Zscaler CEO Jay Chaudhry Talk Earnings, AI Trade
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What is the main topic discussed in this episode?
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hey we are also watching shares of z uh z scalar they're getting smacked down a bit today down about 13 percent hitting a 52-week low now down about 36 percent year to date stock is down more than 60 percent since november of 2021. investors selling shares after the security software company's second quarter results they beat estimates they weren't though strong seen as strong enough to reverse recent negative sentiment toward software companies it comes on top of a tough week
For company shares, stock tumbled 10% on Monday on the AI scare. Worries again, Carol, over the impact of AI on companies and industries. Shares, though, rallied back close to 17% in the next three days, thanks to a calming down a little bit in the trade.
Yeah, it's been a crazy week for Zscaler, no doubt about that. We should point out a bunch of analysts weighing in on the company's earnings and lowering their price target on the stock. But let's get into the business, the outlook, and more. Delighted to have back with us Jay Chowdhury, he's founder, chairman, and CEO of Zscaler, joining us from San Jose, California. Welcome back. Also with us, someone who understands, follows this company very closely, our own Mandeep Singh. He is Bloomberg Intelligence Global Head of Technology Research here in studio. Jay, tell us a little about the quarter, and I think we all want to know how AI is impacting your business. Let's start there.
So AI is a massive opportunity because what AI is doing is bringing lots of AI agents in the enterprise. Agents are some alike people. Traditionally, users have been the weakest link for cybersecurity. Now, AI agents are becoming the weakest link. How do you secure them? Well, you need to make sure that you can do one-to-one connection. That means an agent can only access certain applications and nothing more. That requires a global infrastructure that Z-Square has built in the form of zero-test exchange. That's why we're very bullish about our future. So go ahead, Mandeep.
Jay, I think the street obviously didn't like the Billings number in your print, and that was seen as moderating. Was that attributed primarily because of seed growth slowing down, and we keep hearing layoffs like the one that Square announced yesterday, or was there anything more to the Billings number last night?
What challenges did Zscaler face after their latest earnings report?
So billings is a secondary number for us. The number one area of focus for us is ARR growth and revenue growth. Our revenue grew 26% year over year. ARR, 25%. Free cash flow, 18%. Operating margin, 22%. They're all great numbers. Now, we have a Z-Flex program that gives some flexibility in billings. So, billings can get impacted, but with Z-Flex, customers are doing multi-year, four- or five-year deals with us, committing to Z-scaler, which is a very strong sign. So, I don't think the billing should be viewed in a negative light. Overall business is very strong.
Jay, I want to go back to what you said about AI and protecting these AI agents and just how you're thinking about that, because I think a lot of people are trying not just to understand the impact of AI on cybersecurity, but the impact of AI on a company like yours when it comes to operations. So from an operations perspective, with the context of what we saw from Block late yesterday, the company relying more on AI and less on actual human beings, how are you using AI at the company operationally? to increase your margins, to make your employees more productive.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:00–2:58
2
What challenges did Zscaler face after their latest earnings report?
2:58–9:04
3
How is AI impacting Zscaler's business model?
9:04–10:47
4
What are the implications of AI agents becoming the weakest link in cybersecurity?
10:47–11:27
5
How does Zscaler ensure security for AI agents?
11:27–12:15
6
What is the significance of billings and revenue growth for Zscaler?
12:15–12:23
Speakers
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