Zscaler, Inc. (ZS): history, ownership, mission, how it works & makes money

A Brief History of Zscaler, Inc.

Zscaler, Inc. was founded in 2007, positioning itself at the forefront of the cloud security revolution. The company pioneered the concept of a cloud-native security platform, which has evolved significantly over the years. By 2024, Zscaler has established itself as a leader in securing internet traffic for businesses of all sizes, driven by the increasing adoption of cloud services and remote work environments.

Financial Growth and Performance

As of July 31, 2024, Zscaler reported a revenue of $2,167.8 million, an increase of 34.1% compared to $1,617.0 million in 2023. The company's financial performance over the past three fiscal years is summarized in the following table:

Despite the increase in revenue, Zscaler reported a net loss of $(57.7 million) in 2024, although this represents a significant improvement from the $(202.3 million) loss in 2023. The company's focus on expanding its customer base and enhancing its product offerings continues to drive operational investments, impacting profitability.

Strategic Acquisitions

In 2024, Zscaler expanded its capabilities through strategic acquisitions. Notably, the company acquired Airgap Networks Inc. on April 12, 2024, for a total consideration of $124.4 million. This acquisition aims to integrate Airgap's technology into Zscaler's cloud platform, enhancing its security offerings.

Additionally, Zscaler acquired Avalor Technologies Ltd. on March 8, 2024, for $256.7 million. This acquisition is expected to bolster Zscaler's technology stack and further solidify its position in the market.

Stock Performance and Market Position

As of July 31, 2024, Zscaler's stock price experienced fluctuations but showed an overall upward trend compared to previous years. The cumulative total return for Zscaler stock versus the S&P 500 Index is detailed in the following table:

Throughout this period, Zscaler's stock has outperformed the S&P 500 Information Technology Index, which reflects strong investor confidence and market demand for cloud security solutions.

Market Trends and Future Outlook

As of 2024, the global cloud security market is expected to grow significantly, driven by the increasing need for secure remote access and the protection of sensitive data. Zscaler is well-positioned to capitalize on these trends, leveraging its innovative Zero Trust Exchange platform to meet the evolving security needs of its customers.

The company continues to invest heavily in research and development, with total operating expenses reaching $1,812.1 million in 2024, up from $1,488.7 million in 2023. This investment is critical for maintaining competitive advantage in a rapidly changing technological landscape.

As Zscaler moves forward, its focus will remain on enhancing its product offerings, expanding its global presence, and driving customer acquisition, all while navigating the challenges of profitability amidst growth.

A Who Owns Zscaler, Inc. (ZS)

Major Shareholders

As of August 30, 2024, Zscaler, Inc. had a total of 152,490,005 shares outstanding. The ownership structure is comprised of institutional investors, individual shareholders, and company insiders. The aggregate market value of the common stock held by non-affiliates was approximately $19.8 billion as of January 31, 2024.

Top Institutional Shareholders

The following table lists the top institutional shareholders of Zscaler, Inc. as of the latest reporting period:

Insider Ownership

Insider ownership includes shares held by executives and board members. As of the end of the reporting period, the following executives held significant shares:

Stock Performance

Zscaler's stock has shown significant performance metrics in the fiscal year 2024:

Recent Company Developments

In 2023, Zscaler completed several acquisitions to enhance its technology portfolio:

• Acquisition of Securelyshare Software Private Ltd. for $5.3 million
• Acquisition of Canonic Security Technologies Ltd. for $16.5 million
• Acquisition of Avalor Technologies Ltd. for $256.7 million

The company continues to grow its customer base, with over 8,650 customers across various industries, including approximately 35% of the Forbes Global 2000 as of July 31, 2024.

Zscaler, Inc. (ZS) Mission Statement

Zscaler, Inc. is a cloud security company that aims to transform the way businesses secure their networks in a mobile-first, cloud-enabled world. The company's mission is to enable fast and secure access to cloud resources based on identity, context, and organizational policies. Zscaler's platform is designed to provide comprehensive security solutions to enterprises, enhancing their digital transformation efforts.

Mission Statement Overview

The core of Zscaler's mission is encapsulated in its Zero Trust Exchange platform, which represents a paradigm shift in networking and security architecture. This platform is built to eliminate traditional perimeter security approaches that are increasingly inadequate in protecting users and data in a cloud-centric environment.

Key Elements of the Mission Statement

• Securely connect users, devices, and applications using business policies.
• Support organizations in their transition to the cloud.
• Enhance the user experience while maintaining high security standards.

Market Position and Customer Base

As of July 31, 2024, Zscaler serves over 8,650 customers globally, with a significant emphasis on larger organizations, including approximately 35% of the Forbes Global 2000 companies. The company operates in over 185 countries, indicating a robust international presence.

