ZS - Earnings call transcript Q1 2025

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Operator

Good day and thank you for standing by. Welcome to the Zscaler First Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ashwin Kesireddy, Vice President, Investor Relations and Strategic Finance. Please go ahead.

Ashwin Kesireddy

welcome Conference Zscaler Call. and Year Quarter everyone, Earnings XXXX afternoon, to First the Fiscal Good

On Jay CEO; Chaudhry, call Chairman the with and Remo me Canessa, today are CFO.

supplemental posted Unless website. noted, on all about release we an Investor talk otherwise our we will note to our have and Please a today financial numbers adjusted schedule Relations basis. earnings be non-GAAP

our GAAP earnings the find non-GAAP the will to reconciliation of release. measures You in financial

but and which market operating after customer including, limited I'd billings, of some to free will rely and share, income, retention remind contain hiring remaining of These objectives should future opportunity. net company's as like future to to, the outlook, net statements not our rate, representing dollar-based views future. and obligation you our discussion to anticipated decisions, per statements, to our and performance the today's of today, operating but call. that response products on forward-looking statements performance, expenses, apply income, in share risks update not rather performance undertake guarantees this and We our our market comments income subject you are revenue, These control. calculated are no obligations, statements earnings our future flow, gross cash as margin, these are operating forward-looking them not uncertainties, beyond and other taxes

see and as please risks For in the release. our with a earnings the more discussion complete as today's uncertainties, filings SEC well of

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turn to the call Jay. I'll over Now

Jagtar Chaudhry

accelerated to QX year-over-year Thank interest and our over to growing of Zero AI commitments platform again growth matrix increasing in by grew and guidance. the XX% Revenue you, driven a We once our all customer delivered high bookings Ashwin. our with Exchange strong exceeding end Trust XX%, solutions.

far share of traded XX% by market percentage growth our legacy demonstrating in continued vendors average points cybersecurity. billings over growth Our of gains the XX exceeded network publicly rate security recent

revenue our are executing XX% plans and customers to rule companies at of rule top in for their XX%, XX pleased or our customer margin better. of operating guidance. of solid prioritizing while that operates XX for are on We year the of progress very growth tremendous rare driving SaaS delivered results, scores free for profit for with handful I'm spending. my SaaS SaaS cash with AI full cash making innovations go-to-market on XXX Zero strong This a we and our many a records company by billings relying us demand, conversations, our our operating and margin are QX continued that security QX us grew places and largest free flow flow margin XX% in strive Trust for year-over-year was public revenue profitability the us IT companies quarter makes successful of and operating of CXOs well as and discipline, new increase

and X areas are We following high AI the are AI recently with several expand interest. AI We fighting delivered our in AI. innovations to portfolio of continuing customer

only discovery provides sensitive public to access for enforces right from with fixes pilots. the AI access customers such CoPilot data. applications. data policies cloud granular Zscaler as enable safer adoption of applications to copilots for private AI faster Getacopilot of and use securing to ChatGPT, stop gives and coal visibility securely copilots to apps or Limits and copilot and find data classify data, leaking. for of on-prem misconfigurations users control adopt public We for Zscaler Microsoft First, and

industry-leading Our area in large this driving are wins. customer capabilities

securely secure protection win, accounted For purchased that a customer logo XXX a technology a Microsoft X-figure services Copilot data CoPilot, AI-powered the our in customer enables Data new for of opportunity XXXX opportunity I which ACV XX% as this And a deal. of solution, Global for use use protection example, of us. was out secure Office is huge roll to believe Microsoft well. huge the

AI enabling used visibility provide pilots, public by secure apps In employees we level addition store to scored queries AI auditing risk purposes. for prompt control logging adoption of into core apps and and the or of

their adoption the of security. apps, widespread With AI public for growing demand seeing are we

chatbots, apps public to AI Our including SLM innovations beyond expanding engines. models AIFs and private customers' LLM are securing inference and

expanding prone queries We LLM malicious analyze injections our and detect proxy-based trust to zero and of functionality an and in-line other proxy activities. are pump with the to prevent results exchange

automated digital and AI-powered efficiency operational user for Second, of resolution end-to-end performance experience faster issues.

