Zscaler Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Saket Kalia - Barclays - Analyst : Good quarter. Jay, maybe for you. You dug into a couple products in your prepared remarks that are clearly doing well like data protection. But maybe the higher level question is how much of your business is kind of coming from CIA and secure web gateway replacements versus broader platform products in aggregate? Again, I know we've talked about certain products and we've gotten data points on how they're performing, but curious if you could talk about how the business is looking from that perspective of sort of ZIA and everything else that sort of forms the platform.

Question: Brad Zelnick - Deutsche Bank - Analyst : Jay, it's good to see the go-to-market transformation coming to life. And I think we see it in the strength in $1 million plus customers and emerging product ARR growth. And Jay, I know you're not someone who's easily satisfied. What do you see that proves out that the go-to-market changes are making a difference and that those changes are durable?

Question: Brad Zelnick - Deutsche Bank - Analyst : Maybe a quick follow up for you, Remo. I think your commentary around Q3 billings. It's maybe a little bit lighter than some expected, even though the full year looks great. Just curious if there's been any change to the assumptions around scheduled versus unscheduled billings timing in the back half. Great job.

Question: Mike Cikos - Needham & Company, LLC - Analyst : If I could just build off of Brad's question on the go-to-market. It's great to see the number of $1 million customers that you guys added this quarter. Wanted to get a sense. I know we've had Mike Rich there for some time now. You're talking about GSIs. But can you maybe color the $1 million cohort that you have in light of some of these go-to-market initiatives that you guys have been working on now?

Question: Shrenik Kothari - Robert W. Baird & Co., Inc. - Analyst : Congrats, everyone, Jay, Remo. So Jay, you emphasized the Zero Trust Everywhere as a core strategic initiative. You guys have pretty ambitious targets. You said mandate to triple that figure in 18 months. Just curious, as you're seeing this upcoming hardware request cycle as an opportunity, can you talk about is that going to be your anchor point in terms of CR conversations, looking to replace the aging stocks? Can you talk about the traction you're seeing with customers who are willing to opt out of the legacy back towards their post tax Zero Trust?

Question: Shrenik Kothari - Robert W. Baird & Co., Inc. - Analyst : Just quickly on the NRR improving to 115%. Just can you provide more insights? You mentioned the increased number of ramp sales, reps is improving. Can you talk about the improving deal landing versus the deal expansion velocity? And are you guys maximizing upfront deal sizes versus more longer term expansion and how does it play into the NRR things going forward?

Question: Roger Boyd - UBS Equities - Analyst : Jay, I wanted to go back to the eight figure APAC government deal. I think you talked about kind of them going wall to wall with the Zscaler for users. I'd love to hear any specifics you can give on the ROI with this customer, kind of the scale, the upsell there. And what you're replacing. And then as you think about the pipeline for global government deals, this feels like kind of a landmark deal for you guys. Just would love any color on how you're thinking about the opportunity with other governments.

Question: Brian Essex - JPMorgan - Analyst : Jay, I was wondering if I could dig into maybe the comments that you had on ZDX, and would love to know how you're seeing customers approach agentic protection. And on the data protection side, is your platform obviating the need for data discovery and classification or are you coming in on top of that? How are enterprises viewing getting their data estate in order before they they pursue agentic utilization?

Question: Brian Essex - JPMorgan - Analyst : Great to see the better sales productivity. Appreciate it.

Question: Gregg Moskowitz - Mizuho Securities USA - Analyst : Zero Trust Everywhere campaign appears to be off to a very good start. I realize it's early. But was curious if you're seeing more adoption thus far from small, mid-size or larger enterprises. And then also from what you've so far, how does the size of Zero Trust Everywhere lands? How does that compare to Zscaler's typical net new logo?