Financial Performance

Zscaler's financial trajectory has shown significant growth, with revenues increasing from $1,090.9 million in fiscal 2022 to $2,167.8 million in fiscal 2024, reflecting a year-over-year growth rate of 48% and 34% for the respective fiscal years.

Investment in Technology and Growth

In fiscal 2024, Zscaler invested heavily in its research and development, with expenses reaching $499.8 million. The company continues to enhance its cloud platform's functionality to meet evolving customer needs and to solidify its competitive position in the market.

Future Outlook

Despite experiencing net losses in recent years, Zscaler's strategic investments in technology and customer acquisition reflect its commitment to long-term growth. The company continues to anticipate increasing demand for its cloud security solutions as enterprises increasingly adopt cloud technologies.

How Zscaler, Inc. (ZS) Works

Business Model

Zscaler, Inc. operates primarily through a subscription-based model, which includes access to its cloud security platform and associated support services. Approximately 97% of its revenue comes from these subscriptions. The company recognizes revenue ratably over the contract duration, typically ranging from one to three years.

Financial Performance

For the fiscal year ending July 31, 2024, Zscaler reported:

• Revenue: $2,167.8 million
• Net Loss: $57.7 million
• Gross Margin: 78%
• Operating Margin: -6%

This represents a revenue increase of 34% compared to the previous fiscal year, driven by a 12% increase in the customer base and additional subscriptions from existing customers.

Revenue Breakdown

The following table summarizes Zscaler's revenue by region for the fiscal year 2024:

Cost Structure

Zscaler's cost of revenue for fiscal 2024 amounted to $477.1 million, an increase of 32% from the previous year, primarily due to increased operational costs associated with their cloud platform.

Operating Expenses

The total operating expenses for Zscaler in fiscal 2024 were $1,812.1 million, broken down as follows:

Customer Base and Market Position

As of July 31, 2024, Zscaler serves over 8,650 customers across various industries, including approximately 35% of the Forbes Global 2000 companies. The company operates in over 185 countries.

Cash Flow and Investment

For fiscal 2024, Zscaler reported:

• Net Cash Provided by Operating Activities: $779.8 million
• Free Cash Flow: $584.9 million

These figures reflect a healthy cash flow situation, allowing for continued investment in growth and development.

Stock Performance

As of the end of July 2024, Zscaler's stock has shown resilience despite the overall market challenges, reflecting investor confidence in its growth potential and strategic direction.

Future Outlook

Zscaler anticipates continued investment in its sales and marketing efforts to maximize market opportunities and enhance research and development to improve its cloud platform.

How Zscaler, Inc. (ZS) Makes Money

Revenue Generation Model

Zscaler, Inc. primarily generates revenue through sales of subscriptions to its cloud platform, complemented by related support services. In fiscal 2024, subscription and support services accounted for approximately 97% of total revenue.

Financial Performance

For fiscal 2024, Zscaler reported total revenue of $2,167.8 million, representing a 34% increase from $1,617.0 million in fiscal 2023. The revenue growth was primarily driven by an increase in users and additional subscriptions sold to existing customers, contributing $471.8 million in revenue.

Customer Base and Market Reach

As of July 31, 2024, Zscaler had over 8,650 customers across various industries and over 185 countries. Notably, approximately 35% of the Forbes Global 2000 companies are Zscaler customers.

Cost Structure

The cost of revenue for fiscal 2024 was $477.1 million, an increase of 32% from $362.8 million in fiscal 2023. The gross margin remained stable at 78%.

Operating Expenses

Operating expenses for fiscal 2024 totaled $1,812.1 million, with significant components including:

• Sales and Marketing: $1,100.2 million (15% increase from fiscal 2023)
• Research and Development: $499.8 million (43% increase from fiscal 2023)
• General and Administrative: $212.1 million (19% increase from fiscal 2023)

Net Loss

Despite revenue growth, Zscaler reported a net loss of $57.7 million for fiscal 2024, a decrease from the $202.3 million loss in fiscal 2023.

Cash Flow and Investments

Net cash provided by operating activities for fiscal 2024 was $779.8 million, with free cash flow amounting to $584.9 million. Investments in property and equipment were $144.6 million.

Revenue by Region

In fiscal 2024, Zscaler's revenue distribution by region was as follows:

Revenue by Customer Type

The revenue from contracts by customer type for fiscal 2024 was:

Deferred Revenue

As of July 31, 2024, Zscaler reported total deferred revenue of $1.895 billion, an increase from $1.440 billion in fiscal 2023.