Zscaler (ZS) Q2 2025 earnings summary

Executive summary

• Q2 revenue grew 23% year-over-year to $648 million, exceeding guidance, with billings and ARR also up 23% year-over-year to over $2.7 billion.

• Operating profit rose 36% year-over-year, with operating margin improving to 22% and free cash flow margin reaching a record 22%.

• Large customer momentum continued, with $1M+ ARR customer count up 25% year-over-year and strong upsell activity, especially in Zero Trust and AI-powered security.

• Strategic focus on Zero Trust Everywhere, with over 130 enterprises adopting the platform and a mandate to triple this figure in 18 months.

• Net loss narrowed to $7.7 million for Q2 and $19.8 million for the six months ended January 31, 2025, compared to larger losses in prior periods.

Financial highlights

• Revenue for Q2 FY25 was $647.9 million, up 23% year-over-year, with calculated billings at $743 million, up 18% year-over-year.

• ARR surpassed $2.7 billion, up 23% year-over-year; RPO reached $4.615 billion, up 28% year-over-year.

• Gross margin was 80.4% non-GAAP (77% GAAP), slightly down from a year ago.

• Free cash flow for Q2 was $143.4 million (22% margin); for the six months ended January 31, 2025, it was $435.3 million (34% margin).

• Operating profit was $140.5 million (22% margin), and non-GAAP net income per share was $0.78.

Outlook and guidance

• Q3 FY25 revenue expected between $665–$667 million; non-GAAP income from operations $140–$142 million.

• FY25 revenue guidance raised to $2.640–$2.654 billion (22% growth); calculated billings $3.153–$3.168 billion (20–21% growth).

• FY25 operating profit $562–$572 million (21–22% margin); EPS $3.04–$3.09; free cash flow margin 24.5–25%.

• Management expects continued investment in sales, marketing, and R&D to drive long-term growth.

• Existing cash, cash equivalents, and short-term investments of $2.88 billion are sufficient to fund operations and debt repayment for at least the next 12 months.