including digital already copilot products are large Our experience automated ZDX available deal to wins. contributing

and care seats use example, XX,XXX ZDX more service which this With than provider with XX,XXX doubled the for ZDX IT subscription copilot For This a deal, to to health in us. for automate ZIA to plans and tickets. includes core annual operations time large customer pilot deal, resolution ZDX upsell ACV Advances, this spend double purchased X-figure customer's all a seats. reduced

to automated next and issues. analysis, performance to with in reduction provide the to cause in copilot recommendations ZDX taking further root user fix ZDX resulting agent level automate are a time resolution We AI

security and products better AI-powered Third, SecOps and cyber automation. or protection data

cyber We detection Gen vulnerability automated such AI-based data OT have classification, app and IoT image several for data segmentation delivered zero-day discovery. and as ML-based prevention, classification, AI-powered and innovations protection AI-powered device

including by have our Data Fabric management platform Trust with introduced security availability Zero of extending technology. For RiskXXX increased productivity and several innovations, we efficiency unified and operations,

including prediction, and breach threat hunting more. We AI-powered developing are other innovations,

vast amount proprietary transactions by of billion Exchange. solutions generated data day leverage Trust AI-powered the XXX Zero our Our by enterprise processed per

opportunities, to our creating continue and we our it to AI with AI will new which of expanding agent-based to well and and combine expand platform. exciting We combination positioned our portfolio. new leverage Trust large rapidly technologies with data are The Zero is capture

enable with new vendor of VPN finding sophisticated increasing are the exploit an limitations security firewall or hackers products organization solutions offering start the and often such to entire exploitation threat retail implement enterprises more the billings. architecture, on a was of recently than spending vendors billions of are under for A breached No point which of customers. on, castle-and-moat Security, VPNs so-called try enemy to me flawed despite many them ways disjointed These to move dollars to the the pretext nothing make legacy it, attacks are that up corporate legacy increases network actors security getting wonder, security the that platform. launch sold Moving on compromise traditional laterally attacks, is architecture. legacy for is constant number the platform. offer XX virtual This a nothing And Complexity of cloud. it than and so-called final security when complexity consolidated to and resilience. in they customer found Fortune they told firewalls so SASE more

Sooner organizations security, move Zero our customers reduction. they security and resilient. modernized cost secure away simplicity to for platform the and become from disjointed Zscaler better solutions Trust, and will future-proofed operational these sooner security with

first XX% in logo our deal, an and seeing more chose new enterprises the Global a and over a we're XXX. a protection secured platform. more workload as XXX,XXX and strategic This global aerospace proudly the adopt defense XXXX X-figure their initiated cloud example, towards of for and we purchased and customer their X,XXX for shift architecture ACV large XX% And partner about X,XXX give company ZIA users security Today, of Zscaler workloads. To transformation. Fortune you for

see significant upsells. for ZPA opportunity we Additionally,

ZPA XXX Fortune existing an example, customer to an all for XX,XXX from subscription share and me purchased the users insurance Let users. ZIA XX,XXX expanded XX,XXX

firewall-based is the the acquired us to expedites securely value with having over customer's rapid to Zero entities, was this SASE $X M&A X addition doubled integration this by possible this M&A to providing securing with Trust This upsell, time companies. a faster without access ZPA In annual to realization solution. objective for for key million. private spend customer. for of With employees access applications almost to applications, not networks a integration to connect

'XX. of We expect to one ZPA drivers to in be our growth fiscal biggest continue

Zenith we adopting. to outlined broader solution protection. our are on At data of data Moving increasingly our protection Live, that customers our vision

data purchased example, to multiple legacy solution eliminate protection pharma X-figure insider e-mail, thrilled I'm For more. prevention, Zscaler. Fortune data and This the loss a we with with a company including data double customer this management, in of over users purchase bringing ACV security threat XX,XXX spend to nearly are the protection XXX innovations solution. annual products, data point for deal, our our

yet endpoint. require with which that offering, agent third-party complex the recently combines CPA bring the of to are be cloud partners. on third-party capabilities browsers access access enterprise we all by was and to Zero introduced addressed browser my application to our Traditionally, either third-party Trust suppliers product deployed a that and example, VDIs expensive For unique another

and exploited deploy are Third-party and enterprise by to browsers manage, their are vulnerabilities attackers. complex being

products. eliminate like eliminating insurance IT X,XXX company cloud superior users, for company third-party browsers. examples, to Global third-party home access provide Global for legacy a To for a XXXX Our browser few you security company users, and solution and X,XXX packaging uses our XX,XXX standard U.S.-based users services solution while VDIs browsers shipping a a give XXXX and each over purchased

We to accelerate will this area. continue to invest in innovations

Combined as Emerging cloud products, growing to with account-centric our ZDX, are our emerging Products I'm excited go-to-market Zero our our emerging Trust core increasingly analytics our including success. as AI fast driving is contributing products deals. products. that and X-figure share large Next, twice branch for and motion, to are ARR

X examples. me share Let

number transportation workloads, XX% and firewalls of footprints deal, approximately has First, strategy. $X cloud innovations over of X-figure which by million-plus in a driven protection large of for ARR upsell existing a continued the for for in increasing go-to-market the ARR purchased from eliminating upsell ZIA our Fortune annual workload the virtual spend protection environments. quarters. we past drove This account-centric are this increase customer couple securing our XXX customers, accelerated workload workload customer,

