02/25/2025•8 min read

Zscaler (ZS): New Developments, EY Partnership, and Future Outlook

by monexa-ai

Zscaler's new asset exposure management solution and EY partnership highlight strategic growth. Investors should monitor Q2 earnings, competition, and macro trends.

Zscaler, Inc.

Zscaler, Inc. operates as a cloud security company worldwide. The company provides Zscaler Internet Access solution that provides users, servers, operational technology, Internet of Things device secure access to externally managed applications, including software-as-a-service (SaaS) applications and Internet destinations; and Zscaler Private Access solution, which is designed to provide access to managed applications hosted internally in data centers, and private or public clouds. It also offers Zscaler Digital Experience that measures end-to-end user experience across business applications, as well as provides an easy to understand digital experience score for each user, application, and location within an enterprise. In addition, the company provides workload segmentation solutions comprising Zscaler Cloud Security Posture Management that identifies and remediates application misconfigurations in SaaS, infrastructure as a service, and platform as a service to reduce risk and ensure compliance with industry and organizational benchmarks; and Zscaler Cloud Workload Segmentation, which is designed to secure application-to-application communications inside public clouds and data centers to stop lateral threat movement, as well as prevents application compromise and reduces the risk of data breaches. Its platform modules include Zscaler Central Authority, Zscaler Enforcement Node, and Zscaler Log Servers. It serves customers in airlines and transportation, conglomerates, consumer goods and retail, financial services, healthcare, manufacturing, media and communications, public sector and education, technology, and telecommunications services industries. The company was formerly known as SafeChannel, Inc., and changed its name to Zscaler, Inc. in August 2008. Zscaler, Inc. was incorporated in 2007 and is headquartered in San Jose, California.

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ZS Stock Performance

Quick Stats

Latest Price: $202.16
Market Cap: $N/A
30d Change: -0.77%
ROE: -1.15%
ROA: -0.31%
Current Ratio: 1.20
Earnings Yield: -0.05%

Company Details

Sector: Technology
Industry: Software - Infrastructure
Exchange: NASDAQ
Country: US

Zscaler (ZS): New Developments, EY Partnership, and Future Outlook#

Zscaler, Inc. (ZS), a leader in cloud security, is navigating a dynamic market with strategic initiatives and evolving financial metrics. This report provides a comprehensive analysis of recent developments, including the launch of a new Asset Exposure Management solution, a strategic alliance with EY, and an outlook on upcoming Q2 earnings. We'll also delve into the competitive landscape, macroeconomic factors, and Zscaler's cash flow trends, offering actionable insights for investors.

Zscaler's Asset Exposure Management: A Deep Dive into CAASM#

On February 25, 2025, Zscaler announced the introduction of Zscaler Asset Exposure Management, designed to advance how organizations manage their asset risk, commonly referred to as Cyber Asset Attack Surface Management (CAASM) According to GlobeNewswire. This innovative solution consolidates and correlates data from a vast array of sources to deliver to organizations a precise inventory of assets and visibility into their security gaps to mitigate cyber risk.

Key Features of Zscaler Asset Exposure Management#

Zscaler Asset Exposure Management aims to provide organizations with a precise inventory of assets and visibility into their security gaps to mitigate cyber risk. The key features include:

Comprehensive Asset Inventory: Automatically discovers and inventories assets across the IT environment.
Vulnerability Assessment: Identifies vulnerabilities and misconfigurations in assets.
Risk Prioritization: Prioritizes risks based on potential impact and likelihood of exploitation.
Remediation Guidance: Provides actionable guidance to address identified vulnerabilities.
Integration with Existing Security Tools: Integrates with existing security tools for a comprehensive security posture view.

This offering aligns with the broader Continuous Threat Exposure Management (CTEM) framework, providing a foundation for proactive risk mitigation. Given the increasing complexity of IT environments, this solution addresses a critical need for organizations struggling to maintain visibility over their expanding attack surfaces.

EY Alliance: Strengthening Zscaler's Enterprise Reach#

On February 19, 2025, EY announced a strategic alliance with Zscaler to help secure and simplify digital transformations through cloud-delivered services. The alliance aims to address network architecture challenges with secured and simplified cloud-delivered services. This partnership will help bring visibility and control in the cloud across users, data, and applications, distributing architecture to support centralized management and simplify administration with less complexity and fewer IT costs.

Benefits of the EY Partnership for Zscaler Customers#

The EY alliance offers several potential benefits for Zscaler customers:

Simplified Digital Transformations: The alliance helps organizations simplify their digital transformations by providing a secure and streamlined approach to cloud adoption.
Enhanced Security Posture: By leveraging Zscaler's cloud security platform and EY's expertise, organizations can improve their overall security posture and reduce their risk of cyberattacks.
Reduced IT Costs: The alliance aims to simplify administration and reduce IT costs by providing a centralized management platform for cloud security.
Improved Visibility and Control: Organizations gain improved visibility and control over their users, data, and applications in the cloud.
Access to Expert Consulting: Customers benefit from access to EY's expert consulting services, helping them to optimize their security strategies and implementations.

This strategic alliance is expected to enhance Zscaler's market penetration in the enterprise sector. By leveraging EY's consulting expertise and established client relationships, Zscaler can accelerate customer acquisition and expand its reach within large organizations. The alliance aligns with the growing trend of enterprises seeking comprehensive security solutions that integrate seamlessly with their existing IT infrastructure.

