Q2 2025 Zscaler Inc Earnings Call Transcript
Key Points
- Zscaler Inc (ZS) reported a 23% year-over-year revenue growth, surpassing guidance expectations.
- The company's annual recurring revenue (ARR) grew by 23% year over year, reaching over $2.7 billion.
- Operating profit increased by 36%, with operating margin improving by 2 percentage points to nearly 22%.
- Zscaler Inc (ZS) achieved a record free cash flow margin of 22% for Q2.
- The company is seeing strong customer interest in its Zero Trust Branch solution, with 57% of purchases coming from new logo customers.
- Despite strong performance, there is ongoing scrutiny on large deals, reflecting tighter macroeconomic conditions.
- Gross margin slightly decreased to 80.4% compared to 80.8% in the previous year.
- The company noted that increased success in selling bigger bundles could reduce the dollar-based net retention rate in the future.
- There is a potential impact on sales productivity due to the complexity of closing large deals.
- Zscaler Inc (ZS) faces competition from legacy security vendors, which could impact its market positioning.
Good day and thank you for standing by.
Welcome to the Zscaler second-quarter 2025 earnings call.
(Operator Instructions)
Please be advised that today's conference is being recorded.
(Operator Instructions)
I would now like to hand the conference over to your speaker today, Ashwin Kesireddy, Vice President, Investor Relations and Strategic Finance.
Good afternoon, everyone and welcome to the Zscaler second quarter fiscal year 2025 earnings conference call.
On the call with me today are Jay Chaudhry, Chairman and CEO; and Remo Canessa, CFO.
Please note we have posted our earnings release and a supplemental financial schedule to our Investor Relations website. Unless otherwise noted, all numbers we talk about today will be on an adjusted non-GAAP basis. You'll find the reconciliation of GAAP to the non-GAAP financial measures in our earnings release. I'd like to remind you that today's discussion will
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