Zscaler posts wider quarterly loss on higher spending; shares down 9%

Core Insights - Zscaler reported a wider net loss of $34.3 million in Q2, significantly up from a loss of $7.7 million a year prior, attributed to increased spending on sales, marketing, and R&D in a competitive environment [1] - The company's total operating expenses rose to $676.3 million, compared to $539.5 million in the same quarter last year, driven by higher costs in sales, marketing, and R&D [1] - Despite the losses, Zscaler's revenue increased by 26% to $815.8 million, surpassing analysts' expectations of $798.8 million [1] - The adjusted profit per share was $1.01, exceeding the estimate of 90 cents, and the company forecasts Q3 adjusted earnings per share of $1.00 to $1.01, above the analysts' estimate of 95 cents [1] Financial Performance - Net loss for Q2: $34.3 million, up from $7.7 million year-over-year [1] - Total operating expenses: $676.3 million, compared to $539.5 million in the previous year [1] - Revenue for Q2: $815.8 million, a 26% increase, beating the average estimate of $798.8 million [1] - Adjusted profit per share: $1.01, exceeding the estimate of 90 cents [1] - Q3 revenue forecast: $834 million to $836 million, above expectations of $831.9 million [1] Market Context - The cybersecurity sector is experiencing cautious spending from clients due to tight IT budgets amid economic uncertainty, although cybersecurity budgets are under less pressure compared to general capital expenditures [1] - Zscaler competes with companies like Palo Alto Networks and Cloudflare, and the overall market sentiment has been affected by the potential impact of AI tools on the cybersecurity industry [1] - The demand for security solutions is being driven by the need for secure AI adoption, as highlighted by Zscaler's CEO [1]