Cloudflare Inc. (NYSE:NET) is among the best software infrastructure stocks to buy according to hedge funds. In a mid-December report, Stifel reiterated its positive view on Cloudflare Inc. (NYSE:NET) amid AI-driven security requirements becoming more central to enterprise risk management. The firm highlighted that organizations are expanding the usage of generative and agentic AI. This expansion would mean cybersecurity teams will increasingly focus on controlling how AI is accessed and used internally, ...

Core Insights - Zscaler's stock experienced a 4% decline after reporting strong fiscal Q4 results, but remains up approximately 50% year-to-date [1][2] - The company operates in the zero trust security niche, which is gaining importance in the cybersecurity sector [3] - Zscaler's revenue for the quarter increased by 21% year-over-year to $719.2 million, surpassing management's guidance [5] Financial Performance - Adjusted earnings per share (EPS) rose to $0.89 from $0.72 year-over-year, exceeding the forecast of $0.79 to $0.80 [5] - Operating cash flow was $250.6 million, and free cash flow was $171.9 million, with a cash and short-term investments balance of $3.6 billion [6] - Calculated billings surged by 32% year-over-year to $1.2 billion, while deferred revenue increased by 30% to $2.47 billion, indicating potential revenue growth acceleration [8] Future Guidance - Management forecasts fiscal 2026 revenue between $3.265 billion and $3.284 billion, representing growth of approximately 22% to 23% [9] - For Q1 of fiscal 2026, Zscaler anticipates revenue between $772 million and $774 million, with adjusted EPS between $0.85 and $0.86 [10][11] - The introduction of the Z-Flex payment program has led to a 50% increase in flex billings in fiscal Q4, which could drive further growth [14] Market Position and Strategy - Zscaler is focusing on new growth areas such as AI Security and Zero Trust Everywhere, which contributed to exceeding $1 billion in annual recurring revenue [4] - The company is adapting its strategy by implementing flexible payment options, similar to competitors, to enhance customer engagement [13] - Zscaler's forward price-to-sales multiple is approximately 13, reflecting a fair valuation given its expected revenue growth of around 25% [15]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 reached $1,043 million, representing a 7% year-over-year increase as reported and a 6% increase in constant currency [5][17] - Non-GAAP operating margin was 30%, and non-GAAP earnings per share (EPS) was $1.73, up 9% year-over-year as reported and in constant currency, exceeding guidance by $0.15 [5][17] - Non-GAAP net income for Q2 was $251 million, with a cash gross margin projected at approximately 72% to 73% for Q3 [23][32] Business Line Data and Key Metrics Changes - Cloud Infrastructure Services (CIS) revenue was $71 million, up 30% year-over-year as reported and 29% in constant currency, with expectations for accelerated growth due to large contracts signed earlier in the year [6][18] - Compute revenue was $171 million, up 13% year-over-year as reported and in constant currency [18] - Security revenue was $552 million, up 11% year-over-year as reported and 10% in constant currency, with API security and Zero Trust enterprise security combined revenue at $67 million, up 48% year-over-year [20][21] - Delivery revenue was $320 million, down 3% year-over-year as reported and down 4% in constant currency, but showing improvements in pricing and traffic growth [22] Market Data and Key Metrics Changes - International revenue was $516 million, up 10% year-over-year or 8% in constant currency, representing 49% of total revenue in Q2 [22] - The company noted a positive impact from foreign exchange fluctuations, contributing $17 million sequentially and $8 million year-over-year [23] Company Strategy and Development Direction - The company is focusing on the growth of its cloud infrastructure services portfolio, particularly in AI applications, and is investing in expanding its sales capacity and partnerships [6][30] - The management highlighted the importance of security solutions in response to increasing cyber threats, particularly ransomware, and emphasized the growth potential in API security and micro-segmentation [12][78] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory of CIS, projecting a year-over-year growth rate of 40% to 45% in constant currency by year-end [18][39] - The competitive landscape has improved due to the exit of several CDN peers, allowing for better pricing and traffic trends [44] - The company anticipates a lower operating margin in the second half of the year due to investments in sales and marketing [30] Other Important Information - The company repaid $1,150 million of outstanding convertible senior notes and issued $1,725 million in new senior convertible notes [24] - The company plans to continue share buybacks to offset dilution from employee equity programs [25] Q&A Session Summary Question: Can you walk us through how the first half of the year transpired versus expectations for compute revenue? - Management noted that compute, particularly CIS, has exceeded expectations with significant customer signings, projecting a growth rate of 40% to 45% in ARR by year-end [38][39] Question: What is the competitive environment like for the delivery business? - Management indicated that the competitive landscape has changed significantly, with four major competitors exiting the market, leading to improved pricing and traffic trends [44] Question: Can you provide insight into the guidance and the impact of TikTok revenue? - Management clarified that TikTok revenue is expected to contribute approximately $40 million to $50 million, but the overall guidance reflects strength across multiple areas [56] Question: What is driving the demand for API and micro-segmentation security? - Management highlighted the increasing need for security solutions as enterprises face more vulnerabilities, with strong demand for their market-leading solutions [76][78]

Core Insights - IGEL has announced the availability of the Zscaler Client Connector (ZCC) through the IGEL App Portal, enhancing Zero Trust security and cloud connectivity for IGEL-powered endpoints, which supports digital transformation for hybrid workforces [1][3][4] - The partnership with Zscaler aims to protect organizations from cyber threats while ensuring productivity across various applications and devices [3][6] - The integration of ZCC with IGEL's Preventative Security Model™ reduces the endpoint attack surface and lowers total cost of ownership (TCO) by up to 75% [6][9] Company Overview - IGEL is a secure endpoint OS platform designed for VDI, DaaS, SaaS, and secure browsing, providing a high-performance user experience and simplifying endpoint management [8][10] - The company enforces Zero Trust principles through a modular, read-only OS that eliminates common attack surfaces, thereby extending device lifespans and achieving sustainability goals [9][10] - IGEL is recognized globally across various sectors, including healthcare, financial services, retail, manufacturing, and government, and is supported by a partner ecosystem of over 100 integrated technology vendors [10]