Q2 Earnings Preview: What to Expect from Zscaler#

Zscaler's Q2 earnings, expected in approximately nine days According to Seeking Alpha, are highly anticipated. Investors are keen to assess the company's financial performance amid a backdrop of strategic developments and evolving market conditions. Key metrics to watch include revenue growth, billings, and profitability.

Analyst Expectations for Zscaler's Q2 Performance#

Analysts' expectations for Zscaler's Q2 performance vary, but the general consensus is that the company will continue to demonstrate strong growth. Key areas of focus include:

Revenue Growth: Analysts expect Zscaler to report revenue growth in the range of 25-30% year-over-year.
Billings Growth: Billings growth is another important metric to watch, as it provides insights into future revenue potential.
Profitability: Analysts will be looking for signs that Zscaler is improving its profitability, despite its continued investments in growth.
Customer Acquisition: The company's ability to acquire new customers, particularly in the enterprise sector, will be closely scrutinized.
Guidance for Future Quarters: Zscaler's guidance for future quarters will be closely watched for any signs of a slowdown in growth.

It's important to consider the context of these expectations. Zscaler operates in a high-growth sector, but faces increasing competition and macroeconomic uncertainties. The company's ability to meet or exceed analyst expectations will be a key driver of its stock performance.

Zscaler vs. Competitors: A Cloud Security Showdown#

Zscaler operates in a competitive landscape against companies like Akamai, CrowdStrike, and Palo Alto Networks. As noted by Zacks.com, comparing Zscaler to Akamai reveals considerations for value investors According to Zacks. While Zscaler may not be the better value option, its architecture gives it a unique edge over the competition.

Zscaler's Competitive Advantages in Zero Trust Security#

Zscaler's key competitive advantages include:

Zero Trust Architecture: Built on the premise that no user or device is inherently trustworthy.
Cloud-Native Platform: Designed for scalability and consistent security across environments.
Comprehensive Security Services: Offers a range of security services delivered from the cloud.
Global Presence: Maintains a global network of data centers for optimal performance.
Strong Brand Recognition: Established brand in the cloud security market.

These advantages have contributed to Zscaler's position as a leader in cloud security. The Zero Trust Exchange platform is particularly well-suited for organizations adopting cloud-based applications and remote work models. However, maintaining this competitive edge requires continuous innovation and adaptation to evolving threats.

Interest Rates and Inflation: How Macro Trends Impact Zscaler#

Macroeconomic factors, such as interest rates and inflation, can significantly influence the valuation of growth stocks like Zscaler. Rising interest rates can reduce the present value of future earnings, making growth stocks less attractive. Inflation can increase operating costs and potentially reduce customer spending.

How Interest Rate Hikes Could Affect Zscaler's Valuation#

As a high-growth stock, Zscaler is more sensitive to interest rate changes compared to value stocks. The anticipation of interest rate hikes could put downward pressure on Zscaler's stock price, as investors may reallocate capital to less sensitive asset classes. Understanding this sensitivity is crucial for managing investment risk.

Zscaler's Cash Flow: A Health Check#

Analyzing Zscaler's cash flow is essential, especially given its history of negative net income. Examining operating cash flow per share (OCFPS) and free cash flow per share (FCFPS) provides insights into the company's ability to generate cash and manage capital expenditures. Consistent growth in these metrics signals strong financial health and can positively impact the stock price.

Analyzing Zscaler's Operating Cash Flow Trends#

Operating cash flow is the cash generated from a company's normal business operations. It is a key indicator of a company's ability to generate cash from its core business. Analyzing the trend in Zscaler's operating cash flow per share over the last 5 years can provide insights into its ability to generate cash from its operations. A positive and growing trend in OCFPS would indicate that Zscaler is generating more cash from its business.

Metric	Value
Price	193.6
Changes Percentage	-1.75%
Volume	52,548
Average Volume	1,821,618
Market Cap	29,705,790,400
Price-to-Sales Ratio (TTM)	12.895

Data from Monexa AI

The Road Ahead: Challenges and Opportunities for Zscaler#

Zscaler faces both challenges and opportunities as it navigates the evolving cloud security market. The company's ability to address these challenges and capitalize on these opportunities will determine its future success.

Potential Risks and Challenges for Zscaler's Growth#

Intense Competition: The cloud security market is highly competitive.
Pricing Pressure: Increased competition could put pressure on Zscaler's pricing.
Integration Challenges: Integrating Zscaler's platform with other security tools can be challenging.
Evolving Threat Landscape: The cybersecurity threat landscape is constantly evolving.
Macroeconomic Uncertainty: Macroeconomic uncertainty could impact customer spending.

Opportunities for Future Growth#

Growing Demand for Cloud Security: Increasing adoption of cloud computing drives demand.
Zero Trust Architecture: Well-positioned to capitalize on the adoption of zero trust security.
Strategic Alliances: Alliances like the one with EY can expand market reach.
Innovation: Strong track record of developing new security solutions.
Global Expansion: Opportunity to expand its global presence.

Key Takeaways for Investors#

Zscaler is a leading cloud security provider with a Zero Trust Exchange platform. Recent developments, including a new Asset Exposure Management solution and a strategic alliance with EY, highlight its commitment to innovation and market expansion. Investors should monitor upcoming Q2 earnings, competitive pressures, and macroeconomic factors. Ultimately, Zscaler's cash flow and ability to execute its strategic initiatives are crucial for future success.