth potential [1][2] - The company's total revenue for the quarter ending April 2025 was $678.03 million, reflecting a 22.6% increase year-over-year [4] International Revenue Analysis - Europe, Middle East, and Africa contributed $203.02 million, accounting for 29.94% of total revenue, surpassing the consensus estimate by 1.11% [5] - Asia Pacific generated $107.35 million, representing 15.83% of total revenue, exceeding expectations by 4.08% [6] - Other International regions brought in $24.67 million, making up 3.64% of total revenue, also surpassing projections by 2.82% [7] Future Revenue Projections - Analysts project total revenue for the current fiscal quarter to reach $707.18 million, a 19.3% increase from the same quarter last year [8] - Expected contributions from international markets include $211.52 million from Europe, Middle East, and Africa (29.9%), $109.91 million from Asia Pacific (15.5%), and $25.52 million from Other International (3.6%) [8] - For the full year, total revenue is anticipated to be $2.65 billion, marking a 22.2% increase compared to the previous year [9] Stock Performance Insights - Zscaler's stock has appreciated by 19.6% over the past four weeks, outperforming the Zacks S&P 500 composite, which increased by 6.1% [13] - Over the last three months, Zscaler's shares rose by 32.1%, while the S&P 500 experienced a decline of 0.5% [13]

Cloud stock Zscaler Inc (NASDAQ:ZS) was last seen up 7.6% at $270.32, after the company posted strong fiscal third-quarter results and raised its full-year forecast once again. Separately, the firm also announced the appointment of Kevin Rubin as the new Chief Financial Officer. The positive momentum has ZS brushing off a downgrade from Piper Sandler to "neutral" from "overweight," though no fewer than 18 analysts also lifted their price targets on the stock. Today's pop has ZS trading at three-year highs a ...

Core Insights - Zscaler reported strong third-quarter fiscal 2025 results, with non-GAAP earnings of 84 cents per share, exceeding the Zacks Consensus Estimate by 12% and reflecting an 18.3% year-over-year increase driven by revenue growth and cost management [1][3] - The company's revenues for the third quarter reached $678 million, surpassing the Zacks Consensus Estimate by 1.8% and management's guidance, marking a 23% year-over-year growth [2][3] - Following the positive results, Zscaler raised its fiscal 2025 guidance, which is expected to positively impact its stock performance [3] Financial Performance - Zscaler's calculated billings increased by 25% year over year to $784.5 million, with the Americas contributing 54% of revenues, EMEA 30%, and Asia Pacific and Japan 16% [4] - The non-GAAP gross profit rose by 20.8% year over year to $544.15 million, while the non-GAAP gross margin contracted by 100 basis points to 80% [7] - Total non-GAAP operating expenses accounted for 58.6% of revenues, increasing by 21% year over year to $397.5 million, resulting in a non-GAAP operating income of $146.7 million [7] Customer Metrics - Zscaler added multiple large customers across its offerings, achieving a net 12-month trailing dollar-based retention rate of 114% [5] - The company had 642 customers with annualized recurring revenues (ARR) of $1 million or more, and 3,363 customers with ARR exceeding $100,000 at the end of the third quarter [6] Balance Sheet and Cash Flow - As of April 30, 2025, Zscaler had $1.99 billion in cash and short-term investments, down from $2.88 billion as of January 31, 2025 [8] - The company generated operating cash flow of $211.1 million and free cash flow of $119.5 million during the third quarter [8] Updated Guidance - Zscaler revised its fiscal 2025 revenue forecast to a range of $2.659-$2.661 billion, up from $2.640-$2.654 billion, indicating a growth of 22.18% from fiscal 2024 [9] - The company expects calculated billings to be in the range of $3.184-$3.189 billion, an increase from the previous guidance [9] - Non-GAAP earnings per share for fiscal 2025 are now projected between $3.18 and $3.19, compared to the previous guidance of $3.04-$3.09 [10]

Core Insights - Zscaler Inc reported better-than-expected third-quarter financial results, with revenue of $678.03 million, surpassing the consensus estimate of $666.86 million and adjusted earnings of 84 cents per share, exceeding analyst estimates of 75 cents per share [1][2] Financial Performance - The company expects fourth-quarter revenue to be between $705 million and $707 million, slightly below the estimate of $707.61 million, with anticipated adjusted earnings of 79 to 80 cents per share [2] - Zscaler raised its full-year 2025 outlook, projecting revenue of $2.659 billion to $2.661 billion, compared to estimates of $2.65 billion, and adjusted earnings of $3.18 to $3.19 per share, exceeding estimates of $3.07 per share [3] Market Reaction - Following the earnings announcement, Zscaler shares fell by 1% to close at $251.11 [3] Analyst Ratings - Rosenblatt analyst Catharine Trebnick maintained a Buy rating on Zscaler and raised the price target from $235 to $315 [6] - Needham analyst Mike Cikos also maintained a Buy rating and increased the price target from $240 to $310 [6]