Trust with Trust X-figure is not a automated ACV East-West Zscaler SD-WAN. Trust Zero working integrator supplier SD-WAN eliminate customers' in movement architecture. This lateral the networks achieve will Zero deal traditional closely our an the of combination U.S. XX for their I large a system Zero North-South a decline factories. new and to segmentation possible threat segmentation win, legacy we device A firewalls. SD-WAN GSI, of our Zero to branches Second, or logo, of will and all security Trust for branches and to transform with with among XX and of which accelerate factories, believe, with example across global device is X purchased solutions,

level Next, proudly upsell federal significant DoD posture serve in over opportunities this And to XX agency their and and new landed Federal by including reduce cabinet the adopting and agencies quarter. improve cabinet-level XX of vertical, the security we to added the the cabinet-level a now are Having we we cost complexity firewalls VPNs. platform see ARR these grow Zscaler time. agencies eliminating agencies

are into continuing also other expansion agencies. federal We

the these by these are governments business ZPA large moat the For United architecture. example, as federal to are in Australia, And countries. planning the in opportunity, successfully purchased XX,XXX huge We logo X-figure state and result, created a a a Government our United investigations Japan, solutions. a concluded U.S. nation in federal as other grow new we our including attackers Trust by for success Union, a users countries, and Kingdom breaching will fiber and ZDX, firewall-based ACV leverage in that see Zero and this multiple European win, States Singapore, to deal. adopt the agency

executives are highlights few load hiring highly pleased attrition making attrition. I on strong quarter a of of that the solid a share had me to experienced we're progress we making up-level and share engine. Kona am plans. our progress and hiring We let to had account go-to-market caring Next,

our We of the expect QX, heading to our second continue opportunity-based selling. these decision fiscal trends sales 'XX. from year, to to the strategic we account-centric selling shift sales motion half capacity Last strengthening in into made

growth Strong COO, Our and stronger are already with team execution and this better in and are unscheduled rates Rich in and more executing strategy, customers. contributed engagement customer to customer year-over-year pipeline, Mike seeing QX. XX% billings business close his over sales engagements, we on quality higher

of As billings new reminder, upsell renewal and is a comprised unscheduled billings.

$X We million million $X QX customers ARR also us. year-over-year annually with to XXX. We customers with spending by over grew cross plus XX% ended XX

Moving the on to channel.

hyperscalers closely partners customers. partner partners, continue With working believe to of increasing a strong and An strong national joint ZDX, solutions grow partner ZPA expanding and their is growing beyond value customers. to in more include the expanding mature to platform for our are achieve are million-plus plus and now ZIA, for expect faster strategic their customers account-centric our strategic sales and stronger engagements. our track partners number with combines to execution our a products. our embedding sales offerings I drive of We a emerging that productivity Overall, Zero are In million and in we motion, and increase pace. portfolio with and we regional number AI team pipeline, with including GSIs, realization $X at Zscaler's to of Trust strong customers. conclusion, on remain growth. sales resonating the power $X strategic

of to getting Our over in customer our billion go-to-market proud stronger Xx I quarter, continue Net of further make initiatives average. Score am goal progress XX, $X which achieving is engagements made company of are demonstrated our this we progress towards or ARR. our the as and by in NPS the next will well Promoter SaaS we over

over turn Remo the to like to financial Now call for results. our I'd

Remo Canessa

Jay. you, Thank

QX scrutiny large deals. on even our guidance growth exceeded ongoing of Our and profitability, results customer with

Revenue Americas of a year-over-year XX% APJ EMEA and was was From XX%. geographic XX% up was and sequentially. represented XX% million, X% up $XXX revenue, perspective,

Our total calculated grew billings year-over-year XX% in to $XXX QX million.

billings year-over-year. Jay upsell mentioned, and our comprised As new renewal over of grew billings XX% unscheduled

year-over-year. grew billings current calculated XX% Our

in the in transformation of over RPO. remaining a strategic customers speaks Current ARR. billion. XX% our digital total with over grew $X.XXX performance year $X to $XXX,XXX We Our ARR in RPO customers' XX% of we to play continued was XXX ago or with RPO, growth approximately journeys. customers million strong with ended from QX obligations, role large X,XXX the and This customers

was retention net dollar-based rate XXX%. trailing XX-month Our

There for to variability business, I in start rate retention a our a due dollar-based bundles, can future. increased factors metric the pillars good success quarterly selling in the from and this year, our mentioned. faster selling bigger sales could While our basis within multiple on just reduce in be net the

