Zscaler (ZS -1.64%), a leader in cloud-based cybersecurity, unveiled robust fiscal 2025 first-quarter results on Dec. 2, driven by the increasing adoption of its Zero Trust Exchange platform. For the period, which ended Oct. 31, its earnings per share (EPS) of $0.77 outperformed analysts' consensus expectations of $0.63 and even exceeded its own guidance. Revenue for the quarter rose 26.4% year-over-year to $628 million, surpassing estimates of $605 million.
| Metric | Q1 Fiscal 2025 | Q1 Fiscal 2025 Analysts' Estimate | Q1 Fiscal 2024 | % Change YOY |
|---|---|---|---|---|
| EPS (non-GAAP) | $0.77 | $0.63 | $0.55 | 40.0% |
| Revenue | $628 million | $605 million | $497 million | 26.4% |
| Calculated billings | $517 million | N/A | $457 million | 13.2% |
| Deferred revenue | $1.784 billion | N/A | $1.4 billion | 27.5% |
| Free cash flow | $292 million | N/A | $225 million | 29.9% |
Source: Analysts' estimates provided by FactSet.
Overview of Zscaler's Business
Zscaler is best known for its Zero Trust Exchange platform, which revolutionizes network security by eliminating traditional perimeters and enabling secure user-app connectivity in the cloud. This approach is well suited to today's digital environment, accommodating cloud adoption and mobile workforces. The company has been concentrating on enhancing its platform with AI-driven capabilities, and inking strategic partnerships with CrowdStrike (CRWD -2.76%) and Okta (OKTA -1.66%) -- strategies that highlight its commitment to innovation and expanding customer engagement.
The company's aim has been to expand its customer base and make headway in new market segments. By following a land-and-expand model, Zscaler has been successful in penetrating global markets; half of its revenue is now generated internationally. Its investments in R&D and the hiring of a new chief product officer underscore its efforts to lead in AI-fueled security solutions.
Quarterly Achievements and Financial Performance
During the first quarter of its fiscal 2025, Zscaler's revenue rose 26.4% year over year to $628 million thanks to strong customer adoption. Calculated billings rose by 13.2% to $517 million, reflecting Zscaler's robust engagement with both new and existing customers.
The company's non-GAAP income from operations of $134 million topped management's forecast range of $114 million to $116 million, highlighting its effective cost management and operational efficiency. Its gross profit was $463 million and its non-GAAP operating margin rose by 3 percentage points.
Notably, the number of daily transactions on Zscaler's Zero Trust Exchange platform exceeded 500 billion. This milestone emphasizes its significant role within the market, and shows the company is positioned for further expansion.
There were no significant one-time events impacting financials this quarter, although scrutiny around large deals was noted. While the threat landscape grows more sophisticated, Zscaler's readiness to confront attempted incursions through its security solutions has improved. The company's deferred revenue, which rose by 27.5% to $1.78 billion, reinforces the outlook for its future revenue gains.
Looking Ahead
Management's outlook remains optimistic going into the second quarter of fiscal 2025, during which it expects revenue of between $633 million and $635 million. It also boosted its full-year guidance targets modestly, anticipating ongoing healthy revenue and profitability growth.
Investors should keep an eye on how Zscaler navigates increasing customer scrutiny and macroeconomic pressures, which may affect its large deal cycles. Nevertheless, advancements in AI integrations and strategic partnerships continue to bolster its promising trajectory.