Core Insights - Zscaler reported revenue of $678.03 million for the quarter ended April 2025, marking a year-over-year increase of 22.6% [1] - The earnings per share (EPS) for the same period was $0.84, slightly down from $0.88 a year ago [1] - The reported revenue exceeded the Zacks Consensus Estimate of $666.39 million, resulting in a surprise of +1.75% [1] - The company achieved an EPS surprise of +12.00%, with the consensus EPS estimate being $0.75 [1] Financial Metrics - Billings for the quarter were $784.51 million, compared to the 10-analyst average estimate of $792.21 million [4] - Remaining Performance Obligations stood at $4.98 billion, surpassing the $4.73 billion average estimate based on three analysts [4] - The Dollar-Based Net Retention Rate was 114%, slightly below the two-analyst average estimate of 115% [4] - Revenue from Direct Customers was $80.14 million, exceeding the $76.85 million estimated by two analysts, representing a +57.6% change year-over-year [4] - Revenue from Channel Partners was $597.89 million, compared to the $589.01 million estimated by two analysts, reflecting a +19% change year-over-year [4] Stock Performance - Zscaler shares returned +12.2% over the past month, outperforming the Zacks S&P 500 composite's +6.7% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Company Performance - Zscaler reported quarterly earnings of $0.84 per share, exceeding the Zacks Consensus Estimate of $0.75 per share, although down from $0.88 per share a year ago, representing an earnings surprise of 12% [1] - The company achieved revenues of $678.03 million for the quarter ended April 2025, surpassing the Zacks Consensus Estimate by 1.75% and up from $553.2 million year-over-year [2] - Over the last four quarters, Zscaler has consistently surpassed consensus EPS and revenue estimates [2] Stock Movement and Outlook - Zscaler shares have increased approximately 40.6% since the beginning of the year, significantly outperforming the S&P 500's gain of 0.1% [3] - The future performance of Zscaler's stock will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $0.75 on revenues of $707.18 million, while for the current fiscal year, the estimate is $3.06 on revenues of $2.65 billion [7] - The estimate revisions trend for Zscaler is currently mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Security industry, to which Zscaler belongs, is currently ranked in the top 13% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Another company in the same industry, CrowdStrike Holdings, is expected to report quarterly earnings soon, with estimates indicating a year-over-year decline in earnings but an increase in revenues [9][10]

Financial Data and Key Metrics Changes - Revenue for Q3 was $678 million, representing a 23% year-over-year increase and a 5% sequential increase [30] - Annual recurring revenue (ARR) was approximately $2.9 billion, with a year-over-year growth of 23% [30] - Remaining performance obligations (RPO) grew 30% year-over-year to $4.978 billion [31] - Total calculated billings increased 25% year-over-year to $785 million [31] - Gross margin was 80.3%, down from 81.4% in the previous year [32] - Free cash flow margin was 18%, including data center CapEx at 11% of revenue [33] Business Line Data and Key Metrics Changes - New logo annual contract value (ACV) grew over 40% year-over-year [9] - Significant growth in three categories: Zero Trust Everywhere, Data Security Everywhere, and Agentic Operations, with combined ARR approaching $1 billion [19] - Zero Trust Everywhere customers increased from over 130 to over 210, reflecting over 60% quarter-over-quarter growth [22] Market Data and Key Metrics Changes - Americas represented 54% of revenue, EMEA 30%, and APJ 16% [30] - The macro environment remains cautious, with customers prioritizing cyber and data protection despite ongoing economic uncertainty [16] Company Strategy and Development Direction - The company aims to reach $5 billion or more in ARR, driven by the combination of Zero Trust and AI security [29] - The introduction of the Z Flex program allows customers to flexibly scale their adoption of the platform, contributing over $65 million in TCV bookings [17] - The acquisition of Red Canary is expected to enhance the company's capabilities in Managed Detection and Response (MDR) and Threat Intelligence [28] Management's Comments on Operating Environment and Future Outlook - Management noted that while the spending environment remains challenging, cybersecurity remains a priority for customers [51] - The company is focused on building strategic partnerships with customers to reduce costs and enhance ARR over time [52] - Management expressed confidence in achieving strong growth despite economic uncertainties, emphasizing the importance of Zero Trust architecture and AI security [52] Other Important Information - The company appointed Kevin Rubin as the new Chief Financial Officer, expected to contribute significantly to the next phase of growth [37][38] - The company plans to optimize new products for margins over time as they scale [34] Q&A Session Summary Question: How does the company ensure customer focus amidst rapid product expansion? - The company has implemented a two-tier sales model with specialized teams for new product areas, ensuring effective customer engagement and focus [44][45] Question: What is the outlook on macro trends affecting the business? - The company did not experience a softer April and continues to see strong demand for cybersecurity solutions, particularly in Zero Trust and AI security [51][52] Question: Can you elaborate on the Z Flex program and its impact? - The Z Flex program provides customers with flexibility in product adoption and has already generated significant TCV bookings [47][56] Question: What are the expectations for the federal business? - The federal business is performing in line with expectations, with potential for growth as customers seek to reduce costs associated with legacy security products [89][91] Question: How does the company view the acquisition of Red Canary? - The acquisition is seen as a strategic move to accelerate the company's vision in the security market, leveraging Red Canary's technology and expertise [64][66]

