Executive Summary
Zscaler reported a solid top-line acceleration in QQ4 2024, with revenue of $592.9 million, up 30.3% year over year and 7.2% quarter over quarter, underscoring continued demand for cloud-native security solutions in large enterprise environments. Gross profit was $462.7 million, representing a gross margin of approximately 78.0%, consistent with the year-ago period, signaling a scalable product mix as the company migrates customers to higher-value, subscription-based offerings. However, management faces near-term profitability headwinds: operating income declined to a negative $26.9 million, and net income was negative $14.9 million, resulting in an EPS of -$0.0995 (diluted -$0.0982). The expense base remains elevated, with R&D at $139.2 million and SG&A (selling, general & administrative) at $350.5 million, contributing to a negative operating margin of -4.55% for the quarter. Free cash flow was strong at $136.3 million, and the company exited the period with a robust balance sheet and liquidity, including cash and short-term investments totaling about $2.41 billion and a net cash position of roughly $185 million. The firm continues to generate significant operating cash flow ($203.6 million) despite the negative GAAP profitability, illustrating meaningful underlying cash generation from subscription revenues. Look-forward considerations include the need for operating leverage to materialize as sales scale continues and for expense discipline to improve margins, against a backdrop of secular growth in cloud security adoption and Zscaler’s expanding platform offerings.
Key Performance Indicators
QoQ: -509.31% | YoY:39.51%
QoQ: -177.80% | YoY:51.50%
QoQ: -176.54% | YoY:52.62%
Key Insights
Revenue: $592.868 million; YoY +30.3%; QoQ +7.17%
Gross Profit: $462.663 million; YoY +31.32%; QoQ +6.58%; Gross Margin ~78.04%
Operating Income: -$26.95 million; YoY improvement in loss magnitude not specified; QoQ -$/0% context shows a sharp sequential deterioration (−509.31% QoQ) as cost base remains high
EBITDA: $23.028 million; EBITDA Margin ~3.88%
Net Income: -$14.878 million; YoY change +51.50% (negative base consideration); QoQ -177.80%
EPS (GAAP): -$0.0995; Diluted EPS: -$0.0982; Shar...
Financial Highlights
Revenue: $592.868 million; YoY +30.3%; QoQ +7.17%
Gross Profit: $462.663 million; YoY +31.32%; QoQ +6.58%; Gross Margin ~78.04%
Operating Income: -$26.95 million; YoY improvement in loss magnitude not specified; QoQ -$/0% context shows a sharp sequential deterioration (−509.31% QoQ) as cost base remains high
EBITDA: $23.028 million; EBITDA Margin ~3.88%
Net Income: -$14.878 million; YoY change +51.50% (negative base consideration); QoQ -177.80%
EPS (GAAP): -$0.0995; Diluted EPS: -$0.0982; Shares (weighted avg): 149.586 million; Diluted: 151.497 million
Cash Flow: Operating cash flow $203.557 million; Capex $67.239 million; Free cash flow $136.318 million; Net change in cash $163.883 million; Cash at end of period $1.42308 billion
Balance Sheet: Total assets $4.704968 billion; Total liabilities $3.430866 billion; Total stockholders’ equity $2.474102 billion; Cash and cash equivalents $1.42308 billion; Short-term investments $986.574 million; Total cash & short-term investments $2.409654 billion; Total debt $1.237965 billion; Net debt position: -$185.115 million (net cash)
Liquidity & Efficiency: Current ratio 1.091; Quick ratio 1.091; DSO 111.81 days; CCC 95.64 days; Debt to equity ~0.975; Debt ratio 0.264; Interest coverage negative due to negative operating income; Capital expenditure coverage ~4.12x; Price/Revenue and valuation metrics to follow in peer comparison.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
592.87M |
30.30% |
7.17% |
| Gross Profit |
462.66M |
31.32% |
6.58% |
| Operating Income |
-26.95M |
39.51% |
-509.31% |
| Net Income |
-14.88M |
51.50% |
-177.80% |
| EPS |
-0.10 |
52.62% |
-176.54% |
Key Financial Ratios
operatingProfitMargin
-4.55%
operatingCashFlowPerShare
$1.34
freeCashFlowPerShare
$1.02
priceEarningsRatio
-455.68
Management Commentary
No earning call transcript data provided for QQ4 2024. As a result, management commentary themes, strategic color, and explicit forward guidance quotes could not be extracted from the source material. Once transcript access is available, highlights would typically cover: (a) ongoing deployment of Zscaler’s platform modules (ZIA, ZPA, ZDX) to deepen ARR and cross-sell opportunities, (b) progress against multi-year deals and customer expansion, (c) comments on operating leverage, cost control, and path to profitability, (d) visibility into RFP cycles, customer churn, and net retention metrics, and (e) commentary on product roadmap and AI-driven security enhancements.
Forward Guidance
No formal forward guidance was embedded in the provided data set. Given the quarter’s revenue outturn and healthy gross margin, the key question for investors is the pace at which Zscaler can scale operating expenditures to achieve operating leverage and positive margin expansion. The company’s strong cash generation supports continued investment in R&D and go-to-market activities, but profitability improvement will depend on cost discipline and the ability to convert top-line growth into durable margins. Investors should monitor: trajectory of operating margin as revenue grows, maintenance of gross margin amid mix shift to higher-margin subscription services, R&D productivity and the impact on product-led growth, and the speed at which SG&A scales with revenue without eroding profitability.