Cloud security platform Zscaler (NASDAQ: ZS) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 21.3% year on year to $719.2 million. Guidance for next quarter’s revenue was optimistic at $773 million at the midpoint, 2.9% above analysts’ estimates. Its non-GAAP profit of $0.89 per share was 11% above analysts’ consensus estimates.

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“We had an outstanding Q4, in which we achieved a new milestone of more than $3 billion of Annual Recurring Revenue while achieving our highest ever operating margin for a quarter. We believe Zscaler's Zero Trust and AI security solutions are imperative in today’s world and are driving robust demand,” said Jay Chaudhry, Chairman and CEO of Zscaler.

Company Overview

Pioneering the "zero trust" approach that has fundamentally changed enterprise network security, Zscaler (NASDAQ: ZS) provides a cloud-based security platform that connects users, devices, and applications securely without traditional network-based security hardware.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Zscaler’s 34.8% annualized revenue growth over the last three years was excellent. Its growth beat the average software company and shows its offerings resonate with customers, a helpful starting point for our analysis.

This quarter, Zscaler reported robust year-on-year revenue growth of 21.3%, and its $719.2 million of revenue topped Wall Street estimates by 1.6%. Company management is currently guiding for a 23.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 19.8% over the next 12 months, a deceleration versus the last three years. Still, this projection is commendable and implies the market is forecasting success for its products and services.

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Billings

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Zscaler’s billings punched in at $1.20 billion in Q2, and over the last four quarters, its growth was impressive as it averaged 22.1% year-on-year increases. This performance aligned with its total sales growth, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth.

Customer Acquisition Efficiency

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

Zscaler is efficient at acquiring new customers, and its CAC payback period checked in at 40.2 months this quarter. The company’s relatively fast recovery of its customer acquisition costs gives it the option to accelerate growth by increasing its sales and marketing investments.

Key Takeaways from Zscaler’s Q2 Results

We were impressed by how significantly Zscaler blew past analysts’ billings expectations this quarter. We were also glad its operating profit beat. Looking ahead, revenue guidance for next quarter exceeded Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 5% to $288.24 immediately following the results.

Zscaler may have had a good quarter, but does that mean you should invest right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.