XX.X% QX the our of ago of performance. year rest in the gross to to Total XX.X% quarter. margin Turning financial compared

total Our million. X% increased operating to $XXX and sequentially expenses XX% year-over-year

financial generate margin of model increase to leverage XX%, points about our of in continue year-over-year. significant an We with XXX basis approximately operating

data approximately cash, free Our including and XX%, quarter X% short-term center was with cash ended billion $X.X CapEx over We in revenue. flow cash investments. margin the equivalents of of

QX full year me guidance XXXX. let provide and our Now for fiscal

gross XXX assuming new margins. shares. million margins. $X.XX the of time $X.XX, in per tax gross of for our growth This As a the remind go-to-market to diluted a products the to we margins to reminder, margins $XXX Operating scale. for other in approximately optimize of approximately quarter, earnings we're these second non-GAAP, that strong numbers are I continue growth optimized are will than would of that in expect million, million range experiencing of million, fully $XXX new rather all they of XX% net We range to year-over-year the rate $XXX plan investors products influence income revenue profit $XX a reflecting to range over and XX% to and share million, XX%, $XXX as million reducing are and faster like for

range in $X.XXX billion, expect billion XX%. $X.XXX For of full fiscal billings we year to of growth year-over-year the reflecting XXXX, to a XX% the

year XX.X% our expect be to mix We Revenue billion, $X.XXX half of the to guide. $X.XXX first approximately our to billings to reflecting range of a XX.X% XX% growth of year-over-year in a diluted assuming billion profit approximately Earnings to Operating million shares. in million. million range $XXX to share XXX the the XX% $X.XX, of $X.XX XX%. and $XXX rate per in of range fully full tax

to flow our expect cash to We approximately be free margin XX.X% XX%.

AI compared increasingly a And percentage position adopting upgrades opportunity the long-term data for in of to cloud invest infrastructure. our aggressively to and large and we to as fiscal we'll our approximately platform, market points With a us higher to X and customers expect broader CapEx be growth as XXXX. We center revenue invest profitability.

Zscaler has to $X.X the personally also On Zscaler for which years customers, like to personal in our billion $XXX to I'd thank that our special. Officer me thank their to amazing partnership, been like been very for Directors employees the million decided I greatest investors confidence a also am that and to retire to partners, part several with analysts. next to the to and less for Zero through cybersecurity has decades continue ARR. his a share of confident a Trust I Board me. note, thank He than of journey will of years, X from progress. over I'd Financial Jay Zscaler's It Exchange scale. as in and true look forward been shape Zscaler's I'd a be of after like has I Chief have platform. of my following support pleasure

Jay. I'll to Now the over call turn

Jagtar Chaudhry

all to be his successor trusted Remo many pace. his friend personally Remo business partner remain judgment helped as decisions for dearly and at to appointed. been has will make want thank unprecedented a He a missed. an whose our CFO contributions wisdom we business and Remo I critical scaled Zscaler. us will until

With that, call now operator, the for may questions. you open

Operator

[Operator first Kalia will Instructions] line Saket from question from of Barclays. the come Our

Saket Kalia

on a off, before well. the congrats Zscaler First retirement. this on and as all Remo [indiscernible] your companies

Remo Canessa

Thank you, that. Saket. I appreciate

Saket Kalia

grows as historically? Jay, you sort for confident XX% or and some your versus billings unscheduled versus billings back talk the And of growth you feel what maybe growth accelerated did that Thanks normalizes the last look you. this of billings as the how maybe context? to Can quarter pool still contracted you about quarter. for just it expectation in do noncancelable that sort forward, on of detail was for maybe

Remo Canessa

start. I'll So

expected and exceed So actually expectations our also. the XX% what is growth we

talked the XX% about the X% half billings we As in first second half. and is the scheduled in contracted

about talked in So second the XX% the as also be last plus billings unscheduled do to expect call. we half we the in

Jagtar Chaudhry

comments. to Good. add me that, a And addition few let in

the will One, are we're I platform, have factors for demand that X sales as believe Zscaler security including second has Three, have solid us AI seeing on offerings interest attrition ramp helping Our QX. Two, strengthened half. was strong for growing strong that of have, we signs strong. capacity in before. there keep QX There we sales wasn't pipeline. a we our and very lower

the So guidance for I half. about good our second feel very

Operator

Our next of question will Wells from line Fargo. come the from Nowinski Andrew

Andrew Nowinski

opportunity. decade. to like a the Remo, -- the The guess over working copilot ask retiring. with sorry you certainly a guess It's data security. sounds last I'd question ZDX like an on I been interesting to you hear pleasure certainly I

you're ability Microsoft you if your Given our supporting this would some could just more whether more bring how more Microsoft XXX, beat partnership is but to help on in endeavor, color Varonis wondering how helping imagine and prior you customers I with roll Office helping you Zscaler are and -- traffic securely out to copilot space? provide you they're customers that in seeing deliver maybe and

