Zscaler's Q2 2025 Earnings Highlight AI-Driven Growth and Cybersecurity Innovation

Zscaler Earnings: AI Opportunities

Zscaler beat expectations in the second quarter of fiscal 2025, reporting 23% revenue growth. The company's Zero Trust platform continued to win over customers that were previously using legacy appliance-based cybersecurity solutions, which aren't well suited for cloud-based infrastructures and remote workforces. One notable customer win during the quarter was Nokia (NOK 5.94%), which is dumping its firewall-based system for Zscaler's Zero Trust platform. Zscaler CEO Jay Chaudhry noted in the earnings release that AI is creating new avenues of growth. "By combining AI with Zero Trust, we are delivering several key innovations to secure our customers' use of AI applications," Chaudhry said. As companies increasingly roll out AI applications and agents to their workforce, ensuring secure access is critical. An AI application trained on proprietary data needs to be locked down, and Zscaler's Zero Trust platform is proving to be up to the task. On top of beating expectations for revenue, Zscaler also beat analyst estimates for adjusted earnings per share with 24% growth. Free cash flow grew even faster at 42%, surging to $143.4 million. Immediate Market Reaction Shares of Zscaler were up about 5% in early after-hours trading soon after the second-quarter report was released. In addition to beating expectations across the board, the company slightly raised its guidance for fiscal 2025. The stock has been volatile over the past year, and it went into this earnings report down about 47% from its all-time high reached in late 2021. A solid earnings report could help Zscaler's stock claw back some of those losses. What to Watch Zscaler expects to produce third-quarter revenue between $665 million and $667 million, which represents year-over-year growth of 20% at the midpoint. For the full year, the company sees revenue coming in between $2.64 billion and $2.654 billion, a bit higher than its previous guidance. If Zscaler hits the midpoint of that range, revenue will expand by about 22% in fiscal 2025. The new full-year guidance is certainly good news for investors. The company is talking up securing AI applications and workloads as a significant opportunity, and that could have contributed to the improved guidance. The company will likely discuss its AI opportunity in more detail during the earnings call.

Zscaler Beats EPS Estimates, Up 23.8% | The Motley Fool

Zscaler (ZS 1.36%), a provider of cloud-native security solutions, released its earnings for the second quarter of fiscal 2025 on March 5, 2025. The announcement highlights significant financial gains, with its reported revenue of $647.9 million surpassing the market's expectation of $634 million. Similarly, the company delivered a non-GAAP EPS of $0.78, exceeding predictions of $0.69. The quarter reflects the company's robust strategies and operational focus, despite an increase in operating expenses. Source: Analyst estimates for the quarter provided by FactSet. Founded in 2007, Zscaler is a pioneer in cybersecurity, driving innovation with its Zero Trust Exchange platform. This platform offers comprehensive security solutions, overturning traditional perimeter-based approaches to a more secure, cloud-based model. By ensuring that users can access only necessary resources, Zero Trust architecture effectively reduces potential security threats. Recently, Zscaler centered its efforts on integrating artificial intelligence (AI) into its platform, aiming to enhance security outcomes. Expanding its market presence, the company targets sectors such as federal agencies and international territories. Leveraging its scalable cloud-native solutions, Zscaler seeks to capture emerging demand in cloud security and computing. During the quarter, Zscaler reported noteworthy increases in revenue and profitability. Revenue grew by 23.4% year-over-year, supported by a continued demand for its cloud-native security services. Meanwhile, its non-GAAP net income rose to $127.1 million, up from $99.4 million in the same period last year. Zscaler's free cash flow also demonstrated remarkable growth, increasing by 42.2% from $100.8 million to $143.4 million. Moreover, deferred revenue rose by 25% to $1,878.5 million, signifying strong subscription interest and anticipated future revenue streams. Key advancements in Zscaler's service offerings included upgrades to its Zero Trust Network Access, further integrating with the RISE with SAP solutions. This move facilitates secure interactions for remote users, thereby heightening data protection aspects. Another significant development was the appointment of Phil Tee as EVP of AI Innovations. These actions are directed at propelling AI-driven security enhancements across Zscaler's platform. Despite these achievements, Zscaler's operating expenses increased by 19% compared to last year, which could pose challenges for maintaining high-profit margins. Zscaler's management remains optimistic about future growth. For the third quarter of fiscal 2025, revenue is projected to range between $665 million and $667 million, with a non-GAAP EPS forecast of $0.75 to $0.76. Annual projections are equally promising, with expected revenue of $2.640 billion to $2.654 billion. These forecasts underscore confidence in maintaining the demand for the company's Zero Trust capabilities. Investors should track developments in Zscaler's AI strategies and billing trajectory. Continued penetration into government and international sectors remains crucial, as does the response to rising operating expenses.