Zscaler’s first quarter was marked by a strong market response, reflecting management’s focus on expanding its platform and sales productivity. Leadership credited the quarter’s performance to robust large deal activity and broader adoption of its zero trust security solutions. CEO Jay Chaudhry highlighted that the company now secures over 50 million users, emphasizing the competitive advantage of Zscaler’s network effect and data capabilities. Management also cited the successful rollout of new purchasing programs such as Z Flex, which allowed customers greater flexibility in adopting multiple modules, and continued traction in key growth categories beyond the core offerings.
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Zscaler (ZS) Q1 CY2025 Highlights:
- Revenue: $678 million vs analyst estimates of $667 million (22.6% year-on-year growth, 1.6% beat)
- Adjusted EPS: $0.84 vs analyst estimates of $0.76 (10.8% beat)
- Adjusted Operating Income: $146.7 million vs analyst estimates of $141.8 million (21.6% margin, 3.4% beat)
- Revenue Guidance for Q2 CY2025 is $706 million at the midpoint, roughly in line with what analysts were expecting
- Adjusted EPS guidance for the full year is $3.19 at the midpoint, beating analyst estimates by 3.3%
- Operating Margin: -3.7%, down from -0.5% in the same quarter last year
- Annual Recurring Revenue: $2.9 billion at quarter end, up 24.2% year on year
- Billings: $784.5 million at quarter end, up 24.9% year on year
- Market Capitalization: $49.09 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Zscaler’s Q1 Earnings Call
- Ittai Kidron (Oppenheimer and Company) asked about how Zscaler manages sales focus amid rapid platform expansion and the rollout of Z Flex; CEO Jay Chaudhry explained the company uses specialized takeoff teams for new products and is initially targeting larger customers for Z Flex before broader rollout.
- Mike Cikos (Needham) asked for color on macroeconomic trends and customer spending; CEO Chaudhry and CFO Remo Canessa noted that while the broader IT environment is challenging, cybersecurity remains a priority, especially for projects tied to zero trust and AI-related security.
- Brad Zelnick (Deutsche Bank) questioned how Z Flex contracts are structured and the future of billing metrics; Canessa said Zscaler will shift focus from billings to ARR in upcoming quarters, and Chaudhry noted Z Flex provides customers with procurement flexibility and longer contract durations.
- Saket Kalia (Barclays) asked about the strategic rationale for the Red Canary acquisition; Chaudhry explained it is both an expansion and acceleration of the platform, providing access to advanced AI and detection capabilities, while Canessa added financial context regarding expected margin impacts and integration plans.
- Tal Liani (Bank of America) pressed on drivers of growth between legacy and emerging products as well as trends in net retention rates; Canessa detailed the strong growth in unscheduled billings and emerging products, and Chaudhry addressed the relationship between product bundling and retention metrics.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be watching (1) the pace of adoption and upsell for Z Flex and new platform modules, (2) the successful integration and customer impact of the Red Canary acquisition, and (3) whether Zscaler can sustain growth in its AI security offerings amid evolving enterprise needs. Execution on these fronts will be critical to maintaining momentum in large enterprise wins and platform expansion.
Zscaler currently trades at $305.49, up from $250.94 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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