Executive Summary

Zscaler delivered a solid Q1 FY2025: revenue grew 26% YoY to $628.0M, non-GAAP EPS was $0.77, non-GAAP operating margin reached 21%, and free cash flow margin hit a Q1-record 46% .
Bookings growth accelerated to “over 30%,” unscheduled billings grew 20%+, and RPO grew 26% YoY to $4.411B, underscoring demand and pipeline strength into 2H FY25 .
Full-year FY25 guidance was raised across revenue ($2.623–$2.643B), billings ($3.124–$3.149B), non-GAAP operating income ($549–$559M) and non-GAAP EPS ($2.94–$2.99); Q2 FY25 guide: revenue $633–$635M, non-GAAP EPS $0.68–$0.69, with gross margin ~80% .
Strategic narrative is anchored by Zero Trust + AI: data protection, ZPA (VPN replacement), and emerging products (ZDX, Zero Trust SD-WAN, workload/device segmentation) are driving large deals; federal momentum grew to 14 of 15 cabinet-level agencies; GSIs increasingly catalyze platform consolidations .

What Went Well and What Went Wrong

What Went Well

Demand and execution: revenue +26% YoY to $628.0M, non-GAAP operating margin 21%, and FCF margin 46%; CEO highlighted “all metrics exceeding our guidance,” “rule of 70 or better,” and bookings growth “over 30%” .
Platform-led wins: ZPA positioned as one of the biggest FY25 growth drivers; emerging products ARR growing ~2x core; notable 7-figure branch, workload, and data protection deals; AI security for Copilot cited in large wins .
Federal and GSI channels: now serving 14 of 15 cabinet-level agencies; multiple 7-figure GSI-led transformations eliminating firewalls/SD‑WAN point products; strengthens consolidation ROI thesis .

What Went Wrong

Billings mix and visibility: Calculated billings +13% YoY (to $516.7M) lagged revenue growth and management underscored 1H vs. 2H billings skew (scheduled billings +7% 1H, +23% 2H), elevating dependence on 2H seasonality .
Margin mix headwind: CFO reiterated emerging/newer products are optimized for speed-to-market, not gross margin, holding GM to ~80% near-term (Q1 total GM 80.6%) .
Macro scrutiny persists: management still observes ongoing large-deal scrutiny (though unchanged), keeping sales cycles sensitive; also, CFO transition (retirement) introduces leadership change (tone stable/positive) .

Financial Results

Revenue, EPS, Margins (YoY and Seq), and Free Cash Flow

Metric	Q1 FY2024	Q4 FY2024	Q1 FY2025
Revenue ($M)	$496.7	$592.9	$628.0
GAAP EPS (Diluted)	$(0.23)	$(0.10)	$(0.08)
Non-GAAP EPS (Diluted)	$0.55	$0.88	$0.77
Non-GAAP Gross Margin (%)	81%	81%	81%
Non-GAAP Operating Margin (%)	18%	22%	21%
Free Cash Flow Margin (%)	45%	23%	46%

Notes: Q1 FY25 revenue +26% YoY; FCF margin reached a Q1 record of 46% .

Billings and Balance Sheet KPIs

Metric	Q1 FY2024	Q4 FY2024	Q1 FY2025
Calculated Billings ($M)	$456.6	$910.8	$516.7
Deferred Revenue ($M, End)	$1,399.5	$1,895.0	$1,783.7
RPO ($B)	—	$4.418	$4.411
Current RPO (% of RPO)	—	48%	~49%
Cash, Cash Equivalents & ST Investments ($M)	—	$2,409.7	$2,707.9

Customers and Mix

KPI	Q4 FY2024	Q1 FY2025
Customers >$1M ARR (Count)	567	585
Customers >$100k ARR (Count)	3,100	3,165
Dollar-Based Net Retention Rate (12-mo)	115%	114%
Revenue Mix: Americas / EMEA / APJ	55% / 30% / 15%	54% / 30% / 16%

Segment/Geographic Breakdown (Q1 FY2025)

Geography	Revenue Mix
Americas	54%
EMEA	30%
APJ	16%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY2025	$2.600–$2.620B	$2.623–$2.643B	Raised
Calculated Billings	FY2025	$3.110–$3.135B	$3.124–$3.149B	Raised
Non-GAAP Op Income	FY2025	$530–$540M	$549–$559M	Raised
Non-GAAP EPS (Diluted)	FY2025	$2.81–$2.87	$2.94–$2.99	Raised
Revenue	Q2 FY2025	—	$633–$635M	New
Non-GAAP Op Income	Q2 FY2025	—	$126–$128M	New
Non-GAAP EPS (Diluted)	Q2 FY2025	—	$0.68–$0.69	New
Gross Margin	Q2 FY2025	—	~80%	New
Non-GAAP Tax Rate	FY2025/All	23% policy (effective FY25)	23% policy reiterated	Maintained
Shares (Diluted)	Q2 FY2025	—	~163M	New

