Zscaler reports Q2'23

This may be Pablum for many though i still have a small position in Zscaler and felt it worth sharing.

Zscaler Reports Second Quarter Fiscal 2023 Financial Results
March 2, 2023

First lets take a look at:

  1. Revenue history YoY and outlook
  2. Calculated billings YoY history and outlook
  3. Deferred revs YoY and outlook

Second Quarter Highlights
- Revenue grows 52% year-over-year to $387.6 million
- Calculated billings grows 34% year-over-year to $493.8 million
- Deferred revenue grows 46% year-over-year to $1,111.9 million

"We exceeded both our revenue and profitability guidance in Q2, demonstrating the operating leverage inherent in our business model,”

said Jay Chaudhry, Chairman and CEO of Zscaler.

“Even in this difficult macroeconomic environment, we continue to see customers consolidate multiple point products onto our integrated Zero Trust security platform for better security and lower cost.
We believe that strong customer interest in our platform, together with the growth in our annual recurring revenue base, supports the increase to our fiscal year guidance."

  1. Revenue of $387.6M grew 52% YoY beating their own and analysts expectations though trending lower.
    2023 Outlook is for Total revenue of approximately $1.558B to $1.563B
    Q3’23 Outlook Total revenue of $397M at midpoint. UP ONLY 38% YoY
    (so if my math is correct they project Q4’23 Revenues ~$459M UP~44% YoY)

Revenue History YOY

Q2'23        Q1'23        Q4'22       Q3'22        Q2'22
 52%          54%          61%         63%          63%
$387.6M     $355.5M      $318.1M     $286.8M      $255.6M
  1. Calculated billings of $493.8M grew 34% YOY.
    2023 Full Year Outlook is for Calculated billings of $1.935B to $1.945B
Q2'23     Q1'23     Q4'22    Q3'22
 34%      37%       57%      54%


  1. Deferred revenue has been drifting down as a percent of YoY.
    Q2’23 is $1,111.9M, up 46% YoY
    Q1’23 was $1,005.7M, an increase of 55%YoY
    Q4’22 was $1,021.1M, an increase of 62% YoY
    Q3’22 was $818.7M , an increase of 65% YoY.
    Q2’22 was $759.9M , an increase of 70% YoY.


Now that we have covered revenues, calculated Billings, and deferred revenues and their outlooks, let’s check more.

Second Quarter Fiscal 2023 Financial Highlights

  • GAAP net loss of $57.5M compared to GAAP net loss of $100.4M YoY

  • Non-GAAP net income of $57.6M compared to non-GAAP net income of $19.2M YoY

  • Net income (loss) per share: GAAP net loss per share was $0.40, compared to $0.71 in Q2’22. Non-GAAP net income per share was $0.37, compared to $0.13 in the second quarter of fiscal 2022.

  • Cash flow: Cash provided by operations was $89.5M, or 23% of revenue, compared to $48.3M, or 19% of revenue, in Q2’22.
    Free cash flow was $62.8M, or 16% of revenue, compared to $29.4M, or 12% of revenue, in Q2’22.

****** That Non-GAAP net income per share of $0.37 also beats estimates so they beat analyst estimates for EPS and Revenues.

Recent Business Highlights

  • Achieved a rating of AA in the MSCI ESG Ratings assessment
  • Released new integrations with Zoom Video Communications
  • Announced that Zscaler Private Accesshas achieved FedRAMP Moderate authorization, making Zscaler the only cloud security service provider to have its core services now authorized through the U.S. Federal government’s FedRAMP program at High and Moderate levels.
  • Introduced Zscaler Resilience™, the industry’s first cloud resilience for SSE to ensure nonstop cloud security operations.
  • Acquired Canonic Security™ in February 2023, a SaaS application security platform innovator.

Click on the blue highlights for more detail.


Zscaler’s mission is to empower organizations to realize the full potential of the cloud and mobility by securely connecting users to applications from any device, anywhere .



  • Da’ Bears will focus on the YoY downtrend in revenues and it looks like that will continue through 2023.
  • Da Bulls will focus on raised guidance, a growing TAM, government contracts, a growing platform, and solid cash flow.

Well, that’s what i have for now… what do ya think of their quarter and outlook?

Fool ommmmm , kevin c
long of Zscaler, Inc.



I am probably the only one who thinks that the report was terrific. But this market doesn’t care about terrific. Good thing I am an investor and not a trader. I have a low cost basis and expect to do well with my shares.


Agree - I thought the revenue performance was good and the operating leverage and bottom line progress excellent. Europe and Fed business sounded like stand out pockets of strength. Waiting to review the transcript of the earnings call but I like what they put out. Despite the raise I guess my one concern is the sequential QoQ guide is 2.5% revenue growth so well short of double digits or high single digits they have always put out.



Nice summary CMFSircc! A lot of my notes have already been said. I really liked the latest quarterly report at my first look through it.

It’s down 10% right now as of writing before market open (8:43am Eastern). If I had to guess why, it’s the billings numbers and enterprise customer growth, which have both continued to fall each quarter. Normally I’d say revenue growth (which was great) is more important than billings, but Zscaler is the rare case where management has repeatedly told us in conference calls that billings is the best way to look at the business.

Billings fell to 34% YoY from 58% YoY in the comparable quarter last year. It’s basically been a linear shot down from 74% as recently as 6 quarters ago.

And enterprise customer growth spending > $100k was 5% QoQ and 34% YoY. This is a new low for Zscaler in this metric unfortunately. On the other hand, million dollar customer growth was really not bad though, coming in at 9% QoQ and 51% YoY.

But on the positive side, most all their other numbers looked great. Although it’s already been said here in this thread, here’s what I liked:

–Revenue growth of 9% QoQ (business as usual) beat their guide by 6% (also business as usual)

–Increased annual revenue growth guide to 43% (from 40%)

–A revenue guide for next quarter of 3% QoQ growth (not as high as the comparable quarter last year’s guide of 6%).

–Record NG net profits of $57.6m, and improving GAAP net loss substantially from -$100m in the comparable quarter last year to -$57m.

–Improved free cash flow to $63m or 16% of revenues, up from $29m or 12% of revenues.

Again, there’s a lot to like in this report! But I think the issue is that people expect (with good reason) that revenue growth will eventually fall closer to what billings growth is. Based on their guide, it’s gonna take a few quarters and may not even be that noticeable until next fiscal year.


I agree with everything above. A good quarter clouded by a billings number management continually tells us to focus on as a gauge of underlying health. One thing I noted is management has extended the ramp payments for some customers coming on board so less hits the first year of a contract and more falls into the second. This timing change will create billings pressure now but hopefully lead to a small buffer later assuming these customers meet their payment schedule.

It’s tough to close deals for everyone right now, so I can’t penalize ZS for taking advantage of its cash flows and profits to give customers a temporary break while still landing the deal. That explanation makes enough sense to me to think ZS remains on track.


This should also put a bit more into deferred revenue in the first year of the contract if they’re backloading the contracts. Unfortunately, deferred revenue growth is also slowing but still very good.

Perhaps we can simply explain the slowdown with the general slowing of the industry and macroeconomic headwinds.

I don’t own Zscaler at this time. But it may be time for me to start a position.