Jagtar Chaudhry

in API for line opportunity as in it sitting for It's including and lot go leveraging was one ways. of talking Office traffic some of that a for building data good Microsoft we're did is we essentially XXX. what's advantages work Yes. the and question. like. integration, we've actually integration OfficeXXX, we years. Sure. big known for the our maybe using We classification it's bigger is of drive as also unique others. for And us a some out-of-band as while and us but gives all are classification this can discovery What discovery tons with of for the of done the over What SharePoint

Copilot embraced now wanted the and privacy are are -- a key are well. the briefly deals. customers Customers company, data XXX. earnings Copilot. they We're Microsoft mentioned to release, Office here about to real our they I concerned leakage use already and XXXX secure We beginning have as during seeing Microsoft actually

that's is user data deal really with of they're make identifies a be X-figure solution by and did by using data amount when sure which right us. was they This AI-powered, Microson and accessed protection a right the driven only our can So deal the Copilot.

data sitting of it, many well will while may sitting the do AI be them security, both us. piece as traffic at They out try in but path. not line So there do do in can are many companies to as but of able one to we very

you'll very more see I'm excited us. with opportunity. So coming with And the

the sure to are customers many with We field working the organizations our Microsoft with same the already common of we interest. help have as make customers

Operator

line from comes Borges question Goldman of Gabriela next from the Our Sachs.

Gabriela Borges

on particularly their now want I environment replacement we strategy how your changing? trust VPN close the cycle. FY what are the maybe ZPA on do VPN growth your that How reevaluate comments Maybe the call competitive are a of catalysts meaningful And us is follow it in Jay, driver might to in long think some metaprice COVID? being during versus and far just to you up VPA 'XX. of remind

Jagtar Chaudhry

the Coat are Yes, to, long them in here. of VPN. whole There big discovering Gabriela, be hit opportunity the I kind lots of a and of that are them. a is DDoS setting just Similar external is long all replacing of wonder DMZ It's the ago. VPN thought the VPNs to VPN firewalls, you. it will proxies kind places But not lots stuff. stack, point. used and starting gone lots starting how protection, that be lorbalancers, to out inbound We're us. the with entire we still time we for Blue

the ends out a segmentation next And that's big So zero phase there. up being of this opportunity. opportunity trust

Trust. replacement, entire DMC of segmentation and Zero So inbound X VPN

upsell competition. still about single-digit by time where the matter it in mix up and They're VPN virtual turns will look the ZPA, Trust. of to percent for and cloud when it ZPA business. customers If with buy generated spin our numbers, the more headed. out current new what IPO, of trying ZPA to call you it's see ZIA wins We I that's ZPA are and and our ZIA, customers growth over we've of a believe at done more is combined. was our ZPA new Today, employee, a all and at every so-called and and of Zero upsell ZDX of remarkable it's the a XX%

big a for some advantage time. have we think we say So quite

Operator

Bank. the from Deutsche from Our line Brad of Zelnick question will next come

Brad Zelnick

and year you've given Jay, strong guys. compare information the there, to congrats players out hear bookings to firewall of this much you you your start Remo, surprised I the differentiated are. was shared to run how growth quarter So that nice fantastic just

some of life. of are talking significant as that ahead they And hardware about boxes opportunities go have end folks refresh those

look and set extent rearchitect and opportunities branch totally events a for what transform go and platform? If to displace bring those for them you your of Zscaler and backwards, firewalls, are to example, in onto

Jagtar Chaudhry

question our SD-WAN a not able statement. I with west firewalls and a where agree this cloud takeout are had to limited data Zero most well the have north sitting about a Yes. about was to used, say, with the X opportunity other with ago, customers of our used the a should ever good ask about ago, cost center east fresh branches segmentation. firewall are was year firewalls, highlighting We're today, people billings refresh we the that firewalls, on south for wondering When growth combination till we you delta me Zero And as worth in we but in it. next now impact firewalls firewall programs. we well. is but we on to so of in Trust big replace comparing us. you as target our I on Trust And But firewalls, device that's planning no, years But I to shouldn't, you are to talk directly. are we firewalls. thought replacing it's focused moving would year. I

with seeing eliminate to platform. tremendous reduce interest or firewalls I'm our So customer

be pursuing. good we'll opportunity So that it's a

Brad Zelnick

is know could bookings plus for or Remo, just in sneak strong. XX% that quick I I If a follow-up, really mean don't growth, I but you

I think strong by is my current as bookings CRPO math, well. using even

just you duration. bit unpack as we're feel strong. maybe understand but a us by looking and billings so the -- unscheduled if And help understand is driven that bookings just for dynamic, significant I is I So us not worth at It's versus it's number everyone. for to this like maybe a Can delta. that drilling highlighting pretty scheduled to just I into

Remo Canessa

our growth first of that. Brad. in XX% that. both helping it's second bookings is to half percent and mean is is of growth, proud a XX-plus number, Yes. thing are I fillings that the basically, that call great -- One out half really unscheduled

again, bookings XX%. XX% XX% in with growth but -- year-over-year is, growth number. strong RPO CRPO, So CRPO really a growth good

well And all we're So good positioned metrics. our with again, customers.

