Core Insights - Zscaler Inc reported strong fiscal fourth-quarter results, with annual recurring revenues (ARR) increasing by 22% and initial guidance for fiscal 2026 indicating 19% growth [1][7][8] Financial Performance - Billings reached $1,202 million, a 32% year-on-year increase, surpassing the consensus estimate of $1,145 million [3][8] - Revenue for the quarter was $719 million, exceeding expectations of $708 million [3] - ARR for the fourth quarter was $3.015 billion, remaining flat sequentially, but net new ARR growth accelerated to 16% year-on-year from 6% in the previous quarter [3][11] Guidance and Future Outlook - Management guided for an operating margin expansion of approximately 65 basis points for fiscal 2026, indicating potential for upside [2] - The ARR guidance for fiscal 2026 is set at $3.676-$3.698 billion, reflecting a growth rate of 22%-23% [8] - The guidance does not include contributions from Red Canary contracts, which are up for renewal in fiscal 2026 [9] Market Position and Growth Areas - Zscaler is experiencing strong momentum in the Secure Access Service Edge (SASE) market, with a robust portfolio of emerging products [4][6] - The company's emerging growth categories, including AI Security, Zero Trust Everywhere, and Data Security Everywhere, now represent over $1 billion in combined ARR and are growing faster than the overall business [11] - Customers contributing $1 million in ARR grew by 18% year-on-year, while those spending over $100,000 increased by 13% [11] Analyst Sentiment - Analysts have noted that Zscaler's results substantially exceeded expectations across growth and profitability metrics [4][10] - The company is well-positioned to maintain a 22% year-on-year revenue growth trajectory [5]

Core Insights - Zscaler Inc reported better-than-expected financial results for Q4 fiscal 2025, with revenue of $719.23 million, surpassing the consensus estimate of $706.91 million and adjusted earnings of 89 cents per share, exceeding analyst estimates of 80 cents per share [1][2] Financial Performance - Fourth-quarter revenue: $719.23 million, beating estimates of $706.91 million [1] - Fourth-quarter adjusted earnings: 89 cents per share, surpassing estimates of 80 cents per share [1] - First-quarter revenue guidance: $772 million to $774 million, compared to estimates of $750.51 million [3] - First-quarter adjusted earnings guidance: 85 to 86 cents per share, against estimates of 84 cents per share [3] - Fiscal 2026 revenue forecast: $3.27 billion to $3.28 billion, exceeding estimates of $2.66 billion [3] - Full-year adjusted earnings forecast: $3.64 to $3.68 per share, compared to estimates of $3.18 per share [3] Market Reaction - Zscaler shares fell 4.5% to $262.19 following the earnings announcement [4] Analyst Ratings and Price Targets - Rosenblatt analyst maintained a Buy rating, raising the price target from $315 to $330 [6] - Baird analyst maintained an Outperform rating, increasing the price target from $330 to $345 [6] - Keybanc analyst maintained an Overweight rating, boosting the price target from $345 to $350 [6] - Stifel analyst maintained a Buy rating, raising the price target from $295 to $330 [6] - Piper Sandler analyst maintained a Neutral rating, increasing the price target from $260 to $280 [6] - Susquehanna analyst maintained a Positive rating, raising the price target from $320 to $340 [6] - Scotiabank analyst maintained a Sector Outperform rating, lowering the price target from $360 to $334 [6]

Core Viewpoint - Check Point Software Technologies has introduced the Enterprise Browser, a feature designed to enhance security for unmanaged devices while maintaining compliance and productivity for organizations [1][4]. Group 1: Product Overview - The Enterprise Browser extends Zero Trust security to unmanaged devices, including contractors and BYOD users, providing visibility and compliance-ready data protection without the need for persistent agents [1][3]. - Built on Chromium, the Enterprise Browser creates an isolated workspace that enforces enterprise-grade controls during each session and erases sensitive data upon closure [3][9]. Group 2: Market Context - As hybrid workforces and third-party ecosystems expand, unmanaged devices have emerged as significant security vulnerabilities, leading to risks such as data leakage and compliance gaps [2]. - Traditional security measures, like VPN access and hardware provisioning, are often costly and inefficient, complicating compliance with regulations like HIPAA, GDPR, and NIS2 [2]. Group 3: Key Features and Benefits - The Enterprise Browser allows organizations to secure devices they do not own, enabling flexible work arrangements without compromising critical systems or sensitive data [7]. - Key capabilities include data isolation, integrated data loss prevention, agentless posture checks, complete session visibility, and seamless integration with Harmony SASE [9]. - The solution supports compliance with major regulations and reduces risks associated with insider threats and compliance failures, while also minimizing IT overhead [9].

