Customers do want consolidation and simplification of lots of point products, but they want to do it along best of deep platforms. They don't believe in a single vendor offering the entire, what I may call, God security platform.
— Jay Chaudhry
03Detailed Report
ZS
Company ZS
Period
Q3 2024
CurrencyUSD
Report TypeQuarterly Earnings
GeneratedMay 14, 2026
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Executive Summary
Zscaler reported a strong QQ3 2024 with robust top-line growth, meaningful operating leverage, and continued strategic expansion into AI-enabled security and Zero Trust architectures. Revenue rose 32% year over year to $553.2 million, up 5% sequentially, driven by broad demand for the Zero Trust Exchange (ZDX) platform and expanding adoption of data protection and AI-enabled security modules. Calculated billings grew 30% YoY to $628 million, while Remaining Performance Obligations (RPO) advanced 27% YoY to $3.824 billion, underscoring durable demand and visibility into future revenue streams. The company ended QQ3 with 523 customers generating more than $1 million in ARR and 50 customers above $5 million ARR, highlighting the acceleration of large, multi-pillar deployments.
Management repeatedly stressed that the platform remains mission-critical for customers amid a tougher macro environment and tighter IT budgets. Gross margin expanded to 81.4% (vs. 80.8% last quarter and 80.2% a year ago), aided by a cloud infrastructure useful life extension, while non-GAAP operating margin reached 22% as operating leverage expanded. Net income was positive for the quarter, and GAAP profitability emerged for QQ3, reflecting improved cost management and a favorable stock-based compensation dynamic. Free cash flow margin was 22% of revenue, with free cash flow of approximately $123 million, supported by a solid cash position above $2.2 billion.
Looking ahead, Zscaler raised full-year guidance for fiscal 2024: revenue guidance of $2.140–$2.142 billion (roughly +32% YoY), calculated billings of $2.603–$2.606 billion (≈ +28%), and non-GAAP operating profit of $422–$424 million. The fourth quarter guidance calls for revenue of $565–$567 million (~+24–25% YoY) with gross margins at ~80% and EPS of $0.69–$0.70. Management noted a near-term shift of data center CapEx into fiscal 2025 and acknowledged transitional challenges in the go-to-market organization as Mike Rich integrates and scales an account-centric GTM. Overall, the QQ3 print reinforces Zscaler’s strategic positioning in high-growth security segments and the durability of its multi-pillar, AI-augmented Zero Trust platform.
Key Performance Indicators
Revenue
Increasing
553.20M
QoQ: 5.37% | YoY: 32.09%
Gross Profit
Increasing
434.10M
78.47% margin
QoQ: 6.63% | YoY: 34.42%
Operating Income
Increasing
-4.42M
QoQ: 90.60% | YoY: 91.05%
Net Income
Increasing
19.12M
QoQ: 167.17% | YoY: 141.53%
EPS
Increasing
0.13
QoQ: 168.42% | YoY: 140.63%
Revenue Trend
Margin Analysis
Financial Highlights
Key QQ3 2024 Metrics (USD in millions unless stated otherwise)
- Revenue: 553.2; YoY +32.1%; QoQ +5.0%
- Gross Profit: 434.1; Gross Margin 81.4% (vs. 80.8% prior quarter; 80.2% year ago) – driven partly by extended useful life of cloud infrastructure
- Operating Expenses: 328.0; up 2% QoQ; up 21% YoY
- Operating Income (GAAP): -4.42; Operating Margin (GAAP): -0.80% (negative due to scale)
- EBITDA: 44.30; EBITDA Margin: ~8.0%
- Non-GAAP Operating Margin: 22% (guidance basis)
- Net Income: 19.12; Net Income Margin: 3.46%
- EPS (diluted): 0.12; GAAP EPS: 0.13 (non-GAAP basis higher due to adjustments)
- Free Cash Flow: 123.13; Free Cash Flow Margin: 22% of revenue
- Cash, Cash Equivalents, & Short-Term Investments: 2,239.999 (2.24B) total; Net Debt: -23.76M (net cash position)
- Cash Flow from Operating Activities: 173.41; CapEx (Cash): -50.28; Free Cash Flow: 123.13
- Balance Sheet Highlights: Total Assets 4.199B; Total Liabilities 3.106B; Total Stockholders’ Equity 1.093B
- Billings & Pipeline: Total calculated billings 628.0 (YoY +30%); Current billings YoY +29%
- RPO: 3.824B, up 27% YoY; Current RPO ~51% of total
- ARR Milestones: 523 customers >$1M ARR; 2,922 customers >$100k ARR; 116% 12-month trailing dollar-based net retention rate (NRR)
- Geographic mix: Americas 54%; EMEA 31%; APJ 15%
- Shares & Dilution: Weighted average shares outstanding 150.29M; Diluted 154.08M
Notes:
- The company discusses non-GAAP metrics in its earnings materials; GAAP results show a modest quarterly loss, while non-GAAP metrics illustrate improved operating efficiency and profitability.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
553.20M
32.09%
5.37%
Gross Profit
434.10M
34.42%
6.63%
Operating Income
-4.42M
91.05%
90.60%
Net Income
19.12M
141.53%
167.17%
EPS
0.13
140.63%
168.42%
Key Financial Ratios
Gross Profit Margin
Excellent
78.50%
Gross profit margin is exceptional, indicating strong pricing power and operational efficiency
Operating Profit Margin
Weak
-0.01%
Operating margin is below industry norms, profitability concerns
Net Profit Margin
Fair
3.46%
Net profit margin is moderate, room for improvement in cost management
Return on Assets
Weak
0.46%
Return on assets suggests inefficient capital allocation
Return on Equity
Weak
1.75%
Return on equity suggests inefficient capital allocation
Current Ratio
Healthy
1.67
Current ratio shows adequate liquidity to meet short-term obligations
Debt to Equity
High Risk
1.13
Debt-to-equity indicates high leverage and elevated financial risk
P/E Ratio
High Growth
339.77x
Very high P/E indicates aggressive growth expectations, higher risk
Price to Book
High Premium
23.78x
Very high premium suggests asset-light business model or lofty expectations
Management Insights Available for Members
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