XX% the hold. lot is really we upsell with Our also go in into really second the again, new -- this QX second good new as organization A happen and upsell things half for QX of selling with year. is half go-to-market into Zscaler into the accounts and taking -- of

Operator

from comes from question Needham. of Mike line Cikos next Our the

Unknown Analyst

And unscheduled I year-to-year quarter. the XX%-plus billings wanted the to to really back come just in

that. So congrats on

around by wanted tie the hear that Just sustained on you Is growth products which class as to if that fast base billings to see, emerging those that products. most on get on can products would driver that's emerging core? the we most have emerging products that seeing to color today into disclosure being scheduled traction? that more is of see the or that, growing that as some incremental. that be wanted twice is ARR I Anything would

Jagtar Chaudhry

ZDX as emergent include board. as core workflow AI, doing products it's well Mike, mean -- is both well, our our the protection, solutions. very emerging for products. The it's what we called and doing us. is out ZDX well I across Yes. products also It's branch workloads

for beat feel that to the it's in comment and mid-XXs emerging upsell But answer question, percentage the of we'd products, we forward, across we your and emerging Going new ARR growing more about that. couple or be the it. excited entire I a Xx We're The Yes. products board, at Yes. products. add of core can the platform. about Maybe our very comments still it.

ACV talked one it. securing We automotive the branches. branch. X part of XX for for this We for devices We of branch it? highlight doing segmentation SD-WAN The some the driving branches. I So deals zero trust the what's a airgap set for is branch XX of suppliers. about X-figure

we on, which workload is of the believe taking at on attacks especially the pleased transfer SD-WAN, this is with thing going making disrupt that to progress So lateral enables is cloud and protection. a movement

workload with a early footprints. have workload did selling in been customers is deal smaller lot these have started past the We in that small because a a in on protection. We us. X-figure very of interesting grade

Now opportunity will zero only going here. is deals, all workload what's are they're because the for school competition we space That's expanding then be those we and and footprints with excited are there trust And to had bigger why excited. accelerate segmentation that's for the the in communication our us walls, next opportunity. workload

Operator

Our Oppenheimer. question the of Ittai come line Kidron will next from from

Ittai Kidron

couple you congratulations and so small for A me. of enjoy Remo, ones retirement, it. earned

I number remind trying percent of contribution-wise? ARR can pieces in if emerging the an are category, products, may. they one? number change products an the all, the right end. the get wondering here what biggest give And two, I'm on target or year. represent ARR now year you and for ARR then to number better do But here also, of you I mix target within First business on of what fiscal X emerging an for last secondly, was Remo, in us you of just X the there right now? new you activity can for us the give the earnings update call, if end a sense

Remo Canessa

-- let start Jay finish let I'll then up.

end the for billion. ARR year the our So is $X of target

rate for retention Net is track again, we that $X which so on think And outstanding. we is are XXX%, billion.

retention But related to the to products, I'll effect products. net upfront. about, products has new vision we Jay. the the of and with that of it more to turn a customers talked makes that emerging emerging what As strength that up over influenced of is rate positive part the buying because

Jagtar Chaudhry

Yes.

Let me expand upon that.

piece Zero the And Trust them Zero appliance. now few in of put ZDX Trust shared very our Group Connect a good You for workload with area has Trust a opportunities. couple done well. started well. a biggest branch becoming Zero a SD-WAN. of as AI It's out It out. buckets. us. for Trust is it. Branch started examples, cloud, It's Zero great good I actually the products us pretty can

we we excited. up year. pleased out, it business analytics. as are but I from emerging be products very mid-XX% part we're AI other about This traction, base, we was last opportunity, it In solution with coming believe, of talked taking. for and a upsell In in expect past, AI to the So new the XX% various XX% from, small year-over-year. was had the up are called range, bundle a It's products we the

emerging in see we do strength So increasing we forward. as products go

Operator

of Piper Owens the question Sandler. Rob next will come from Our from line

Robbie Owens

you I while deals. guys Remo on if remarks, there's around I opportunity, said rolling you just And or something the And some scrutiny pick A I'll your ongoing a about in he large comment because something out. of transformational general know in I and covering and have solutions script customer Remo guess the your don't prepared that's AI are opinion. adding these of else that lot economic is talked

getting if economic or Just curious comment? general to something else that there's if cycles a was might lending be are longer deals bigger more as sales that just of

