Executive Summary
Zscaler’s QQ3 2024 results reflect a solid top-line performance amid a challenging profitability backdrop, underpinned by robust cash generation and a strong balance sheet. Revenue reached $553.2 million, up 32.1% year over year and 5.4% quarter over quarter, supported by a gross margin of approximately 78.5%. Despite a small GAAP operating loss of about $4.4 million, the company delivered positive net income of $19.1 million driven by other income and a favorable tax line, resulting in EPS of $0.13 (diluted $0.12).
Operating cash flow was healthy at $173.4 million for the quarter, with free cash flow of $123.1 million, highlighting durable cash generation even as the company continued strategic investments. The balance sheet remains strong with cash and cash equivalents of $1.26 billion and total cash plus short-term investments of roughly $2.24 billion, modest net debt of about $24 million (net cash), and a long-term debt load of $1.184 billion. Notably, acquisitions had a meaningful cash outflow (net acquisitions cash effect of approximately $357 million), contributing to a more assertive growth strategy.
The quarterly results are accompanied by a high-valuation backdrop typical of cloud-native software peers: elevated price-to-sales and price-to-free-cash-flow multiples, reflecting investors’ expectations for sustained ARR growth and expanding margins over time. Management commentary (where available in the dataset) is limited here; no transcript content is provided, so the forward-looking narrative leans on industry dynamics and the company’s product roadmap. Investors should monitor ARR growth, dollar-based net retention, mix shifts toward higher-margin SaaS modules, and the efficiency of acquisitions as growth accelerants.
Key Performance Indicators
QoQ: 167.17% | YoY:141.53%
QoQ: 168.42% | YoY:140.63%
Key Insights
Revenue: $553.2 million in Q3 2024; YoY growth 32.1%; QoQ growth 5.37% (four-quarter metric data corroborates a recovering growth trajectory).
Gross Profit: $434.1 million; gross margin 78.5% (0.7850).
Operating Income: -$4.42 million; operating margin -0.80% (YoY and QoQ improvements implied by the data, but still negative on GAAP basis).
Net Income: $19.12 million; net margin 3.46%.
EPS (GAAP): $0.13 basic; $0.12 diluted.
Weighted Shares: 150.29 million basic; 154.08 million diluted.
EBITDA: $...
Financial Highlights
Revenue: $553.2 million in Q3 2024; YoY growth 32.1%; QoQ growth 5.37% (four-quarter metric data corroborates a recovering growth trajectory).
Gross Profit: $434.1 million; gross margin 78.5% (0.7850).
Operating Income: -$4.42 million; operating margin -0.80% (YoY and QoQ improvements implied by the data, but still negative on GAAP basis).
Net Income: $19.12 million; net margin 3.46%.
EPS (GAAP): $0.13 basic; $0.12 diluted.
Weighted Shares: 150.29 million basic; 154.08 million diluted.
EBITDA: $44.30 million; EBITDA margin ~8.0%.
Cash Flow: Net cash provided by operating activities $173.41 million; capex $50.29 million; free cash flow $123.13 million.
Balance Sheet Highlights: Cash and cash equivalents $1.259B; cash and short-term investments $2.240B combined; total assets $4.199B; total liabilities $3.106B; total stockholders’ equity $1.093B; long-term debt $1.185B; total debt $1.235B; net debt: -$23.76 million (net cash).
Liquidity & Ratios: Current ratio 1.666x; gross margin 78.47%; operating margin -0.80%; net margin 3.46%; cash conversion cycle ~62.9 days; debt to capital ~0.531; debt to equity ~1.130; cash-to-share metrics indicate substantial liquidity and solid cash runway.
Valuation (as of QQ3 2024 data): Price-to-sales ~47.5x; price-to-earnings ~343x; enterprise value multiple ~1,756x; price-to-free cash flow ~213x. These reflect a high-growth, cloud-native SaaS narrative rather than a short-term margin normalization.
Trailing four-quarter revenue progression (USD): 496.7M (Q1 2024) → 524.999M (Q2 2024) → 553.201M (Q3 2024); indicative of continued growth momentum.
Management view (qualitative): No explicit guidance provided in the dataset; implied ongoing emphasis on expanding Zscaler Internet Access (ZIA) and Zscaler Private Access (ZPA) adoption, and strategic use of acquisitions to augment product capabilities. Investors should monitor pipeline health, ARR expansion, and integration efficiency of acquisitions.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
553.20M |
32.09% |
5.37% |
| Gross Profit |
434.10M |
34.42% |
6.63% |
| Operating Income |
-4.42M |
91.05% |
90.60% |
| Net Income |
19.12M |
141.53% |
167.17% |
| EPS |
0.13 |
140.63% |
168.42% |
Key Financial Ratios
operatingProfitMargin
-0.8%
operatingCashFlowPerShare
$1.15
freeCashFlowPerShare
$0.82
priceEarningsRatio
343.29
Management Commentary
Transcript data not included in the provided dataset. Consequently, management commentary and quotes from the QQ3 2024 earnings call could not be incorporated here.
Forward Guidance
No formal forward guidance is provided in the supplied data set. Based on industry dynamics and Zscaler’s product trajectory, the following qualitative view is offered:
- Revenue trajectory: Expect continued year-over-year growth in the high-teens to low-30s percent range driven by expanding enterprise adoption of cloud security, ZIA/ZPA upsell, and increased deployments across multi-cloud environments. The four-quarter revenue trend supports an ongoing growth narrative.
- Profitability path: GAAP operating margins may remain modestly negative in the near term due to ongoing investments in R&D, go-to-market expansion, and the integration of acquisitions. Margin normalization could occur as scale increases, the product mix shifts toward higher-margin cloud subscription offerings, and integration benefits accrue.
- Cash flow and balance sheet: Positive operating cash flow and robust liquidity suggest capacity to fund growth activities while maintaining a strong net cash position. Watch for a more defined target for free cash flow conversion and any non-recurring acquisition-related cash outlays.
- Key factors to monitor: ARR growth and dollar-based net retention, deal cycle length and average contract value, mix between ZIA and ZPA, contribution from newer cloud-security modules (posture management, workload segmentation), and the rate of acquisition integration efficiency. Regulatory and competitive dynamics in cloud security could influence pricing and retention.
In sum, the outlook hinges on sustaining high-velocity ARR expansion, successfully integrating acquisitions, and improving operating efficiency to translate top-line growth into stronger profitability over time.