Jay Chaudhry, CEO of Zscaler, said the company's integration with competing cybersecurity platforms such as CrowdStrike, generative AI upsells and new executive additions will fuel growth in future quarters.
"In my scores of customer conversations, CXOs are prioritizing zero trust security and AI for their IT spending. We are fighting AI with AI. We recently delivered several AI innovations and are continuing to expand our AI portfolio," said Chaudhry.
The outlook for the second quarter, however, fell short of expectations.
Zscaler's first quarter results were better than expected. The company reported first quarter non-GAAP earnings of 77 cents a share on revenue of $628 million, up 26% from a year ago. Wall Street was expecting non-GAAP earnings of 63 cents a share on revenue of $605.55 million. On a GAAP basis, Zscaler reported a net loss of $12.1 million, or 8 cents a share.
As for the outlook, Zscaler said its second quarter revenue will be between $633 million to $635 million with non-GAAP earnings of 68 cents a share to 69 cents a share. Wall Street was expecting second quarter earnings of 70 cents a share on revenue of $633.8 million.
For fiscal 2025, Zscaler projected revenue of $2.62 billion to $2.64 billion, up from its $2.6 billion to $2.62 billion range.
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Chaudhry said Zscaler is focused on using AI to secure applications, enable enterprise usage of generative AI copilots for security and provide visibility across cloud and on-prem environments. He added that Zscaler was seeing larger deals due to genAI upsells with ZDX Copilot and automation.
Yes, Zscaler is also playing the platformization play too like Palo Alto Networks and CrowdStrike. Chaudhry said:
"To make up for the flawed architecture, legacy security vendors are offering disjointed point products under the pretext of a platform. This increases cost and complexity for customers. A Fortune 50 retail customer recently told me that a legacy firewall vendor sold them a so-called platform. And when they tried to implement it, they found that it was nothing more than consolidated billings. Complexity is the enemy of security and resilience. No wonder so many enterprises are getting breached despite spending billions of dollars on so-called SASE security, which is nothing more than virtual firewalls and VPNs in the cloud.
The sooner organizations move away from these disjointed security solutions to Zero Trust, the sooner they will become secure and resilient."
Chaudhry said the company's Chief Revenue Officer Mike Rich, a ServiceNow alum, has moved the company to account-based selling and has improved the pipeline since joining the company a year ago. Zscaler has also ramped sales hiring and cut attrition.
The company also recently hired Adam Geller to be Chief Product Officer. Geller was previously at Exabeam and Palo Alto Networks.
Zscaler was also upbeat about securing Office 365 and Microsoft Copilot implementations.
So, what's the problem with the outlook? Zscaler said CIOs are still scrutinizing large deals. However, the guidance is likely to be a bit conservative. Chaudhry said:
"We are seeing interest in cyber that can really reduce the chance of ransomware attacks and the like. So that's where Zero Trust comes in. And then the CIO often will say: 'I like your cyber method. But if you can reduce my cost and complexity I'm doubly motivated.' We have combined the need for Zero Trust and now AI becomes a further catalyst with cost and complexity reduction, which is helping us because most companies can't do cost reduction."
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