Reference vs prior quarter guidance: Q1 FY2025 actual revenue of $628.0M exceeded prior Q1 guide of $604–$606M; non-GAAP EPS of $0.77 exceeded prior guide of $0.62–$0.63 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 FY24, Q4 FY24)	Current Period (Q1 FY25)	Trend
AI/Technology initiatives	Q3: Acquired Avalor; launched ZDX Copilot; accelerated AI data protection . Q4: AI analytics contributed ~3 pts to new/upsell in Q4, 2 pts for FY24; >0.5T daily transactions fueling models .	Expanded AI security for public/private AI apps (e.g., Microsoft Copilot), LLM proxy, ZDX Copilot/AI agent; “fight AI with AI” .	Accelerating
ZPA/VPN replacement	Q4: ZPA share >40% of new/upsell vs ZIA+ZPA; platform secures 47M users .	ZPA “one of the biggest growth drivers” in FY25; customers replacing firewalls/VPNs and inbound DMZ stacks .	Strengthening
Federal/Public sector	Q4: 13 cabinet-level agencies; expanding internationally .	Now 14 of 15 cabinet-level agencies; significant upsell opportunities .	Expanding
GSIs/Channel	Q4: 8 of top 10 GSIs are customers; largest TCV services deal; consolidation ROI 200% .	Multiple 7-figure GSI-led branch/segmentation programs; GSIs standardizing on broader ZS portfolio .	Building
Billings/Bookings	Q4: 1H/2H billings skew (7% vs 23% scheduled growth) .	Bookings growth “over 30%”; unscheduled billings +20% YoY; RPO +26% .	Improving trajectory
Margin mix	Q4 GM 81.1% with useful-life benefit; investing in cloud/AI .	Q1 GM 80.6%; emerging products prioritizing GTM speed over margins near term .	Slight near-term headwind
Data protection	Q4: Data protection pillar one of fastest-growing; multi-pillar 8-figure TCV wins .	AI-driven data protection (Copilot security) driving large wins; comprehensive platform cited .	Accelerating

Management Commentary

“Growing customer engagements and strong sales execution drove a solid Q1 with all metrics exceeding our guidance. The combination of Zero Trust and AI is creating exciting new opportunities…” — Jay Chaudhry, CEO .
“We grew operating profit by 50% year-over-year and delivered new Q1 records for operating margin of 21% and free cash flow margin of 46%… our revenue growth and free cash flow margin makes us a rare SaaS company that operates at rule of 70 or better.” — CEO prepared remarks .
“We expect ZPA to continue to be one of our biggest growth drivers in fiscal ’25.” — CEO .
“Emerging Products ARR is growing twice as fast as our core products.” — CEO .
“Gross margins ~80%… newer products are optimized for faster go-to-market rather than margins… we plan to optimize for margins over time.” — CFO .

Q&A Highlights

Unscheduled billings growth and bookings: Unscheduled billings grew >20% YoY; bookings growth “over 30%”; management remains confident in 2H billings acceleration given scheduled billings skew and pipeline/sales capacity .
ZPA/VPN and firewall refresh catalyst: ZPA seen as a major FY25 driver; firewall refresh cycles now a clear opportunity to re-architect with Zero Trust (replacing north-south/east-west firewalls) .
Emerging products and AI traction: Emerging products contribution rising (mid-20s% of new/upsell expected in FY25) with momentum in Zero Trust SD‑WAN, device segmentation (Airgap), workload protection, and AI analytics .
Federal strength and GSIs: Federal broadened to 14 of 15 cabinet-level agencies; GSIs increasingly drive large platform consolidations and standardize on ZS solutions .
Guidance clarification and macro: 1H/2H billings mix driven by scheduled billings cadence from prior multi-year contracts; macro scrutiny of large deals unchanged from prior quarters .

Estimates Context

We were unable to retrieve S&P Global consensus estimates due to access limits in this session; therefore, vs-consensus comparisons are not shown. However, ZS exceeded its prior Q1 FY25 guidance on revenue ($628.0M vs $604–$606M guided) and non-GAAP EPS ($0.77 vs $0.62–$0.63 guided), demonstrating substantial outperformance vs company guidance .

Key Takeaways for Investors

Bookings momentum and pipeline: Bookings growth “over 30%” and unscheduled billings +20% YoY support 2H acceleration and raised FY25 outlook; watch execution against 2H-skewed billings .
Zero Trust + AI is a durable growth vector: AI security for Copilot, AI-driven data protection, and ZDX Copilot/AI agent are catalyzing larger platform deals and cross-selling .
ZPA and firewall displacement cycle: VPN replacement and broader firewall refresh present multi-year share gains; management expects ZPA to be a major FY25 growth driver .
Channel leverage with GSIs: Growing GSI-led transformations are accelerating platform consolidation and cost-out ROI for customers—an important multiplier for large, complex deployments .
Federal tailwind: Expansion to 14 of 15 cabinet-level agencies enhances upsell visibility and showcases resilience/mission-critical capabilities .
Margins near-term capped by mix: Gross margin ~80% as newer products prioritize time-to-market; expect optimization over time as scale improves .
Leadership note: CFO retirement announced; tone remains confident with strengthened sales capacity and account-centric GTM pivot underpinning raised FY25 guidance .

Appendix: Additional Data Points

Cash from operations: $331.3M (53% of revenue); Free Cash Flow: $291.9M (46% of revenue) in Q1 FY25 .
Balance sheet strength: Cash, cash equivalents and ST investments: $2,707.9M as of 10/31/24 .
Non-GAAP tax rate policy: 23% effective FY25; EPS shares: ~163M for Q2 guide .

Zscaler, Inc. (ZS)·Q1 2025 Earnings Summary