Financial Data and Key Metrics Changes - Revenue grew 21% year over year in Q4, reaching $719 million, and total revenue for fiscal year 2025 was $2.7 billion, representing 23% year over year growth [8][24] - Annual recurring revenue (ARR) surpassed $3 billion, marking a 22% year over year increase [9][23] - Operating margin exceeded 22%, a quarterly record, and free cash flow margin was 24% for Q4 [8][26] Business Line Data and Key Metrics Changes - AI security solutions, including AI Guard and JNI security offerings, saw significant customer interest, contributing to the overall growth [8][10] - SecOps ARR grew over 85% year over year, while IT operations innovations drove 58% year over year growth in bookings of ZDX Advanced plus SKU [14][19] - Data Security Everywhere ARR reached approximately $425 million, with strong demand for comprehensive data security capabilities [19][20] Market Data and Key Metrics Changes - The Americas accounted for 55% of revenue, EMEA for 29%, and APJ for 16% in Q4 [24] - The company now serves nearly 40% of the Global 2000 and over 45% of Fortune 500 companies, indicating a strong market presence [25] Company Strategy and Development Direction - The company is focusing on three growth factors: AI security, Zero Trust Everywhere, and Data Security Everywhere, which together surpassed $1 billion in ARR in Q4 [10][20] - The Z Flex program generated over $100 million in TCV bookings in Q4, representing over 50% sequential growth, and is becoming a preferred method for strategic multi-year deals [21][70] - The company aims to accelerate platform innovations and capitalize on the $100 billion security market opportunity [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for their solutions and the operational scale, expecting continued growth in fiscal year 2026 [23][31] - The macro environment is anticipated to remain relatively unchanged, with a focus on ARR as the primary growth metric moving forward [28][95] Other Important Information - The company successfully closed the acquisition of Red Canary, contributing approximately $83 million to ARR at close [27] - The gross margin for Q4 was 79.3%, lower than the historical target of 80% due to a one-time deployment [25][26] Q&A Session Summary Question: How is SASE replacing firewall appliances? - Management indicated that firewall appliances, particularly in branches, are being replaced by Zero Trust architecture, with significant demand for Zero Trust branch solutions [34][36] Question: How will Z Flex help exceed sales goals? - Z Flex provides flexibility in module adoption and pricing, allowing for larger and better deals, and is being expanded to a broader customer base [40][44] Question: What does a Zero Trust Everywhere customer look like? - A Zero Trust Everywhere customer typically sees significant increases in ARR, with many deals resulting in 2x or 3x growth [46][50] Question: What is the focus of AI security product adoption? - Customers are primarily focused on securing public AI applications and private models, with growing interest in agent-to-agent communication [54][56] Question: What is the expected growth for data security solutions? - Data security solutions are being adopted alongside Zero Trust solutions, with a significant opportunity for upselling additional modules [61][65] Question: What is the methodology behind fiscal year guidance? - The company maintains a prudent approach to guidance, shifting focus from billings to ARR as a better alignment with the business model [92][94]

Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $719 million, representing a 21% year-over-year growth and exceeding guidance [19] - Annual recurring revenue (ARR) surpassed $3 billion, marking a 22% year-over-year increase [19][6] - Operating margin reached 22.1%, a record high, with a free cash flow margin of 24% [21][19] - Gross margin was 79.3%, slightly lower than the historical target of 80% due to a one-time deployment [21] Business Line Data and Key Metrics Changes - AI Security, Zero Trust Everywhere, and Data Security Everywhere collectively surpassed $1 billion in ARR in Q4 [6] - SecOps ARR grew over 85% year-over-year, while ZDX Advanced Plus Queue bookings increased by 58% year-over-year [10] - Data Security Everywhere ARR grew to approximately $425 million, with significant deal wins [16] Market Data and Key Metrics Changes - The Americas accounted for 55% of revenue, EMEA for 29%, and APJ for 16% [20] - The company serves nearly 40% of the Global 2000 and over 45% of Fortune 500 companies [19][5] Company Strategy and Development Direction - The company is focusing on three growth vectors: AI Security, Zero Trust Everywhere, and Data Security Everywhere [6] - The ZFlex program is being utilized to facilitate strategic multi-year deals and increase module adoption [17] - The company aims to replace legacy solutions in various sectors, including finance, healthcare, and retail [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for their solutions, particularly in AI and Zero Trust security [5] - The company anticipates a stable macro environment for fiscal 2026, with a focus on ARR as the primary growth metric [24][72] - Management expects to continue strong growth in AI Security and Zero Trust solutions, with significant upsell opportunities [67] Other Important Information - The acquisition of Red Canary is expected to contribute approximately $95 million to ARR in fiscal 2026 [23] - The company ended Q4 with $3.6 billion in cash and short-term investments [23] Q&A Session Summary Question: How is SASE replacing firewall appliances? - Management indicated that Zero Trust architecture is essential, and firewall appliances are being phased out, starting with branch firewalls [29] Question: How will ZFlex be utilized by the sales force? - ZFlex is designed to provide flexibility in module adoption, allowing for larger and better deals, and is being expanded to a broader customer base [33] Question: What does a Zero Trust Everywhere customer look like? - A Zero Trust Everywhere customer typically adopts multiple modules, leading to significant increases in ARR [36] Question: What is the focus of AI security product adoption? - Customers are primarily interested in securing both public and private AI applications, with a growing focus on agent-to-agent communication [41] Question: What is the expected growth trajectory for net new ARR? - Management is guiding for high single-digit net new ARR growth in fiscal 2026 on an organic basis [46] Question: How is the data security portfolio performing? - Data security solutions are often purchased alongside Zero Trust solutions, with significant growth potential as customers consolidate their security products [49] Question: What is the impact of ZFlex on financial metrics? - ZFlex is applicable to both new and existing customers, increasing potential deal sizes without fundamentally changing the financial model [53]

Financial Data and Key Metrics Changes - Revenue for Q4 2025 grew 21% year over year, reaching $719 million, and total revenue for fiscal year 2025 was $2.7 billion, representing a 23% year over year growth [6][23] - Annual recurring revenue (ARR) surpassed $3 billion, marking a 22% year over year increase [7][22] - Operating margin for Q4 was 22.1%, exceeding long-term targets and growing approximately 60 basis points year over year [26] - Free cash flow margin for Q4 was 24%, with data center CapEx at 8% of revenue [26] Business Line Data and Key Metrics Changes - AI security solutions, including AI Guard and JNI security offerings, saw significant customer interest, contributing to the overall growth [6][10] - SecOps ARR grew over 85% year over year, while ZDX Advanced plus SKU bookings increased by 58% year over year [12][19] - Data Security Everywhere ARR reached approximately $425 million, with strong demand driving growth [18] Market Data and Key Metrics Changes - The Americas accounted for 55% of revenue, EMEA for 29%, and APJ for 16% [23] - The company now serves nearly 40% of the Global 2000 and over 45% of Fortune 500 companies, indicating a strong market presence [22][24] Company Strategy and Development Direction - The company is focusing on three growth factors: AI security, Zero Trust Everywhere, and Data Security Everywhere, which together surpassed $1 billion in ARR in Q4 [8][19] - The Z Flex program generated over $100 million in TCV bookings in Q4, representing over 50% sequential growth, and is expected to drive future growth [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing demand for their solutions and the potential for growth in the Zero Trust and AI security markets, which are expected to disrupt a $100 billion security market [20][21] - The macro environment is anticipated to remain relatively unchanged, with a focus on ARR as the primary growth metric moving forward [28][92] Other Important Information - The acquisition of Red Canary is expected to contribute approximately $95 million to ARR and $90 million to revenue in fiscal year 2026 [27] - The company plans to optimize new products for margins over time as they scale [29] Q&A Session Summary Question: How is SASE replacing firewall appliances? - Management indicated that firewall appliances, particularly in branches, are being replaced by Zero Trust architecture, with significant demand for Zero Trust branch solutions [33][36] Question: How will Z Flex help exceed sales goals? - Z Flex provides flexibility in module adoption for customers, allowing for larger and better deals, and is being expanded to a broader customer base [39][42] Question: What does a Zero Trust Everywhere customer look like? - A Zero Trust Everywhere customer typically adopts multiple modules, with significant increases in ARR observed as they transition to this model [45][50] Question: What is the focus of AI security product adoption? - Customers are primarily focused on securing public AI applications first, followed by private models, with significant interest in agent-to-agent communication solutions [54][56] Question: What is the expected growth for data security solutions? - Data security solutions are being adopted alongside Zero Trust solutions, with a significant opportunity for upselling additional modules to existing customers [60][63] Question: What is the methodology behind fiscal year guidance? - The company maintains a prudent approach to guidance, shifting focus from billings to ARR as a more aligned growth metric [90][92]

