If I came and told you that in one year I'm going to build the best firewall, well, it'll be hard for me to say that because I can't say -- make statements like that, OK? Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Their incumbent CASB provider could not scale to even 5% of the employees when T&S inspection was turned on. Our large and major segment did well. Thank you, Brad. As I mentioned before, customers are increasingly buying Zscaler for Users with bundles ZIA, ZPA, and ZDX together. We see more customers buying our Data Protection, along with ZIA, and replacing their existing CASB point products. RAMP deals started coming in, you know, a few years ago. Jay, for you, you spent some time talking about generative AI and the ability to monetize it with large data sets. Shrenik Kothari -- Robert W. Baird and Company -- Analyst. Jay, I wanted to ask you about the U.S. federal opportunity. Opinions expressed by Forbes Contributors are their own. Yeah. Digital Experience will introduce you to Zscaler's digital experience monitoring capabilities. But, you know, really, what we did in Q2 was to better position ourselves to make the proper hires going forward, and that's what we're doing. On the call with me today are Jay Chaudhry, chairman and CEO; and Remo Canessa, CFO. So, is it impacting our performance? And then just any other colors or commentary on how to think about F4Q billings, which appears seasonally conservative? Most of the firewalls don't have any URLs. Thank you. They are point product. Thank you. This customer said it is the first time they have seen a security vendor that understands their business needs and aligns its solution to address them. Customer Exclusive: Data Loss Prevention Workshop (AMS only). Additionally, you'll be able to ask ZDX subject matter experts questions on how to operationalize ZDX and get the most out of it in the first 48 hours. And then the customer is saying, what's your track record? I mean, that's how I personally look at it. One moment for our next question. I mean, you know, just a follow on, you know, customers recognize the ROI. Build and deploy serverless applications with scale, performance, security, and reliability. Yeah. We feature a 100% uptime SLA for paid plans that only an Anycast architecture can deliver. Watch this video for a guide to logging in for the first time, changing your password, and touring the ZPA Admin portal. When you are driving transformation at C level and whatnot, it is different. You know, what we look at really is we look at new and upsell as the driver in total. So, I do believe that in spite of all that noise and thought that comes from out there, our engagement, our differentiation, the way we are executing in the market, the way we are innovating, and now the new area of AI-ML where we have a unique advantage of better data, better private logs, with structured and unstructured data, we will do better than any of the vendors out there. And that's where you figure out what all is going on. So, having a great highly differentiated platform which were built on zero trust as a key platform. By consolidating point products and embracing zero trust with Zscaler, our customers are modernizing their security and increasing productivity, which gives them the competitive edge they need to succeed in today's rapidly evolving business environment. Watch on demand But now, they're beginning to do full rollout. Customers are not going to delay cyber as a priority. While plenty of AI apps like ChatGPT, GPT-4, Bard, and Bedrock use public data, AI-powered cybersecurity for enterprises requires their own private data. We'll balance growth and profitability based on how our business is growing. I wondered if you could just address the competitive backdrop a little bit. "Digital experience monitoring (DEM) is a performance analysis discipline that supports the optimization of the operational experience and behavior of a digital agent, human or machine, with the application and service portfolio of enterprises. Thanks. And thanks so much for taking the question. I can tell you, more than a dozen at least have asked me, hey, what is this MQ? On a sequential basis, billings declined 2% quarter over quarter, which was better than our normal seasonality. Zscaler has AI experts and data scientists and the most valuable anonymized private data to customize and effectively train LLM models for the security domain. You know, I think a good place for the Street to be, you know, fiscal '24, just to give you kind of a framework, you know, is in that 15.5% to 16% range. Leveraging the largest security cloud on the planet, Zscaler anticipates, secures, and simplifies the experience of doing business for the world's most established companies. Theyjust revealed what they believe are thetenbest stocksfor investors to buy right now and Zscalerwasn't one of them! Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. And this year, the duration basically was slightly above the midpoint. Yeah. We secured over 40 million users from some of the largest global brands, and we surpassed 300 billion transactions daily. Sign In CancelApply rate limit Code not recognized. Redirecting to https://www.zscaler.com/resources/data-sheets/zscaler-digital-experience-data-sheet.pdf June 03, 2023 Technical Analysis of Bandit Stealer Key Points Bandit is a new information stealer that harvests stored credentials from web browsers, FTP clients, email clients, and targets cryptocurrency wallet applications. In this webinar you will be introduced to Zscaler and your ZIA deployment. The most intelligent information that generative AI can use comes from the URL, which could be hundreds of bytes long. If you take a look at basically, you know, the duration, you know, the billings duration, you know, our growth rate was 44% short term. Our consultative sales process enables our account teams to adapt to the changing business environment and stay close to our customers, especially at the C level. In fact, we used the same certification to get what's known as StateRAMP certification that states require. ZPA replaces the entire inbound DMZ, and ZPA is often purchased for all employees. You know, it's all the things I mentioned and your comments. Yeah. From a capacity perspective, we're in good shape. And I think we are tracking well, and we are tracking well for two reasons. We believe the intellectual property, the IP needed to do so is very hard. We now have 400 customers with greater than $1 million in ARR, including over 35 customers exceeding $5 million in ARR. Zscaler's (ZS) fiscal third-quarter results reflect the benefits of the increased demand for cybersecurity products amid the growing cloud migration and digitization trends. And then they say we -- if you really contrast, I've only seen a couple of cases where they say, yeah, we got a competitive solution. We are No. Our end-to-end traffic automation ensures reliable and scalable network connectivity with consistent protection from any location. So, Jay, is there any validity behind kind of what they're building? Platform Services will allow you to explore fundamental capabilities that Zscaler offers including Private Service Edges, Device Posture, TLS Inspection, Policy Framework, and Analytics & Reporting. I wonder if you could just highlight for us or remind us the timing of when you did your big hires, where you are in the capacity of your sales force, and what the hiring might look like going forward to extend the durability of the growth that you're seeing currently. Section 1: Verify Identity & Context will allow you to discover the first stage for building a successful zero trust architecture. While Zero Trust principles remain the same across providers, implementation and ROI vary widely. Supporting Users and Troubleshooting Access. You know, that basically was related to duration. Maybe a comment on unstructured data. It really seems like you've got a number of good things happening there. What Is Zscaler Digital Experience? As we do some of this stuff, I believe we'll further increase our lead. And that's helping us as well because customers are looking at vendors who will be around and who will be the leaders in this area. ZPA provides zero-trust application access architecture for their employees, partners, and suppliers as it consolidates multiple point products, including multiple VPNs, load balancers, VDIs, and dedicated private network services. *Average returns of all recommendations since inception. So, I guess a question for Remo, and I know you addressed it a little bit on the call, but I'd love to take a little bit step further about the methodology considered in making sure that you're not sacrificing growth as you continue to expand margins at this pretty impressive level. As an existing ZIA customer, it was easy and seamless for them to roll out workload protection, which increased their annual spend with us by 35%. At the end of Q3, we had 400 customers with greater than $1 million in ARR, up 39% from a year ago. In a large SSE win, a Global 30 healthcare insurance company purchased ZPA and ZDX for 450,000 users and ZIA for 430,000 users. We are not a firewall company that's trying to pivot to zero trust. Investigating Security Issues will assist you in performing due diligence in data and threat protection. It's because we purpose-built our stuff. Thanks for the color on the fiscal '24 margins, but to the extent you can, any color or high-level discussions you can share with us now on how you're thinking about the growth outlook and to what extent is macro playing into that thought process. I had a broad go-to-market level. I'll go back to what I feel. In this webinar you will be introduced to Zscaler Private Access and your ZPA deployment. Maybe for Jay, you talked in the script about increasing traction with Zscaler for Users. Every edge service is built to run in every network location, available to every customer. Now, I like to turn over the call to Remo for our financial results. Yeah. Market-beating stocks from our award-winning analyst team. One moment for our next question. With this latest purchase, this customer's ARR surpassed $10 million. Customer Exclusive: Digital Experience Monitoring Workshop (AMS only). New security monitoring features In today's environment, our strategy is to double down on customer success. RAMPs, I would consider the same, you know, quarter over quarter. Troubleshooting & Support will teach you about Zscaler's support ecosytem and how to troubleshoot common issues. Having said that, to give you more clarity related to fiscal '24, you know, the current Street consensus is about 15.5% operating profitability. It's an architectural change. The Zscaler was chosen over carefully vendor because of our best-in-class