Summary of Zscaler Conference Call Company Overview - **Company**: Zscaler - **Industry**: Cybersecurity Key Points Organic Growth - Zscaler reported a 26% growth in Annual Recurring Revenue (ARR), with organic growth being strong at 22% last quarter [6][11][12] - The company emphasizes the importance of organic growth moving forward, despite recent acquisitions [6][7] Zero Trust Strategy - Zscaler is a pioneer in the Zero Trust market, with 450 customers adopting Zero Trust across three platforms [9][10] - The company is expanding its Zero Trust offerings to include Zero Trust Cloud and Zero Trust Branch, which are expected to drive significant growth [10][11] - The Zero Trust Everywhere initiative is seeing strong adoption, with expectations for continued growth in the next 12 to 18 months [11][12] AI Security - Zscaler processes over half a trillion transactions daily, providing a strong data foundation for security operations [19][20] - The company is focusing on AI security, with a current ARR of over $400 million in this segment [22][41] - AI security posture management is a growing area, with significant customer interest and traction [26][34] Data Security - Zscaler has developed a comprehensive data security platform, integrating various solutions like DLP and CASB [39][41] - The company is addressing the growing demand for Data Security Posture Management (DSPM) and believes it can lead the market with its integrated solutions [40][41] Core Business Strength - The core business, including ZIA and ZPA, remains strong, contributing significantly to overall revenue [42][46] - Upsell opportunities have increased, with a shift from 20% upsell at IPO to approximately 70% currently [47][48] Go-to-Market Strategy - Zscaler underwent management changes to improve sales efficiency, resulting in increased sales productivity [49][51] - The introduction of Zflex contracts has been well-received, allowing customers more flexibility in module selection [53][55] M&A Strategy - Zscaler focuses on small, strategic acquisitions that enhance its integrated platform rather than pursuing large, unrelated acquisitions [59][61] - The company aims to maintain a cohesive product offering, avoiding the pitfalls of disjointed solutions [60][62] Future Outlook - Zscaler sees significant opportunities in AI security and Zero Trust solutions, particularly in the evolving landscape of cloud security [64][66] - The company is well-positioned for long-term growth, with strong customer reception for its differentiated technologies [68]

Core Insights - Zacks Premium provides various tools to enhance stock market investment confidence and knowledge [1] - The Zacks Style Scores serve as complementary indicators to the Zacks Rank, helping investors select stocks with high potential for market outperformance [3][10] Zacks Style Scores - The Style Scores categorize stocks into four types: Value Score, Growth Score, Momentum Score, and VGM Score, each rated from A to F based on specific investment characteristics [4][5][6][7] - Value Score focuses on identifying undervalued stocks using financial ratios [4] - Growth Score assesses a company's financial health and future growth potential [5] - Momentum Score evaluates stocks based on price trends and earnings outlook [6] - VGM Score combines all three styles to highlight stocks with the best overall characteristics [7] Zacks Rank - The Zacks Rank is a proprietary model that utilizes earnings estimate revisions to guide investors in stock selection [8] - Stocks rated 1 (Strong Buy) have historically achieved an average annual return of +23.93% since 1988, significantly outperforming the S&P 500 [9] - Investors are encouraged to focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B for optimal investment potential [10][11] Company Spotlight: Zscaler (ZS) - Zscaler is recognized as a leading provider of cloud-based security solutions, currently holding a 3 (Hold) Zacks Rank with a VGM Score of B [12] - The company is projected to experience a year-over-year earnings growth of 15.6% for the current fiscal year, supported by a Growth Style Score of A [12] - Recent upward revisions by 13 analysts have increased the Zacks Consensus Estimate for Zscaler to $3.79 per share, with an average earnings surprise of +12.3% [13]