Remo Canessa

just basically, a it seen Robbie, we comments, general a was Yes. which for economic any change while. haven't really

Jagtar Chaudhry

Yes. But that in us. ways helps

cyber, and We reduce interest especially of ware really attacks the cyber in the that like. can are seeing chance ransom

CIO doubly changed. offer the I Trust to in. your motivated. But And Zero you cost complexity got use like cyber my where comes will So hasn't and that if to then and say, method. that's

the firewalls. for base most can. So helping combined Legacy of reduction, do is further with not us We is Zero final reduction. cost that need cost can to companies large a Trust and we because going now vendor have which becomes cannibalize complexity and catalyst AI installed

Operator

from will JPMorgan. Essex of line question come the next from Brian Our

Brian Essex

How you I Remo, noted I hit congratulations. progress release, can understand terms to you to over where working you the daily you the with traffic side and environment? you of in Jay, We're huge. and data customers you. your scale we're is the your help to volume the the evaluating [ the of of certainly trillion ability in noticed of seeing are ] surpass going would maybe SecOps that the side press in Avalor have the in market that X.X be which current on us want equation. with SecOps all transactions, the given are changes

Jagtar Chaudhry

big a It's ready SecOps disruption. market. market is for

need taken approach massive data of very can all the fabric stuff to building all link, queries come which so take to starting thoughtful the that We by the have forever. data doesn't and

Avalor for acquisition that has So us. done

market. that back started a Now with things in we done few that's by end powered Avalor, upon are have Avalor. We building RiskXXX the the already the

called platform, they as are on experience power do we're the being stage sure be the properly the products biggest [indiscernible] vulnerabilities the some building, done. of same what the better others and some In can of the have doing of We it's working that the seeing reach But design helps to that that prediction customers very hunting. And actually then results. some will is that customers management in -- be win and is unified getting value offerings seconds, and prioritization digital prioritize are next running They're bigger space. early good well. essentially scoring with thing the we're easily needs can't phase

point you much was, technology, have can we with what go it. can't build you enterprise kind the do and make the but of to private need, you if you don't want So data

do took ChatGPT, trained actually we having thing available, on those of based collected me be each so are But this private. customer customers, benefit. data world, a able lots can it can the logs whole they're the Let applied it on the stuff. the contrast it, train to LLS, specific learning, public well, to the but gets Zscaler

you're start going increasing are area. And over investment results to meaningful area. some we in So more this this seeing our in time,

Operator

The Joel will of line come question next the Fishbein from Truist. from

Joel Fishbein

fill bit you U.S. shoes public and big sector little sorely talked Federal. the Remo, missed and a to you'll Jay, about be

that realization to They've seem hear a any and where I be update there's other and you if at primed been any and DoD stands. there. would been curious projects Just looking for ThunderDome on doing love to that.

Jagtar Chaudhry

on cost about Abney that's business. our the believe XX One have We we had think all the we to NAC, North-South, the reduction. cost agencies there reduce of for opportunity very Lab coming federal in across all We defense, those share continue of federal initiatives. new positive complexity. reading out have kind and are big I This as and we them because market of with too, some West, number XX we a roofs a We very, is other -- of of in board. gain board, across past. we customers. our East products. we administration push VPN, we reached segmentation, now eliminate the So about for us, thing talked for our

not and kind narrow friendly the countries well. So opportunities, taking I'm of western same the about solutions excited the to U.S. just it's federal They're some the friendly, as of

Operator

come from the Our question will line of Fatima Citi. next from Boolani

Fatima Boolani

to should illustrious question regards on to guidance with Visa some the quarter the a of we I wanted maybe early. I Remo, billings shared that on Is second based and of you commentary an congratulations about you think appreciate implied it the Remo. anything and some ask updated landed that career. transactions billings there seasonality

get a quarter quarter to out why of better second pay hey, gate, sense first strong trying the see really that expectations. certainly to was some quarter. Just relative of fiscal But in second would down the -- of, we

around can you give If some that. us color

Remo Canessa

dynamic, on occurring talked key up the great we -- our for the you the half. Yes, billings first take quarter a the the guide first And year. XX.X% for at beat thing in for look, quarter. second is for about half prior call, X% and billings which we to indicate the we're The that second Really fundamentally, would that nothing's a changed the is scheduled XX.X% key if the is actually XX% passing the had XX% in the quarter. is entire what to second

as pipeline I been very Attrition Zscaler. very So that the hiring organization forward, will can a go our is good becoming I down nothing's guidance. say important really can really supports is organization. say become What our What sales go-to-market SIs also part in has very, fundamentally more strong. that changed. we is is our to

our guidance full up we the with that. brought outstanding. we comfortable feel basically, second go-to-market the our Absolutely, we half, also talked guidance, Mike as up for been thing, and Bridge, team have the year, leadership the So about same execution and has you

