Zscaler (ZS, Financial) has unveiled plans to acquire Red Canary through a definitive agreement, aiming to finalize the transaction by August 2025, contingent upon regulatory clearances and standard closing conditions. This strategic move is designed to bolster Zscaler’s managed detection and response and threat intelligence capabilities, aligning with their vision for an advanced AI-driven Security Operations Center (SOC). By merging Red Canary’s expertise with Zscaler’s existing technologies, including their Zero Trust ExchangeTM platform and AI-powered risk management like Risk360, Zscaler intends to offer a comprehensive, integrated security solution to its clients. This acquisition marks a significant expansion in Zscaler’s efforts to revolutionize traditional security operations and enhance their service offerings.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 41 analysts, the average target price for Zscaler Inc (ZS, Financial) is $244.38 with a high estimate of $340.00 and a low estimate of $195.00. The average target implies an
downside of 5.02%
from the current price of $257.30. More detailed estimate data can be found on the Zscaler Inc (ZS) Forecast page.
Based on the consensus recommendation from 47 brokerage firms, Zscaler Inc’s (ZS, Financial) average brokerage recommendation is currently 2.0, indicating “Outperform” status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Zscaler Inc (ZS, Financial) in one year is $296.24, suggesting a
upside
of 15.13% from the current price of $257.3. GF Value is GuruFocus’ estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business’ performance. More detailed data can be found on the Zscaler Inc (ZS) Summary page.
ZS Key Business Developments
Release Date: March 05, 2025
- Revenue: $648 million, up 23% year over year and 3% sequentially.
- Annual Recurring Revenue (ARR): Over $2.7 billion, a 23% year-over-year growth.
- Net Retention Rate (NRR): Improved to 115%.
- Operating Profit Growth: 36% growth, with operating margin improving by 2 percentage points to nearly 22%.
- Free Cash Flow Margin: Record 22% for Q2.
- Gross Margin: 80.4%, compared to 80.8% in the year-ago quarter.
- Operating Expenses: Increased 19% year over year to $380 million.
- Cash and Investments: Approximately $2.9 billion in cash, cash equivalents, and short-term investments.
- Guidance for Q3 Revenue: Expected to be in the range of $665 million to $667 million, reflecting 20% to 21% year-over-year growth.
- Full Year Revenue Guidance: Expected to be in the range of $2.64 billion to $2.654 billion, reflecting approximately 22% year-over-year growth.
- Full Year Free Cash Flow Margin Guidance: Expected to be approximately 24.5% to 25%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zscaler Inc (ZS, Financial) 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.
Negative Points
- 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.
