Zscaler delivered better-than-expected second quarter results as the company platform is gaining due to its zero trust architecture and the need to secure AI applications.
The cybersecurity vendor reported a second quarter net loss of $7.7 million, or 5 cents a share, on revenue of $647.9 million, up 23% from a year ago. Non-GAAP earnings were 78 cents a share in the second quarter.
Wall Street was expecting Zscaler to report second quarter earnings of 69 cents a share on revenue of $635.35 million.
Jay Chaudhry, CEO of Zscaler, said the company was seeing strong demand for its platform. "By combining AI with Zero Trust, we are delivering several key innovations to secure our customers’ use of AI applications, creating new avenues of growth," said Chaudhry.
Zscaler is part of a trio of cybersecurity vendors looking to consolidate enterprises on their AI-driven platforms. CrowdStrike and Palo Alto Networks also reported strong results. SentinelOne is a smaller vendor with an AI-driven cybersecurity platform and Fortinet has expanded its reach too.
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As for the outlook, Zscaler's fiscal 2025 outlook for revenue and earnings were above estimates. The third quarter earnings outlook was above expectations with revenue a bit lighter than expected.
The company projected third quarter revenue between $665 million to $667 million with non-GAAP earnings of 75 cents a share to 76 cents a share. For fiscal 2025, Zscaler projected revenue of $2.64 billion to $2.65 billion with non-GAAP earnings of $3.04 a share to $3.09 a share.
Zscaler in the quarter launched its Zero Trust Network Access service natively integrated within RISE with SAP. it also launched a segmentation tool for branches and cloud environments.
By the numbers:
- Zscaler said it landed several 7-figure deals across its platform.
- More than 85% of more than $1 million deals in annual recurring revenue included two or more data protection modules.
- Data protection was included in more than 40% of new and upsell deals.
Here's what Chaudhury had to say on the Zscaler earnings call:
- "Our go-to-market investments are resulting in increased sales productivity, double-digit new and upsell business growth and lower sales attrition. I expect sales productivity to continue growth in the second half, driven by ongoing success of our go-to-market initiatives and growing number of ramped sales reps."
- "Our mission is to create a Zero Trust Everywhere world. With the upcoming hardware refresh cycle, CXOs are increasingly looking for ways to eliminate the legacy security stack including firewalls, VPNs, SD-WANs and more."
- "We are leaning into the opportunity presented by the refresh cycle with surgical field campaigns to educate our customers on how they can leapfrog to Zero Trust everywhere and free themselves from firewalls and other legacy appliances forever."
- "In Q2, many customers purchased data protection to securely adopt public AI, including a Global-2000 hospitality company, a Global-2000 technology company, a Global-2000 manufacturing company and more. In addition to securing the use of public AI apps, we are investing to deliver solutions to secure customers' private AI apps such as LLM and SLM models, chatbots and inference engines."
- "We are also leveraging AI in many other areas, including automated data classification, image classification, zero-day vulnerabilities detection and prevention, app segmentation, IoT, OT device discovery and more."
