Executive Summary
Zscaler’s QQ2 2025 results deliver solid top-line momentum with revenue of $647.9 million, up 23% year-over-year, driven by continued cloud security demand and robust intake across industries. The gross margin remained healthy at approximately 77.1%, suggesting strong product economics despite a substantial operating expense burden. The company posted an operating loss of about $40.1 million and a net loss of $7.7 million for the quarter, reflecting sustained investment in R&D, sales & marketing, and general administration, including notable stock-based compensation. Importantly, Zscaler generated meaningful free cash flow of $143.4 million and ended the period with a strong liquidity position (net cash). These dynamics yield a classic growth-at-scale profile common to high-growth SaaS names: expanding revenue and cash generation alongside ongoing investments that weigh on GAAP profitability in the near term.
Looking ahead, the balance sheet remains robust with a net cash position and a sizable deferred revenue base, which supports revenue visibility. The key questions for investors center on management’s ability to achieve operating leverage as revenue scales, potential improvements in sales efficiency, and how SBC cadence evolves as the company continues to scale. The competitive landscape remains intense in cloud security, with looming pressures from incumbents and rising entrants. The QQ2 2025 performance validates Zscaler’s growth trajectory, while execution on margin expansion and cash flow optimization will be critical to sustaining a premium valuation in a high-mmultiple software environment.
Key Performance Indicators
QoQ: -30.89% | YoY:14.72%
Key Insights
Revenue: $647.9 million in QQ2 2025, YoY +23.41%, QoQ +3.18%
Gross Profit: $499.402 million, Gross Margin 77.08% (YoY +22.67%, QoQ +2.65%)
Operating Income: -$40.14 million, Operating Margin -6.20% (YoY improvement but QoQ a sharp decline of -30.89%)
Net Income: -$7.724 million, Net Margin -1.19% (YoY improvement of +72.87%, QoQ +35.91%)
EPS (Diluted): -$0.0503
EBITDA: $13.553 million, EBITDA Margin 2.09%
Depreciation & Amortization: $28.733 million
Stock-Based Compensation: $172.117 million...
Financial Highlights
Revenue: $647.9 million in QQ2 2025, YoY +23.41%, QoQ +3.18%
Gross Profit: $499.402 million, Gross Margin 77.08% (YoY +22.67%, QoQ +2.65%)
Operating Income: -$40.14 million, Operating Margin -6.20% (YoY improvement but QoQ a sharp decline of -30.89%)
Net Income: -$7.724 million, Net Margin -1.19% (YoY improvement of +72.87%, QoQ +35.91%)
EPS (Diluted): -$0.0503
EBITDA: $13.553 million, EBITDA Margin 2.09%
Depreciation & Amortization: $28.733 million
Stock-Based Compensation: $172.117 million (major driver of opEX)
Operating Expenses: $539.542 million; Cost & Expenses: $688.040 million
R&D: $170.860 million (≈26.4% of revenue)
SG&A: $608.100 thousand G&A + $307.447 million SG&A (S&M) total ≈ $376.? million; SG&A intensity remains high relative to revenue
Net Cash Provided by Operating Activities: $179.433 million
Free Cash Flow: $143.428 million
Cash, Cash Equivalents: $1,758.506 million; Short-Term Investments: $1,121.734 million; Total Cash & ST Investments: $2,880.240 million
Total Assets: $5,005.968 million; Total Liabilities: $3,398.622 million; Total Stockholders’ Equity: $1,607.346 million
Net Debt: -$520.164 million (Net cash position); Current Ratio: 1.15; Quick Ratio: 1.15; Cash Ratio: 0.58
Deferred Revenue: $1,595.78 million (significant source of future revenue visibility)
Capital Expenditures: $36.005 million; Free Cash Flow Yield: ~22.1% of revenue
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
647.90M |
23.41% |
3.18% |
| Gross Profit |
499.40M |
22.67% |
2.65% |
| Operating Income |
-40.14M |
14.72% |
-30.89% |
| Net Income |
-7.72M |
72.87% |
35.91% |
| EPS |
-0.05 |
73.53% |
36.33% |
Key Financial Ratios
operatingProfitMargin
-5.71%
operatingCashFlowPerShare
$1.17
freeCashFlowPerShare
$0.93
priceEarningsRatio
-1020.29
Management Commentary
Transcript data not provided in the supplied dataset. Consequently, there are no official management quotes or themes to extract for QQ2 2025. If a transcript becomes available, a separate update should group insights by themes (strategy, go-to-market, product roadmap, security landscape) and map quotes to actionable implications.
Forward Guidance
No formal forward guidance was included in the provided data. Inference from the QQ2 2025 results suggests:
- Revenue momentum remains solid with 23% YoY growth, indicating healthy demand for Zscaler’s cloud security platform.
- Profitability hinges on achieving operating leverage; current operating losses are driven largely by elevated stock-based compensation and SG&A, particularly sales and marketing spend.
- Free cash flow generation is a positive signal, underscoring strong underlying cash generation and balance-sheet resilience.
- Key factors to monitor: trajectory of SBC cadence, mix of ARR vs. professional services (if any), customer retention and expansion (land-and-expand), evolution of deferred revenue as visibility increases, and any macro or competitive pressures that could impact IT/security budgets.
- If management executes on scaling with efficiency (reducing opex as a % of revenue and improving S&M efficiency), the company could plausibly move toward positive operating margins in the medium term; otherwise margin expansion may lag growth expectations. Investors should watch quarterly SBC expense as a leading indicator of margin trajectory and monitor deferrals and renewal rates for revenue visibility.