capabilities in DLP, CASB, browser isolation, SSPM, and SaaS supply chain security. Your gross margins are likely to be selling some of the 50s and 60s and not like 80% where we sit at. We can connect you, Partners that support organizations of all sizes adopting our Zero Trust solutions, Partners with deep expertise in SASE & Zero Trust services, Interested in joining our Partner Network? What is Digital Experience Monitoring? Build powerful applications on our global network with our Developer Platform. The duration that we had in Q3 of last year was at the high end of our 10- to 14-month range. Thanks. So, do I kind of try to focus too much on some of the comparative campaigns that are kind of trying to spread lies on? For example, for new logos, what have we done? We have a blueprint for delivering greater value, which drives strong upsell. Explain to us the complexity to lift and shift customers overnight and if you're even seeing any attrition on that front. Cisco Systems ( CSCO -1.02%). In our outlook for Q4, we intend to deliver operating margin expansion of more than 400 basis points year over year. Number two, we had to refine our business value case, CFO-ready case studies a lot more. Thank you. Use this 20 question practice quiz to prepare for the certification exam. So, there's really no headwind or tailwind related to the RAMP deals. If interested in learning more, I provide further insight in this article. And then just one quick one from Remo. As we have been saying for the last several years, we made early investments in federal certification, FedRAMP accounts from the highest level of certifications. I know you mentioned lower close rates, but is there anything else, timing, renewals, or anything else we should think about? Thanks. So, RAMPs did not create basically the positive impact to our billing -- short-term billings. You're now in 12 of 15 cabinet-level agencies. The data protection advancements we launched in October 2022 leveraged AI-ML to classify unstructured documents for policy enforcement. The Zscaler Digital Experience (ZDX) service is built as a multi-tenant, cloud-based monitoring platform to probe, benchmark, and measure the digital experiences for every single user within your organization. Zscaler, Inc. All rights Our remaining performance obligations, or RPO, grew 36% from a year ago to $3.023 billion. It is easy to deploy and run, so you can take . But the best results we do is when customers deploy our technology than [Inaudible] We are able to turn on 20,000 users in seven days, and the results are amazing. Verifying Identity and Context will enable you to understand user and device authentication processes to access private applications using Zscaler Private Access (ZPA). Weitere Informationen darber, wie wir Ihre personenbezogenen Daten nutzen, finden Sie in unserer Datenschutzerklrung und unserer Cookie-Richtlinie. As a result, ZPA is expected to generate a 300% ROI for this customer. 5 Courses Administrator ZDX-Digital Experience Path English ZDX Certified Administrator Exam Take this exam to become certified in Zscaler Digital Experience (ZDX). And then, of course, the execution, high-touch engagement is helping to get through finish line, international. It was natural for us to expand beyond U.S. And what we've done is looked at the West-friendly nations and NATO-friendly nations who depend upon FedRAMP certifications for protecting their federal governments. I should note that while this will ensure better video collaboration experiences for users, it wont solve the issue of forgetting to take yourself off mute! Our dollar-based net retention rate was once again above 125%. Digital experience monitoring is an IT management technique that measures performance, helps IT teams resolve issues, & monitors health of apps and end users. It is a priority. I'll go with Jay mentioned. Zscaler Digital Experience score that quantifies the experiences of each user and helps you get to root cause of issues faster. Zero Trust Architecture Deep Dive Summary. Our differentiation is very strong. And our next question comes from the line of John DiFucci from Guggenheim Securities. Great. Another aspect of our market not well understood by investors is that scale and performance are paramount considerations to customers in the real world. Watch this video series to get started with ZPA. And we are not sitting, we are expanding our platform at a larger pace. In addition, by combining Zscaler's endpoint agent with its global cloud footprint, you get innovative and . Our first acquisition in 2018 was an AI-ML company. Analyzing Internet Access Traffic Patterns will teach you about the different internet access traffic patterns. It's hard. While many companies can hire data scientists and large language models are becoming open source and will probably be available more easily, the data will become the new IP, the new barrier to entry. Our NPS score sits north of 80. ZDX has also introduced new troubleshooting tools that aim to proactively remediate broader unified communications issues, such as connection faults, and avoid the generation of trouble tickets that can overwhelm IT help desks. English (US) Copyright 2007-2023 Zscaler Inc. All rights reserved. And our next question comes from the line of Joshua Tilton from Wolfe Research. A Fortune 100 logistics company made a four-year multimillion-dollar ACV