Core Insights - Zscaler has been awarded the AWS Marketplace Partner of the Year (NAMER) for 2025, recognizing its significant contributions to innovation and customer solutions on AWS [1][2] - The partnership between Zscaler and AWS has resulted in record-breaking sales exceeding $1 billion, highlighting the effectiveness of their collaboration in driving cloud adoption and addressing critical use cases [2][3] Group 1: Award Recognition - Zscaler received the 2025 Geography and Global AWS Partner Award, showcasing its role in helping customers innovate and build solutions on AWS [1][2] - The award was announced during the Partner Awards Gala at AWS re:Invent 2025, emphasizing the importance of specialization and cooperation among AWS Partners [2][3] Group 2: Partnership Impact - The collaboration between Zscaler and AWS focuses on co-selling and co-innovating, which has led to significant sales achievements and customer empowerment in securely adopting cloud technologies [2][3] - Zscaler's leadership in Zero Trust security and AI is transforming how enterprises modernize their operations, bridging the gap between innovation and execution [6] Group 3: Performance Metrics - The AWS Partner Awards utilized a data-driven approach to evaluate partners' performance, ensuring objective and accurate measurements through third-party audits [4] - Finalists in the award categories represented the top three ranked AWS Partners, indicating a competitive landscape among AWS Partners [4] Group 4: Company Overview - Zscaler is a pioneer in zero trust security, serving a wide range of clients including large businesses and government agencies, and operates over 160 data centers globally [8] - The Zscaler Zero Trust Exchange platform combats billions of cyber threats daily, facilitating digital transformation and enhancing productivity for modern enterprises [8]

Core Insights - Zscaler's quarterly revenue grew at its fastest pace in a year, reaching $788 million, a 26% year-over-year increase, surpassing management's forecast [10][11] - The company is adopting a "Zero-Trust Everywhere" approach to enhance cybersecurity, which includes new products like AI-SPM to manage AI-related risks [5][6][8] - Analysts are generally bullish on Zscaler stock, with a consensus price target of $330.69, suggesting a potential 31% upside [13] Financial Performance - Zscaler's revenue for fiscal Q1 2026 was $788 million, exceeding the forecasted range of $772 million to $774 million, marking a 26% increase from the previous year [10] - The company modestly raised its full-year revenue guidance for fiscal 2026 from $3.275 billion to $3.292 billion [11] - Zscaler reported a GAAP loss of $11.6 million but achieved an adjusted net income of $159.5 million, a 28% increase from the previous year [12] Market Position - Zscaler's stock is currently down 31% from its 2021 peak, but analysts maintain a positive outlook, with 32 out of 50 recommending a buy [4][13] - The stock trades at a price-to-sales (P/S) ratio of 14.5, which is a slight premium compared to Palo Alto Networks but a discount to CrowdStrike [14] - The company aims to significantly increase its annual recurring revenue to $10 billion in the coming years, indicating strong growth potential [16]

Core Viewpoint - Zscaler (ZS) has experienced a significant decline of 24.1% over the past four weeks, but it is now in oversold territory, suggesting a potential turnaround as analysts expect better earnings than previously predicted [1]. Group 1: Technical Analysis - The Relative Strength Index (RSI) is a key technical indicator used to identify oversold conditions, with a reading below 30 typically indicating that a stock is oversold [2]. - ZS has an RSI reading of 27.83, indicating that the heavy selling pressure may be exhausting, which could lead to a price rebound [5]. - Stocks oscillate between overbought and oversold conditions, and the RSI helps investors identify potential entry points for a rebound [3]. Group 2: Fundamental Analysis - There is strong consensus among sell-side analysts regarding ZS, with earnings estimates for the current year increasing by 11.8% over the last 30 days [7]. - An upward trend in earnings estimate revisions is generally associated with price appreciation in the near term, indicating a positive outlook for ZS [7]. - ZS holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate trends and EPS surprises, further supporting the potential for a turnaround [8].