Operator

the of from Kothari question next Shrenik Our will line come Baird. from

Unknown Analyst

Congrats luck working next you on the chapter. for with retirement, Remo. the good and great It's

account-centric mentioned, the benefits is yielding to shift the So already pipeline course, quality. with selling, as of Jay

or sound follow-up Jay, figure mentioned color going cycles? how with Remo, quantify you the incremental terms deals about the Just question longer leading any the the partnership GSI of SD-WAN. mentioned should some we us on facilitating you billings to I'd bookings say, Can you and [indiscernible] significant of is think [indiscernible] sales examples deals? that larger, GSI-led in and a to help forward? And also that or growth more let GSI with highlight success And bigger provide about type of more

Jagtar Chaudhry

lots U.K. we segmentation also trust and also us actually branches. contribution need protection firewalls phone helped trust actually GSI sold branch, for was highlighted the stuff. especially that zero this large combination and as and eliminating key we this lots GSIs of type And increasing and They very of of accounts. partners. are where driven in copier A and a good supply Bs of with in -- X auto Microsoft service question. seeing time Right. company company, factories a GSIs, I zero by parts for

now standardizing as are they are to ZIA, I the now standard be some including used of that we're closely on seeing working ZPA, is well. solution there's on, starting difference GSIs think and more stage, products with solutions our early customers ZDX, emerging

and generally, of advice VDIs, replace products this GSI a that's time, drive with eliminating we the of leadership those services is So Over about momentum And it. a take I'd about the difference. giving start those when up results. making opportunity firewalls, segmentation. get the GSI added of we to out. we're they what to their big it talk more and the an products It partners being very more you SD-WAN, But because end data say good are we'll VPN, pleased also the bunch think the creates products for to NAC,

Operator

come question Matt of Next line Hedberg from RBC. the from

Matthew Hedberg

seems back 'XX, thing it's you I I contributing Lots I first like go to of 'XX, of in QX wanted about ARR. to really look good protection $XXX million I in to guess large the talked not this about things it's think, think approaching deals. It quarter. to really of you talked about solution. fiscal back, And data

XX% about was . Any maybe it's really, business? to new like that feels product then. I it of business. imagine think contributor on faster was of I I that think emerging really ARR been XX%. at it the a back the growth. growing the base about growing scale than have and it's time But update to

Jagtar Chaudhry

growing our keeps faster overall business. on protection Yes. than Data

like about to. out when start And doing going thing of the then We falls is they leasing drive ChatGPT, biggest deals. AI be of that that's VI there AI, customers using protection worried because really some private think worry companies help Copilot as the will big there and our application with data under to are more public their building about services And data AI more I one area. are emergence that are

So in built the security even comprehensive data data for platform just protection, world well. not the and for end in SaaS probably of line, data data most and point e-mails with data over as we the have cloud applications, DSPM

totes We're us and inspection. other naturally to I I was for we on We're sitting the line. seeing in all there. think Internet, made as protection, you largely keep comment exfiltration doing happens data SSL are

and this doing So to it's natural grow it. good expect a for we're with business, job

Operator

today Boyd And of from UBS. our for last Roger be will from line the question

Roger Boyd

congrats been that you a security. extent your a And really to to my here. that you've vendors It's start to big traction seems to up competitive It going data do how follow of influence ZIA a see retirement data of seen but has forward? in-line pleasure. I'll said new deals? do like on holistic wondering on I'm that lot differentiator being you're what you go, Great. only having security just Jay, see ZPA, can Remo that view upselling But portfolio. echo that

Jagtar Chaudhry

side time, small the There is a no on data protection. ZIA such So data customer it installed base, or large and Data of started majority with comes protection protection, ZPA. our

us for it's natural easy start to and way. So that

relatively both with who why also The well one new out has the big helping that a unified important Zero well. or biggest and push small. device We a on there. -- segmentation are products Avalor, that products the opportunities side base. like large a what customers We a the some we prospects sell for they're management. think or protection Look, actually market are interest ZPA. don't of can some for gaps, company without can us on the air starting of are ZIA, installed seeing us Those are doing We logos as both Trust We areas. numbers because Villiger with of other. lot platform. in sell data Zscaler really in are for logo new us That's we the like

Operator

now back with to I closing it And Jay that, turn would like over to for any remarks. Chaudhry

Jagtar Chaudhry

to forward Thank your you you in. for See Well, Zscaler you you. be then. look conferences interest that seeing all thank participating Okay. many We in of we'll in one the

Unknown Executive

Goodbye.

Operator

Thank you conclude the participation for program. your today's in conference. This does

day. a may disconnect. great have Everyone, now You

Zscaler (ZS) 2 Dec 242025 Q1 Earnings call transcript