purchase of ZPA and ZDX for 100,000 users. And looking at the numbers, it looks like real clean results. Dont lock yourself out of your own future. Watch this video for an introduction to traffic fowarding with GRE. Welcome to Zscaler Pulse, a monthly podcast brought to you by the Zenith Community team that is aimed at empowering our audience to better understand Zscaler products, the Zenith Community, and the zero-trust industry. And we will also host an investor briefing focused on our latest innovations at our Zenith Live conference on June 15th. Strong verticals were federal, financial services, healthcare, and transportation. Zscaler's digital experience monitoring offering, called Zscaler Digital Experience (ZDX), has been helping clients diagnose call quality problems since its inception. A cabinet-level agency purchased ZIA and ZPA for 110,000 users to cover all of its sub-agencies. Can you double-click on the opportunity and pipeline ahead and maybe talk just more about your strategy in the public sector more generally, not just fed, but SLED, and maybe international government as well? Modernize your network with DDoS protection, WAN and firewall as a service. And as I had said, even two or three years ago, it's a matter of time when every customer buys ZIA, ZPA, ZDX for every employee. Formerly called ZCCA-PA. Getting Started with Zscaler Client Connector. And we have a pretty good degree of engagement with those countries, and we expect to share more success with you in next year and beyond. So, basically, it's a tough compare. Understanding Zero Trust Exchange Network Infrastructure will focus on the components of Zscaler Private Access (ZPA) and the way those components shape the architecture and infrastructure of a Zero Trust Network. Moreover, C-level leaders from around the globe are telling me that the technical debt of the legacy network and security point products impedes progress and slows down business operations. Security should not feel like a puzzle. Just remember, you know, it is a tough compare. I spoke with executives ahead of the launch and would like to share my takeaways from the conversation. You're starting to close larger deals with federal. I do expect RAMP deals to go forward, you know, as we go forward. Andy Nowinski -- Wells Fargo Securities -- Analyst. That's right -- theythink these 10stocks are even better buys. And what we've talked about before is we believe the best measure for Zscaler is really billings. I hope to see you at Zenith Live in Vegas in a couple of weeks. Thanks. So, it is not unnatural for us to see the competition trying to come and say, maybe I can get into this space. It was built from the ground up to leverage AI-ML to not just show where performance . Our unique architecture with our patented single scan, multiaction technology enables us to deliver comprehensive security at high performance and scale. Understanding Zero Trust Exchange Network Infrastructure. Thank you. Our total operating expenses increased 3% sequentially and 33% year over year to $272 million, primarily due to higher compensation expenses. This is simply not true. You know, our mix this year, we're expecting 40-60, you know, new versus upsell. Watch this video for a review of ZIA tools and resources. We also ended the quarter with 2,432 customers with greater than $100,000 in ARR. Zscaler, with 300 billion logs per day and trillions of signals, we have probably the most precious private data, and that we anonymize and feed it to large language models to give us an advantage that, I believe, other competitors would not have. Your question, please. Getting Started with Zscaler Private Access. Checking Private Applications Connected to the Zero Trust Exchange will introduce you to tools for monitoring and checking the health status of private applications. It's much bigger than that. Watch this video for an overview of the Client Connector Portal and the end user interface. And now, I'd like to introduce your host for today's program, Mr. Bill Choi, senior vice president of investor relations and strategic finance. Our total calculated billings in Q3 grew 40% year over year to $482 million. So, they have eight categories. This is Patrick on for Josh. Our proven experience at scale makes us a partner of choice for customers pursuing their zero-trust security journey. Join our interactive workshop to engage with peers and Zscaler experts in a small-group setting as you kick-start your data loss prevention journey. And our next question comes from the line of Sterling Auty from MoffettNathanson. And so, customers basically want to go with a proven vendor who knows how to operate and run and manage such a massive cloud. And I guess when they'll start to anniversary after year one, that's when you start to see a tailwind from the RAMP deals when those customers move to more of a full price for their subscription. Related to large deals, mega deal, you know, we talked about mega deals when we first went public, it being, you know, deals of greater than $10 million. Thank you. We have said many, many times that we are not a typical security company selling boxes through [Inaudible] We are a transformation player. And of course, certifications are helping. Watch Zscaler experts walk through a live demo of ZDX. But I guess I'll go with the one question on the RAMP deals. Thanks for taking my questions, guys, and