01—Abstract
Summary
Summary of the 10-Q filed May 29, 2025. Cited figures are marked; the original filing is the authoritative source.
Zscaler, Inc. filed this Form 10-Q for the quarter ended April 30, 2025 (fiscal 2025 third quarter).
Revenue for the three months ended April 30, 2025 was $678.0 milliona, up 23% from $553.2 million a year earlier, and nine-month revenue was $1,953.9 million, up 24% from $1,574.9 million. The company reported a GAAP net loss of $4.1 million for the quarter, compared with net income of $19.1 million a year earlier, and a nine-month net loss of $23.9 million, compared with $42.8 million. GAAP loss from operations was $25.4 million for the quarter, while non-GAAP income from operations was $146.7 million, a non-GAAP operating margin of 22%.
Calculated billings grew 25% to $784.5 millionb for the quarter, and free cash flow for the nine months was $554.8 million. The balance sheet shows cash, cash equivalents and short-term investments of $3,005.6 million as of April 30, 2025. The company's $1,150.0 million of 0.125% convertible senior notes mature on July 1, 2025, and the company elected in April 2025 to settle conversions in cash for principal, with any excess in shares.
Remaining performance obligations were $4,978.0 millionc, with 48% expected to be recognized over the next 12 months. Dollar-based net retention was 114% for the trailing twelve months, compared with 116% a year earlier.
Subsequent to quarter end, on May 27, 2025, the company agreed to acquire Red Canary, Inc. for $675.0 milliond in cash, plus employee equity awards, with closing expected in the first quarter of fiscal 2026 pending regulatory clearance. The company also signed a lease for a new headquarters in Santa Clara, California, with total base rent of approximately $69.5 million, with occupancy beginning September 1, 2026.
02—Key points
Key Highlights
- Revenue of $678.0 million for the quarter, up 23% year over year; nine-month revenue of $1,953.9 million, up 24%.
- GAAP net loss of $4.1 million for the quarter versus net income of $19.1 million in the prior-year quarter; GAAP gross margin was 77% versus 79%.
- Non-GAAP income from operations of $146.7 million for the quarter, a 22% non-GAAP operating margin, compared with $121.8 million and 22% a year earlier.
- Calculated billings rose 25% to $784.5 million for the quarter; deferred revenue totaled $1,985.0 million at April 30, 2025.
- Cash, cash equivalents and short-term investments totaled $3,005.6 million, against $1,150.0 million of 0.125% convertible notes maturing July 1, 2025, which the company elected to settle in cash for principal.
- Agreement signed May 27, 2025 to acquire Red Canary, Inc. for $675.0 million in cash plus equity awards, expected to close in the first quarter of fiscal 2026.
- Dollar-based net retention rate of 114% for the trailing twelve months, down from 116% a year earlier.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2025, Zscaler lost $0.01.
- Revenue$678.0M100.0%
- Cost of revenue−$156.0M23.0%
- Gross profit$522.1M77.0%
- Operating costs−$547.5M80.7%
- Operating income−$25.4M3.7%
- Interest, other & tax$21.3M3.1%
- Net income−$4.1M0.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2025filed May 29, 2025Financial Statements
Q3 FY2025 against Q3 FY2024
| Line item | Q3 FY2025Q3 FY2024 | Change |
|---|---|---|
| Revenue | $678.03M$553.20M | +22.6% |
| Cost of Revenue | $155.98M$118.33M | +31.8% |
| Gross Profit | $522.06M$434.87M | +20.0% |
| R&D Expenses | $169.76M$124.96M | +35.9% |
| Operating Expenses | $547.47M$437.88M | +25.0% |
| Operating Income | -$25.41M-$3.01M | −743.4% |
| Interest Expense | $1.34M$1.34M | +0.4% |
| Net Income | -$4.13M$19.12M | −121.6% |
| EPS (Basic) | $-0.03$0.13 | −123.1% |
| EPS (Diluted) | $-0.03$0.12 | −125.0% |
| Shares Outstanding (Basic) | 154.91M150.29M | +3.1% |
| Shares Outstanding (Diluted) | 154.91M154.08M | +0.5% |
05—Questions
Frequently Asked Questions
Did Zscaler return to profitability in the quarter?
Not on a GAAP basis. The company reported a net loss of $4.1 million for the three months ended April 30, 2025, compared with net income of $19.1 million a year earlier. The nine-month GAAP net loss narrowed to $23.9 million from $42.8 million. Non-GAAP operating income, which excludes stock-based compensation and acquired intangible amortization, was $146.7 million.
How will the convertible notes maturing in July 2025 be settled?
On April 1, 2025, the company elected to satisfy conversion obligations by paying cash equal to the principal amount of any converted notes and delivering shares only for the conversion value above principal. The notes had a principal amount of $1,149,954 thousand and mature July 1, 2025. The company stated that its existing cash, cash equivalents and short-term investments are sufficient to fund working capital, capital expenditures and the notes repayment for at least the next 12 months.
What is the pending Red Canary acquisition?
On May 27, 2025, the company entered into a definitive agreement to acquire Red Canary, Inc., a privately held provider of managed detection and response solutions, for $675.0 million in cash, subject to customary adjustments, plus equity awards to employees. The company expects the deal to expand its security operations offerings and close in its first fiscal quarter of 2026, pending closing conditions including regulatory clearance.
What is driving the growth in revenue and customer spending?
The filing attributes most of the quarterly revenue increase to more users and additional subscriptions sold to existing customers, which contributed $83.5 million of the $124.8 million increase. The company also cited an increase of 10% in its customer base from April 30, 2024 to April 30, 2025. Channel partners generated 88% of revenue in the quarter.
What are the main drivers of rising operating expenses?
Sales and marketing expenses rose 20% to $314.6 million, and research and development expenses rose 36% to $169.8 million for the quarter. The filing attributes these increases primarily to employee-related costs, including higher headcount and stock-based compensation. Stock-based compensation expense was $159.4 million for the quarter, compared with $113.2 million a year earlier.
06—Continue