Zscaler (ZS) 2 Dec 24 2025 Q1 Earnings call transcript

In its latest earnings call, Zscaler Inc., a leading cybersecurity company, reported a strong start to its fiscal year 2025. The company's revenue grew by 26% year-over-year, with billings growth accelerating to over 30%. This impressive performance was driven by the adoption of Zscaler's Zero Trust Exchange platform and increasing interest in its AI solutions.

Strategic Focus on AI Security and Zero Trust Solutions

Zscaler's Chairman and CEO, Jay Chaudhry, highlighted the company's continued market share gains in cybersecurity. The company's billings growth of 13% far exceeded the recent average growth rate of publicly traded legacy network security vendors. Chaudhry emphasized that Zscaler's AI-powered data protection solutions, such as securing the use of public AI applications, are a significant factor in this success.

Securing the Adoption of Public AI Applications

One of Zscaler's recent innovations involves securing the use of public AI applications, such as ChatGPT, Microsoft Copilot, and Getacopilot. Zscaler for copilots provides granular visibility and access control, limiting copilot discovery of data, and enforcing policies to stop sensitive data from leaking. This capability is driving large customer wins, as evidenced by a recent 7-figure ACV deal with a Global 2000 technology services customer.

Expanding Functionality Beyond Public AI Applications

Zscaler's innovations extend beyond securing public AI applications to customers' private AI models, including chatbots, LLM and SLM models, and inference engines. The company's goal is to provide comprehensive AI security solutions for a wide range of applications and use cases.

Strategic Investments in AI and Zero Trust Solutions

Zscaler is making significant investments in AI and Zero Trust solutions, with emerging products growing twice as fast as core products. This strategic focus is reflected in the company's financial results, with a 21% operating margin and a 46% free cash flow margin in Q1. These metrics, which are well above the industry average, demonstrate Zscaler's ability to generate strong profitability while investing in future growth.

Addressing the Challenges of Legacy Security Solutions

Zscaler's leadership in AI security and Zero Trust solutions is particularly relevant in the context of the evolving cybersecurity landscape. As hackers find new ways to exploit the limitations of legacy castle-and-moat security, Zscaler is positioned to provide more effective and efficient security solutions. By modernizing and future-proofing security with its platform, Zscaler is helping organizations become more secure and resilient.

Looking Ahead

Zscaler's strong performance in Q1, coupled with its strategic focus on AI security and Zero Trust solutions, sets the stage for continued growth in fiscal year 2025. With a growing customer base, a robust product portfolio, and a strong financial position, Zscaler is well-positioned to capitalize on the opportunities and challenges in the cybersecurity market.