congrats on the strong results. You, of course, are seeing benefits from kind of strategic customers ramping into larger commitments. And our next question comes from the line of Joel Fishbein from Truist Securities. Workload Communications Self-Guided Workshop & Lab. It's our job to make sure we educate them, we communicate them. Our calculated current billings grew 44% year over year. Architecture, you know, related to, you know, in-line cloud, you know, multitenant architecture not only for users but workloads and IoT, OT, and B2B, you know, that's a vision basically, you know, Zscaler. Our customer success team, our TAMs are doing a great job. In Q3, our new logo business grew approximately 20% year over year. 1 in eight Gartner's categories. First off, just wanted to congratulate you all on the great results in what's been a tough environment. Cybersecurity was a top priority as their IP in software development and manufacturing was being actively targeted by nation-state actors and hackers. Leveraging the largest security cloud on the planet, Zscaler anticipates, secures, and simplifies the experience of doing business for the world's most established companies. One moment for our next question. Our free cash flow margin was 18%. Get Started Already registered? Again, congrats on the very strong results. These emerging products are on track to meet our full year target of high-teens percentage of new business. To take our customer-centric innovation to the next level, we welcomed Syam Nair as our new CTO, who will lead our R&D teams. I wanted to see if you just had any views on that, and more importantly, whether you've seen that maybe make its way into customer conversations at all. Connecting Users to the Zero Trust Exchange with Zscaler Client Connector. One moment for our next question. I mean, CIOs, CXOs, they talk to each other. Operating profit in the range of $69 million to $70 million. Following our optimization efforts in Q2, we're seeing higher efficiency in supporting roles across the departments. You know, I mean, companies typically do those once a year. It was really duration. I have many times described Zscaler being the in-line business, almost like an ERP application. In fact, in Gartner's Peer Insights ratings, which is a customer survey done by Gartner, Zscaler is the only MQ leader who is in No. We are the largest in-line security cloud, and no one comes close to us. As noted earlier, to account for our convertible notes in EPS, you will need to add back $1.4 million in annual interest expense. We continue to expect our data center capex to be around the high single-digit percentage of revenue for the full year. 1 IT priority. Control Content & Access will allow you to discover the second stage for building a successful zero trust architecture. We also said those deals were not lost but just delayed, and we did close a good number of those deals. SAN JOSE, Calif., May 09, 2023 (GLOBE NEWSWIRE) -- Zscaler, Inc. (NASDAQ: ZS), the leader in cloud security, today announced advancements to Zscaler Digital Experience TM (ZDX), an integrated solution that provides end-to-end visibility and IT troubleshooting capabilities accessed through the Zscaler security cloud. Our guidance assumes that new business will take longer to close over the remainder of the fiscal year in view of the macro. Register for this workshop to join our experts in a self-paced video series that looks in detail at todays cloud native threat landscape and best practices to address your security challenges with Posture Control. While good for our business, larger deals take longer to close as customers introduce more checks and reviews. Adjusting Internet Access Policies is designed to help you monitor your network and user activity, and examine your organizations user protection strategy from the ZIA Admin Portal. [Operator instructions] Our first question comes from the line of Brad Zelnick from Deutsche Bank. Thank you. Thank you. Certainly, it doesn't appear in the numbers again, but I know that there were some noise out there with competitive quadrant stuff. Total gross margin of 80.2% compares to 80.4% in the prior quarter and 80.6% in the year-ago quarter. Thank you for standing by and welcome to the Zscaler third quarter fiscal year 2023 earnings conference call. As a result, we are assuming a slightly lower close rate in Q4 compared to Q3. They generally sit at the domain-level stuff. Zscaler (ZS) Q2 2023 Earnings Call Transcript, Zscaler (ZS) Q1 2023 Earnings Call Transcript, Zscaler (ZS) Q4 2022 Earnings Call Transcript, Zscaler (ZS) Q3 2022 Earnings Call Transcript, Zscaler (ZS) Q2 2022 Earnings Call Transcript, Cumulative Growth of a $10,000 Investment in Stock Advisor, Join Over Half a 1 Million Premium Members And Get More In-Depth Stock Guidance and Research, Copyright, Trademark and Patent Information. Auditing Security Policy is designed to help you leverage the superior security measures that Zscaler provides to ensure safety across your organization. Thank you. Happy customers buy more. From our perspective, the global macro environment remains uncertain and customers continue to scrutinize large deals. Zscaler ( ZS Quick Quote ZS - Free Report) enhanced its digital experience monitoring solution, Zscaler Digital Experience ("ZDX"), which provides end-to-end visibility and.
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