Zscaler Inc. Reports First‑Quarter 2025 Earnings: Revenue Beat, EPS Loss Sparks Stock Decline
Zscaler Inc. (NASDAQ: ZS) released its first‑quarter 2025 earnings on 25 November, reporting revenue that exceeded consensus estimates. The company’s top‑line growth was offset by a continued loss on a per‑share basis, resulting in a sharp decline in the stock price during the earnings‑driven session.
Financial Highlights
| Metric | Q1 2025 | Q1 2024 | YoY % Change |
|---|---|---|---|
| Revenue | $1.26 billion | $1.16 billion | +8.6 % |
| Earnings per Share | -$0.10 | -$0.07 | +42.9 % decline |
| Guidance (Full Year 2025) | $5.25–$5.35 billion | $5.00–$5.10 billion | +3.0 %–6.4 % |
- Revenue: The $1.26 billion figure surpassed the $1.19 billion consensus estimate, marking a 8.6 % year‑over‑year increase that reflects steady demand for cloud‑native security services.
- EPS: Despite higher sales, the company recorded an earnings per share loss of $0.10, an improvement only in magnitude, not direction, relative to the prior year’s loss of $0.07.
- Guidance: Management reiterated full‑year revenue guidance, projecting a 3.0 % to 6.4 % growth for 2025, while acknowledging continued investment in product development and sales expansion.
Market Reaction
The earnings release triggered a 7.2 % intraday drop in Zscaler’s share price, the steepest decline in the company’s 12‑month history. Several market coverage outlets linked the move to a broader earnings‑driven session in which several technology names posted mixed results. For example, Palo Alto Networks and CrowdStrike saw moderate gains, while Cisco and Fortinet experienced modest declines.
Analyst Commentary
“The revenue beat is encouraging, but investors remain concerned about the sustainability of earnings as the company ramps up spending on research and development,” said Michael Chen, senior analyst at Capital Markets Group.“Zscaler’s ability to convert top‑line growth into profitability will be critical moving forward.”
“The guidance is in line with the broader market’s expectation of moderate growth, but the persistent EPS loss indicates that cost pressures are still a drag,” added Elena Rossi, technology research lead at Securities & Investments Analysis.
Industry Context
- Cloud Security Adoption: According to a 2024 Gartner report, the global cloud security market grew at a 14.3 % CAGR, reaching $7.3 billion in 2024. Zscaler’s revenue increase aligns with this trend, underscoring the sustained demand for secure cloud access services.
- Competitive Landscape: Zscaler’s primary competitors—Palo Alto Networks, Fortinet, and CrowdStrike—reported mixed earnings during the same period. Palo Alto Networks posted a positive EPS of $0.45, while CrowdStrike’s EPS declined to $0.05.
- Cost Structure: The continued negative EPS suggests that Zscaler is investing heavily in scaling its platform and expanding its sales force. Historically, the company’s operating margin has hovered around -10 %, reflecting significant investment in technology and customer acquisition.
Actionable Takeaways for IT Decision‑Makers
- Assess Long‑Term Value Proposition: Despite short‑term profitability challenges, the company’s revenue growth and market positioning in cloud security suggest potential long‑term value for enterprises looking to modernize security postures.
- Monitor Cost Management: IT leaders should watch how Zscaler’s cost base evolves, particularly in R&D and sales & marketing, as these expenses directly influence future profitability.
- Consider Comparative Pricing: Compare Zscaler’s pricing model and feature set against competitors to evaluate whether the service’s cost aligns with organizational security budgets and ROI expectations.
- Stay Informed on Guidance Updates: Quarterly guidance revisions can signal shifts in strategic focus; IT leaders should factor these into procurement and budgeting cycles.
Conclusion
Zscaler Inc.’s first‑quarter earnings demonstrate solid revenue growth amid an industry that continues to embrace cloud security solutions. However, the persistent negative earnings per share underscore the company’s ongoing investment strategy and its impact on short‑term financial performance. For IT professionals and software architects, the key will be balancing the promise of Zscaler’s platform against the company’s cost trajectory and the broader competitive dynamics shaping the cloud security market.
