Zscaler Q1 FY7/25 Earnings Review

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Full of Promise

By HermitWarrior a.k.a. Richard Iacuelli

To look at Zscaler ($ZS) is to see seemingly boundless potential. As a leader in Zero Trust security, with - by their own calculations - an addressable market of $96B, it is perceived as one of the biggest beneficiaries of the eventual demise of legacy firewalls, more so given the backdrop of ever higher numbers of high profile cyber attacks that penetrate those same firewalls, and compromise the personal information of millions of people. What's not to like?

For now at least, ZS is not living up to that promise. Q1 revenue growth was a relatively sedate 26%, compared to 30% in Q4, and 40% in the year ago quarter - with guidance pointing to further deceleration in Q2. In comparison, CrowdStrike ($CRWD) managed 28.5% yoy growth, and Cloudflare ($NET) 28.2% in their most recent quarters (you can read our earning reports for CRWD here and NET here).

The initial 10% post-market dip softened to just under 5% at the close the next day (and recovered much of that today) substantially better then the 18% drop after Q4 earnings. In effect, the market responded with a shrug, despite a valuation that has ticked up considerably in the intervening months.

Here are the headlines.