Zscaler(US:ZS)2025-09-02 21:32Financial 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]