In This Article:
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Revenue: $648 million, up 23% year over year and 3% sequentially.
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Annual Recurring Revenue (ARR): Over $2.7 billion, a 23% year-over-year growth.
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Net Retention Rate (NRR): Improved to 115%.
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Operating Profit Growth: 36% growth, with operating margin improving by 2 percentage points to nearly 22%.
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Free Cash Flow Margin: Record 22% for Q2.
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Gross Margin: 80.4%, compared to 80.8% in the year-ago quarter.
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Operating Expenses: Increased 19% year over year to $380 million.
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Cash and Investments: Approximately $2.9 billion in cash, cash equivalents, and short-term investments.
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Guidance for Q3 Revenue: Expected to be in the range of $665 million to $667 million, reflecting 20% to 21% year-over-year growth.
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Full Year Revenue Guidance: Expected to be in the range of $2.64 billion to $2.654 billion, reflecting approximately 22% year-over-year growth.
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Full Year Free Cash Flow Margin Guidance: Expected to be approximately 24.5% to 25%.
Release Date: March 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Zscaler Inc (NASDAQ:ZS) reported a 23% year-over-year revenue growth, surpassing guidance expectations.
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The company's annual recurring revenue (ARR) grew by 23% year over year, reaching over $2.7 billion.
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Operating profit increased by 36%, with operating margin improving by 2 percentage points to nearly 22%.
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Zscaler Inc (NASDAQ:ZS) achieved a record free cash flow margin of 22% for Q2.
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The company is seeing strong customer interest in its Zero Trust Branch solution, with 57% of purchases coming from new logo customers.
Negative Points
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Despite strong performance, there is ongoing scrutiny on large deals, reflecting tighter macroeconomic conditions.
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Gross margin slightly decreased to 80.4% compared to 80.8% in the previous year.
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The company noted that increased success in selling bigger bundles could reduce the dollar-based net retention rate in the future.
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There is a potential impact on sales productivity due to the complexity of closing large deals.
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Zscaler Inc (NASDAQ:ZS) faces competition from legacy security vendors, which could impact its market positioning.
Q & A Highlights
Q: How much of Zscaler's business is coming from CIA and secure web gateway replacements versus broader platform products? A: Jay Chaudhry, CEO, explained that ZIA was the starting point, often replacing blue code and other web gateways. However, the platform now commonly includes ZIA, ZPA, and ZDX. Recently, Zero Trust Branch has become an important starting point, with 57% of customers who bought it being new logos.