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]

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]

Core Insights - Palo Alto Networks (PANW) and CrowdStrike (CRWD) are leading companies in the cybersecurity sector, focusing on different aspects of security solutions [1][2] - The cybersecurity market is projected to grow at a CAGR of 12.45% from 2025 to 2030, driven by increasing cyber threats [2] - A comparison of fundamentals, growth prospects, market challenges, and valuations is necessary to determine which stock presents a better investment opportunity [3] Palo Alto Networks Overview - Palo Alto Networks is recognized for its comprehensive cybersecurity solutions, including next-generation firewalls and advanced threat detection technologies [4] - The company is experiencing growth in areas like Zero Trust, Secure Access Service Edge (SASE), and private 5G security, which supports its long-term growth potential [5] - In Q4 of fiscal 2025, SASE saw a 35% year-over-year increase in annual recurring revenues, and the company secured a $60 million contract for SASE services [6] - However, PANW faces challenges such as shortened contract durations and a slowdown in transitioning to cloud-based platforms, which may impact revenue growth [7][8] - The revenue growth rate has declined from mid-20s percentage in fiscal 2023 to mid-teens percentage recently, with Q4 fiscal 2025 sales and non-GAAP EPS growing 16% and 27% year-over-year, respectively [8] CrowdStrike Overview - CrowdStrike's Falcon platform is a cloud-native security solution that secures various environments and endpoints [11] - The share of subscription-based sales has increased significantly from 72% in fiscal 2017 to 95% in fiscal 2025, indicating strong customer adoption [12] - The Falcon Flex subscription model has driven customer growth, with 48% of subscription customers using six or more cloud modules by the end of Q2 fiscal 2026 [13] - In Q2, CrowdStrike added $221 million in net new annual recurring revenue (ARR), bringing total ARR to $4.66 billion, a 20% increase year-over-year [14] - The company’s sales and non-GAAP EPS grew 21% and 5.7% year-over-year, respectively, with revenue growth estimates for fiscal 2026 and 2027 around 21% [16] Price Performance and Valuation - Year-to-date, CrowdStrike shares have increased by 23.9%, while Palo Alto Networks shares have risen by 4.7% [18] - CrowdStrike is trading at a forward sales multiple of 19.68X, while Palo Alto Networks is at 12.04X, reflecting higher growth expectations for CrowdStrike [20] Conclusion - Despite both companies being key players in cybersecurity, Palo Alto Networks is currently facing challenges that may hinder its growth, while CrowdStrike is better positioned for future growth due to its innovative solutions and strong customer adoption [24][25]

Core Insights - CrowdStrike reported strong results for Q2 of fiscal 2026, adding a record $221 million in net new annual recurring revenue (ARR), bringing total ARR to $4.66 billion, a 20% increase year-over-year [1][9] Group 1: Growth Drivers - A significant portion of the growth is attributed to the Falcon Flex subscription model, which now has over 1,000 customers, with more than 100 signing early "re-Flex" deals, indicating faster-than-expected customer expansion [2][9] - Falcon Flex facilitates the adoption of multiple modules across CrowdStrike's platform, with customers consolidating their security tools around CrowdStrike, exemplified by a Fortune 500 software firm that signed an eight-figure re-Flex deal [3] Group 2: Future Outlook - Management anticipates at least 40% year-over-year growth in net new ARR for the second half of fiscal 2026, driven by the demand for Falcon Flex and strong AI-driven security needs [4][9] - The long-term goal for CrowdStrike is to reach $10 billion in ARR, with Falcon Flex potentially being a transformative factor in achieving this target [4] Group 3: Competitive Landscape - Competitors like Palo Alto Networks and Zscaler are also experiencing growth, with Palo Alto Networks reporting a 32% increase in Next-Gen Security ARR and Zscaler achieving 23% year-over-year growth in ARR [5][6] Group 4: Valuation and Performance - CrowdStrike's shares have increased by 29.4% year-to-date, outperforming the security industry's growth of 9% [7] - The company trades at a forward price-to-sales ratio of 19.63X, significantly higher than the industry's average of 12.12X [10]