Zscaler CEO addresses investor 'disconnect' on 2025 guidance

Zscaler (ZS) exceeded fiscal fourth-quarter expectations on both the top and bottom line, but weaker-than-expected fiscal 2025 guidance disappointed investors. Zscaler CEO Jay Chaudhry joins Asking for a Trend to discuss the cloud company's latest earnings print.

Chaudhry notes that the fourth quarter numbers were strong "across all metrics." He explains that Zscaler's fiscal 2025 guidance projects for 19 to 20% growth year-over-year, adding: "Investors expected that. What they got a disconnect was the growth in the first half of billing was lower" while the second half growth for billings was higher. The combination of these factors led to the guidance that disappointed investors.

"We have a lot of opportunity in front of us," Chaudhry emphasizes. As far as competition, Chaudhry notes "the large customers are very picky, very demanding." With Zscaler having established its position within the market, he believes that they have a sizable lead over newer entrants.

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This post was written by Angel Smith

Video Transcript

Z Scaler beating analyst estimates for its fourth quarter on the top and bottom lines.

But the full year 2025 guidance overshadowing those results and you know, walk us through the print is Z Scaler co Jay Chaudhry Jay.

It is always good to have you on the show.

Let's dig into this report, Jay because this is the the first time we had a chance to speak with you about it.

This was a good report, Jay.

Uh listen, 30% revenue growth, 27% billings growth.

I do know Jay some on the street though said that that guide for 25 appeared disappointing, you know, their words specifically billings.

So walk us through that Jay, what are you seeing in the business?

So Josh, it's good to be back on your show.

Uh Our numbers are very strong for Q four as we said across all metrics, top line, bottom line cash flow, everything.

In fact, we crossed $2.5 billion in annual record revenue.

A big milestone for us.

Our guidance for fiscal 25 is 19 to 20% year over year at a fairly large scale.

So I think in general investors expected that what they got a disconnect was the growth in the first half of bill was lower because of the historical reasons because of some of the contracts we had from fiscal 23 which was a top period.

The second half billings growth is very good.

The two combined together leads to 19 to 20%.

So as I met with a lot of investors, we have cleared this confusion or disconnect.

I think overall we are pleased with it and I think investors understand it.

We have a lot of opportunity in front of us.

We're seeing good opportunity.

In fact, we stated during the earnings was we expect to cross $3 billion in annual recording revenue this year.

So I guess you're going where I where I wanted to go, Jay because you know, I guess bottom line for investors.

Um you know, Jay, you've been in tech a long time, you you've seen a lot of cycles, you know, markets evolve though.

Um They change, competition is intense.

I is Z scaler Jay, is it still bottom line?

The growth story uh that bulls believe it is.

So these killer is the growth story.

We we believe in it and we are investing for growth.

If you think about three main areas for growth, the market is needs better.

Cyber, the firewalls and VPN based solutions aren't working these color pioneered Zero Trust architecture.

So customers want it.

It's a big market.

We, we pioneered zero trust architecture.

We are the biggest brand that customers know.

Over 35% of global 2000 companies and 40% of Fortune Fire companies depend upon us.

So yes, we are going through some of the sales organization changes where we're taking a step function.

We're taking our sales organization to the next level where we can go from $2.5 billion to $5 billion plus beyond A R we have the products, we have great and happy customers.

And I think we are well positioned to provide some greater tones to our investors.

Jay, let's talk about competition.

Uh You know, there's Palo Alto, I really recently spoke to Shlomo Kramer uh over Cato Networks.

I'm just interested, Jay, how you're seeing the competitive landscape right now and your place in it.

We haven't seen a lot of change in the competitive landscape.

Yes, there are bunch of entrants, those entrants are going after the lower and the market because the large customers are very picky, they're very demanding and we have established a sizable lead when it comes to large enterprises.

We do extremely well.

In fact, some of these entrants who tried to go to large enterprises haven't fared well.

So today we are at 40% of fortune 500 companies.

In fact, in the last year, in fiscal 24 we doubled the number of large customers, which is G two K as compared to fiscal 23 we expect to really do extremely in the large enterprises where the newcomers they come from, all legacy architecture.

Most of them are based on firewalls, spinning firewalls in the cloud as a virtual machine is like taking your DVD players and spinning them up there and calling it Netflix, the architecture.

We have the barrier to entry to come to what we need to do in a market that requires resilience.

I think we are extremely well positioned.

Jay, always love having you on the show.

Thanks for making time for us, Josh.

Thank you.