Summary
Zscaler's fiscal 2025 first quarter, ended October 31, 2024, showed revenue growth and narrower GAAP losses. Revenue rose 26.4% to $628.0 million, and gross profit increased 26.3% to $486.5 million. GAAP operating loss narrowed to $30.7 million, while operating margin improved 4.4 percentage points to negative 4.9%. GAAP net loss narrowed to $12.1 million, and diluted EPS improved to negative $0.08. Gross margin was 77.5%, down 0.1 percentage points. Non-GAAP operating income was $134.1 million, or 21% of revenue, and non-GAAP net income was $124.3 million, or $0.77 per diluted share.
Cash generation was strong. Operating cash flow rose 27.0% to $331.3 million. Capital expenditures fell 40.6% to $17.0 million. Free cash flow was $291.9 million, or 46% of revenue. Deferred revenue rose 27.5% to $1.78 billion, and remaining performance obligations rose 26.5% to $4.41 billion. Calculated billings, a non-GAAP metric, grew 13% to $516.7 million. The company also changed its non-GAAP tax rate presentation to a long-term projected rate of 23% effective August 1, 2024, and recast prior period amounts.
Operational momentum included a platform milestone. Zscaler surpassed half a trillion daily transactions, which the company said is nearly 60 times greater than the total number of Google searches per day. It appointed Adam Geller as Chief Product Officer. It announced AI and Zero Trust integrations with the CrowdStrike Falcon platform and four new integrations with Okta. ThreatLabz published its 2024 Mobile, IoT, and OT Threat Report, finding that the Zscaler cloud blocked 45% more IoT malware transactions than last year. The customer base increased 12% from October 31, 2023 to October 31, 2024. Dollar-based net retention rate was 114% for the trailing 12 months ended October 31, 2024, compared with 120% for the trailing 12 months ended October 31, 2023.
Guidance sets expectations for the next quarter and the full fiscal year. For the second quarter of fiscal 2025, management expects revenue of $633 million to $635 million, non-GAAP income from operations of $126 million to $128 million, and non-GAAP net income per share of approximately $0.68 to $0.69, assuming approximately 163 million fully diluted shares and a non-GAAP tax rate of 23%. For the full fiscal year 2025, the company expects revenue of approximately $2.623 billion to $2.643 billion, calculated billings of $3.124 billion to $3.149 billion, non-GAAP income from operations of $549 million to $559 million, and non-GAAP net income per share of $2.94 to $2.99, assuming approximately 164 million fully diluted shares and a non-GAAP tax rate of 23%.
Risks remain. Management cited macroeconomic and geopolitical uncertainty, customer scrutiny and elongated approval processes for larger deals, and longer sales cycles. The company also flagged execution challenges, risks tied to managing rapid growth, new product introductions, competition, the use of AI in its platform, and legal matters and related accruals. Zscaler still expects to incur net losses for the foreseeable future, and its dollar-based net retention rate was 114%, compared with 120%. The quarter showed revenue growth and cash flow, but GAAP profitability remains negative.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2025 | Q4 FY2024 | QoQ | Q1 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $628.0M | $592.9M | +5.9% | $496.7M | +26.4% |
| Gross profit | $486.5M | $462.7M | +5.2% | $385.3M | +26.3% |
| Gross margin | 77.5% | 78.0% | -0.6 pp | 77.6% | -0.1 pp |
| Research & development | $154.3M | $139.2M | +10.9% | $113.5M | +35.9% |
| Sales & marketing | $306.1M | $294.2M | +4.0% | $267.1M | +14.6% |
| General & administrative | $56.8M | $56.3M | +1.0% | $50.7M | +12.0% |
| Total operating expenses | $517.2M | $489.6M | +5.6% | $431.4M | +19.9% |
| Operating income (loss) | -$30.7M | -$26.9M | -13.8% | -$46.1M | +33.4% |
| Operating margin | -4.9% | -4.5% | -0.3 pp | -9.3% | +4.4 pp |
| Net income (loss) | -$12.1M | -$14.9M | +19.0% | -$33.5M | +64.0% |
| Net margin | -1.9% | -2.5% | +0.6 pp | -6.7% | +4.8 pp |
| Diluted EPS | -$0.08 | -$0.10 | +$0.02 | -$0.23 | +$0.15 |
| Customers | 8,650 | 8,650 | ±0.0% | 7,700 | +12.3% |
| Net retention rate | 114.0% | 115.0% | -1.0 pp | 120.0% | -6.0 pp |
Risks
Management says challenging macroeconomic conditions are causing customer scrutiny and elongated approval processes, particularly for larger deals, and expects customer cautiousness to continue in the near term, elongating sales cycles and the timing of large deals.
The filing reports a dollar-based net retention rate of 114% for the trailing 12 months ended October 31, 2024 and 120% for the trailing 12 months ended October 31, 2023, while customers may renew for fewer users, shorter contract lengths or lower-cost product suites.
The Chief Financial Officer has informed the company that he plans to retire and a successor will need to be appointed, and Zscaler has added several new senior management employees in the last year while depending on CEO Jay Chaudhry and other key personnel.
The $1,150 million 0.125% Convertible Senior Notes mature on July 1, 2025 and were classified as current liabilities as of July 31, 2024, which may be seen as a material adverse reduction of net working capital, and conversion conditions were not met during the three months ended October 31, 2024.
Sales through the top five channel partners and their affiliates represented 26% of revenue for the three months ended October 31, 2024 and 25% for the three months ended October 31, 2023, and these non-exclusive partners may promote competitors or cease reselling the platform with limited notice.
As of July 31, 2024, 37% of the global workforce was based in India, mostly in R&D, finance and operations, and wage and benefit costs in India are increasing at a faster rate than in the United States.
Advancements in AI and ML are changing how the industry identifies and responds to cyber threats, and new AI-enabled technologies that deliver competitive products at lower prices or more efficiently could adversely affect Zscaler's ability to compete.
Calculated billings increased $60.1 million, or 13%, for the three months ended October 31, 2024 over the prior-year period, and the company expects its calculated billings growth rate to trend down over time as calculated billings grows in absolute terms.
SaaS KPIs
All quarters →Free Cash Flow Margin
Free Cash Flow
Non-GAAP Operating Margin
Calculated Billings
Non-GAAP Gross Margin
Total Customers
Deferred Revenue
Summary, forecast, risks and KPIs are extracted from Zscaler, Inc.'s SEC filings for Q1 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.