Question: Fatima Boolani - Citi - Analyst : Remo, you made a specific reference to the fact that there is ongoing scrutiny on large deals, so I wanted to ask you, both actually a very stratospheric question. The entire business and the business model and the pipeline is, becoming more tethered and indexed to larger deals. You're talking about scrutiny and then you layer on the fact that, there's segments of the economy and the global economy that have been a little bit in flux by virtue of, trade wars and tariffs and things like that. I wanted to get your perspective on how that's maybe helping accelerate the conversation for you. If at all, just kind of given, that could have implications for how, sectors of the economy think about transforming, their networks and their security architecture, and, any kind of anecdotal feedback or color you got, actually from your CXO summit that you referenced earlier, I would love to kind of get some, real-time feedback from how customers are internalizing some of this with their budgetary, aspirations and expectations.

Question: Joseph Gallo - Jefferies - Analyst : Remo, as a follow up to your earlier scheduled billing comments, does that acceleration peak in 4Q or how should we think about that piece of the business as we move into fiscal '26?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Congrats on the results. Jay, I wanted to go back to your comments about agentic and ZDX, and I guess, I'm curious, it feels like a natural fit there, but I guess I'm wondering like as customers roll out agents, right? I think a lot of people think identity, they might think, aspects of cloud security. What's the skier's role in protecting customers agents, because it seems like that's obviously a massive trend, that's very early.

Question: Joshua Tilton - Wolfe Research - Analyst : I'll echo my congrats on a solid quarter as well. I have a two parter, but it's along the lines of the sales productivity comments. Good to see the improvements this quarter. I guess what I'm trying to understand is the sales productivity that you saw in the quarter kind of ahead of what you were expecting as we entered this year. And then if I look to the balance of the year, like where does sales productivity have to go from here in order to hit the updated billings guidance that you gave us for the year today.

Question: Gray Powell - BTIG - Analyst : Yeah, I just wanted to say congrats on the good results but yeah, so I wanted to follow up. I think it was Gregg's earlier question about the firewall refresh can you talk about some of the targeted marketing you're doing with existing customers to get in front of the firewall refresh? And then just how should we think about sizing the opportunity and I know it's early days, but when should we actually start to see it materialize in the results in a more meaningful way? I'm guessing it's really sometime next year, but just want to get some general thoughts around that.

Question: Tal Liani - BofA Global Research - Analyst : I want to understand the concept of Zero Trust, what it means for you, meaning Zero Trust is a concept, and I'm trying to break it down to products. So when you talk about Zero Trust Branch, when you talk about errus cloud, practically what does it mean? What are you selling to the customers? And second, how does it change the competitive landscape, meaning if, someone is in the branch and someone is in the cloud, and there are competitive solutions, if I rewind back two years you competed on on Sassy, how does it change the competitive landscape when you focus on Zero Trust?

Question: Tal Liani - BofA Global Research - Analyst : Yes. And in when you focus on it, the the second part of my question was. What's your competition? Who do you meet that that provides the same kind of value and you have to compete with them?

Question: Peter Weed - Bernstein - Analyst : Glad to hear the continued progress, particularly with upsales, obviously NRR expanding is pretty exciting and, probably a good signal around the sales performance. The one thing though that it also does seem to indicate is the contribution from net new customers has been declining. How should we think about that looking forward? Is that a short term deceleration, and would pick back up and so when you put those two things together, we could get, even stronger growth or should we be expecting lower kind of contribution from net new customers, looking forward.

Question: Keith Bachman - BMO Capital Markets - Analyst : Jay. I wanted to direct this to you and at a high level, wanted to dig a bit deeper on how you think AI changes your competitive positioning versus some of the landscape out there. And if I change the question around a little bit, you have in your slide deck a, AI and analytics solution is a $2 billion dollar TAM. Relative to $96 billion so it's a relatively small part. Now data protection, we could argue is part of that as well, which is much more meaningful. But if I break the question down again into two parts, is I just want to understand from a technology perspective, how do you change your solutions to capture the benefits of AI, and is that embedding into existing products or is it offering new products downstream or both? Thank. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 9:30PM, ZS.OQ - Q2 2025 Zscaler Inc Earnings Call