Zscaler(US:ZS)2025-05-29 21:32Financial 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]