Financial Data and Key Metrics Changes - Revenue for Q3 was $678 million, representing a 23% year-over-year increase and a 5% sequential increase [29] - Annual recurring revenue (ARR) was approximately $2.9 billion, with a year-over-year growth of 23% [29] - Remaining performance obligations (RPO) grew 30% year-over-year to $4.978 billion [30] - Total calculated billings increased 25% year-over-year to $785 million [30] - Free cash flow margin was 18%, including data center CapEx at 11% of revenue [32] Business Line Data and Key Metrics Changes - New logo annual contract value (ACV) grew over 40% year-over-year [7] - Zero Trust Everywhere, Data Security Everywhere, and AgenTic Operations are significant growth drivers, with combined ARR approaching $1 billion [18] - ZDX CoPilot bookings grew over 70% year-over-year to nearly $75 million [24] - SecOps solutions saw over 120% year-over-year growth in ACV [26] Market Data and Key Metrics Changes - Americas represented 54% of revenue, EMEA was 30%, and APJ was 16% [29] - The dollar-based net retention rate was 114% [31] Company Strategy and Development Direction - The company aims to reach $5 billion or more in ARR, focusing on Zero Trust and AI security [28] - The Z Flex program allows customers to flexibly scale their adoption of the platform, contributing over $65 million in TCV bookings [16] - The acquisition of Red Canary is expected to enhance capabilities in Managed Detection and Response (MDR) and Threat Intelligence [26][66] Management's Comments on Operating Environment and Future Outlook - Customers remain cautious about IT spending due to economic uncertainty, but prioritize cyber and data protection [15] - The company is seeing strong demand for its platform despite macroeconomic challenges [50] - Management is optimistic about the growth potential in federal business, although it is not a significant revenue contributor currently [88] Other Important Information - The company appointed Kevin Rubin as the new Chief Financial Officer [36] - The acquisition of Red Canary is valued at $675 million and is expected to close in August 2025 [66] Q&A Session Summary Question: How does the company ensure customer focus amidst rapid product expansion? - The company has implemented a two-tier sales model with takeoff teams for new product areas, allowing for focused expertise [43][44] Question: What is the outlook on macro trends affecting the business? - The spending environment remains challenging, but cybersecurity projects are prioritized, especially those involving Zero Trust and AI [50][51] Question: Can you elaborate on the Z Flex program? - Z Flex provides customers with flexibility in purchasing and deploying modules without lengthy procurement cycles, starting with larger customers [46][47] Question: What are the growth drivers in the new product categories? - The company is seeing significant growth in Zero Trust Everywhere, Data Security Everywhere, and AgenTic Operations, with impressive growth rates in each category [18][94] Question: What attracted the company to acquire Red Canary? - The acquisition was driven by the need to accelerate the vision of becoming a leading player in the security market, leveraging Red Canary's technology and expertise [64][66]

Q3 2025 Financial Performance - Revenue for Q3 2025 reached $678 million, exceeding guidance, representing a 23% year-over-year increase[6] - Calculated billings for Q3 2025 totaled $785 million, exceeding expectations with a 600 bps Q/Q increase[6] - Calculated Current Billings reached $760 million, a 24% year-over-year increase[6] - The company achieved a gross margin of 80.3% and an operating margin of 21.6%[6] - EPS for Q3 2025 was $0.84, an 18% year-over-year increase[6] - Free cash flow was $119 million, representing an 18% margin[6] Key Business Metrics and Growth - Remaining Performance Obligations (RPO) reached approximately $5 billion, with a 30% year-over-year growth[8] - Annual Recurring Revenue (ARR) reached approximately $2.9 billion, with a 23% year-over-year growth[8] - TCV Bookings exceeded $1 billion, marking a Q3 record[8] - New growth categories ARR is growing faster than total ARR, approaching $1 billion in combined ARR[8, 30] Strategic Initiatives and Customer Adoption - Over 210 enterprises are adopting "Zero Trust Everywhere," with a growth rate exceeding 60% quarter-over-quarter[8] - 59% of customers purchasing Zero Trust Branch were new logos[8] - Zscaler secured over 50 million total users on its platform[15] FY25 Guidance - The company increased its FY25 revenue guidance to $2.659 billion - $2.661 billion, representing approximately 23% year-over-year growth[59] - Calculated billings guidance for FY25 was increased to $3.184 billion - $3.189 billion, representing 21%-22% year-over-year growth[59] - Operating profit guidance for FY25 was increased to $573 million - $575 million, with an approximate 22% margin[59] - Earnings per share guidance for FY25 was increased to $3.18 - $3.19[59] - Free Cash Flow Margin guidance for FY25 was increased to 25.5%-26.0%[59]