Core Insights - Zscaler's international revenue performance is crucial for assessing its financial resilience and growth prospects [1][2] - The company's total revenue for the quarter was $788.11 million, reflecting a year-over-year increase of 25.5% [4] International Revenue Breakdown - Other International generated $28.2 million, accounting for 3.6% of total revenue, slightly exceeding Wall Street's projection of $28.12 million [5] - Asia Pacific contributed $120.45 million, representing 15.3% of total revenue, which was below the expected $122.58 million [6] - Europe, Middle East and Africa accounted for $212.33 million, or 26.9% of total revenue, falling short of the anticipated $229.37 million [7] Future Revenue Projections - Analysts project Zscaler's revenue for the ongoing fiscal quarter to be $798.08 million, a 23.2% increase year-over-year, with contributions from Other International, Asia Pacific, and Europe expected to be $28.53 million, $124.88 million, and $233.64 million respectively [8] - For the full year, total revenue is projected at $3.29 billion, indicating a 23.1% rise from the previous year, with regional contributions expected to be $118.22 million from Other International, $518.12 million from Asia Pacific, and $968.28 million from Europe, Middle East and Africa [9] Conclusion on International Market Involvement - Zscaler's reliance on global markets presents both opportunities and challenges, making the analysis of international revenue trends essential for forecasting future performance [10] - Changes in earnings outlook significantly influence stock price performance, with upward revisions typically leading to stock price increases [11]

Core Insights - The AGIX index aims to capture the beta and alphas of the AGI era, which is expected to be a significant technological paradigm shift over the next 20 years, similar to the impact of the internet [2] - The "AGIX PM Notes" serves as a record of thoughts on the AGI process, inspired by legendary investors like Warren Buffett and Ray Dalio, to witness and participate in this unprecedented technological revolution [2] Market Performance - AGIX recorded a weekly performance of 6.00%, a year-to-date return of 26.73%, and a return of 74.56% since 2024 [4] - In comparison, QQQ, S&P 500, and Dow Jones had year-to-date returns of 21.13%, 16.45%, and 12.16% respectively [4] Sector Performance - The application sector saw a weekly performance of 2.20% with an index weight of 33.62% - The semi & hardware sector had a weekly performance of 1.76% with an index weight of 24.22% - The infrastructure sector recorded a weekly performance of 2.08% with an index weight of 37.19% [5] AI Industry Developments - Ilya's recent interview sparked significant market discussion, highlighting concerns about model training stagnation while also noting advancements in Google's Gemini 3 capabilities [9][10] - The AI industry is transitioning from a research phase to a focus on productization and optimization, with Google leveraging its TPU technology for enhanced performance [10] - The future of AI may not be dominated by a single model but rather by productization capabilities and external factors such as distribution and ecosystem [11] Investment Trends - The AI startup financing landscape remains robust, with 49 companies securing over $100 million in single rounds by November, matching the total for 2024 [17] - Major investments include Anysphere's $2.3 billion funding round and OpenAI's record $40 billion financing, indicating a growing concentration of capital in the AI sector [17] Corporate Actions - ServiceNow is in talks to acquire cybersecurity startup Veza for over $1 billion, which would enhance its identity management capabilities [19] - Zscaler reported strong Q1 results but saw its stock drop over 7% due to a conservative outlook, reflecting investor expectations for tech company growth [19]

Market Overview - U.S. stocks closed higher on Friday, with the Nasdaq Composite gaining for the fifth consecutive session as hopes for rate cuts increased and risk appetite returned across technology, cryptocurrency, and commodities [1] - Despite the recent gains, the Nasdaq recorded a nearly 2% loss for November, while the S&P 500 and Dow experienced slight gains during the same month [1] Analyst Insights - Benzinga's Analyst Ratings API provides high-quality stock ratings through partnerships with major sell-side banks, offering daily updates on ratings changes three hours before the U.S. equity market opens [3] - Analyst insights from Benzinga Pro subscribers have been identified as effective trading indicators that can outperform the stock market [3] Top Analyst Picks - The latest stock picks from top analysts include: - John Todaro from Citigroup maintained a Neutral rating on HP Inc (NYSE:HPQ) with a price target cut from $27 to $25, indicating a potential upside of around 3% [5] - An analyst from Citizens maintained a Market Outperform rating on Zscaler Inc (NASDAQ:ZS) with a price target of $355, suggesting a potential upside of approximately 43% [5] - An analyst from Truist Securities maintained a Hold rating on Analog Devices Inc (NASDAQ:ADI) and raised the price target from $249 to $258, expecting a decline of around 3% [5] - An analyst from Baird maintained a Neutral rating on Symbotic Inc (NASDAQ:SYM) and increased the price target from $55 to $58, anticipating a decline of about 29% [5] - An analyst from Needham maintained a Buy rating on Robinhood Markets Inc (NASDAQ:HOOD) with a price target of $145, expecting a gain of around 16% [7]

Group 1: Nasdaq Bull Market Overview - The Nasdaq Composite entered a new bull market on April 8, advancing by 53% since then, with historical data suggesting further upside is likely over the next year [1] - Historically, the Nasdaq has returned an average of 281% during bull markets, compounding at 31% annually since 1990 [1] Group 2: Nvidia Overview - Nvidia reported a 62% increase in revenue to $57 billion in the third quarter, with non-GAAP net income climbing 60% to $1.30 per diluted share [4][11] - The investment thesis for Nvidia is based on its leadership in data center GPUs and generative AI networking gear, supported by its CUDA software platform [5][6] - Analysts estimate Nvidia will maintain a 70% to 90% revenue share in AI accelerators through the end of the decade, with spending in this market forecast to grow at 29% annually through 2033 [7] - Nvidia's earnings are expected to grow at 37% annually over the next three years, making its current valuation of 44 times earnings appear relatively cheap [7] - Among 71 analysts, Nvidia has a median target price of $250 per share, implying a 41% upside from the current price of $177 [8] Group 3: Zscaler Overview - Zscaler specializes in zero trust network access and cloud protection, modernizing corporate networks through its security service edge (SSE) platform [9] - The company processes trillions of signals daily, enhancing its threat detection capabilities, and was ranked as a leader in the SSE market by Gartner [10] - Zscaler reported a 26% increase in revenue to $788 million for the first quarter of fiscal 2026, with non-GAAP earnings increasing 25% to $0.96 per diluted share [11] - Revenue from AI security products increased by 80% in the first quarter, indicating strong growth potential [12] - Wall Street expects adjusted earnings to grow at 17% annually through the fiscal year ending in July 2028, with a current valuation of 72 times adjusted earnings [13] - Among 51 analysts, Zscaler has a median target price of $330 per share, implying a 31% upside from its current price of $251 [8]

Core Viewpoint - Oracle has experienced a significant decline in stock value, down 22% month-to-date, raising concerns about its credit and future financial commitments [1][2][5]. Company Analysis - Morgan Stanley has reiterated that risks for Oracle's credit are skewed to the downside, suggesting that the issues affecting Oracle are persistent and not likely to resolve soon [2][3]. - The credit team at Morgan Stanley is now recommending investors to go long on Oracle's credit default swaps (CDS) while removing the buy bond leg of their previous trade strategy [3][4]. - Analysts are questioning Oracle's ability to meet its estimated $90 billion debt commitments over the next three years without reassurance from OpenAI regarding a significant $300 billion deal [6]. Market Sentiment - There has been a shift in sentiment among bondholders due to the emergence of large-scale bond deals, which provide alternative investment options, leading to increased concerns about Oracle's stock [4][5]. - The upcoming earnings call for Oracle, expected the week of December 8th, is anticipated to provide clarity on the company's financing plans and future debt commitments [5]. Industry Context - The software sector is facing challenges, with the software ETF experiencing its worst month since January 2022, influenced by the performance of several key companies, including Oracle [10]. - In contrast, other companies in the cybersecurity space, such as Zscaler, are being viewed more favorably, with significant growth reported despite the overall downturn in the software sector [12][13].