Zscaler (ZS) CFO on Reaffirming FY27 Guidance, AI's Big Demand Tailwind

SPEAKER_1 (0:00)

Joining us now from the NASDAQ, I'm very pleased to say to discuss all of this is Kevin Rubin, who's the CFO of Zscaler. Kevin, good afternoon. I know you've had a very busy day, so thank you for setting aside the time to speak with us. We have seen, of course, you have reaffirmed your guidance for the first quarter and for full fiscal 2027 Investors have seemingly reacted positively. Your stock ended up 5.2%, $212 and change. Just walk us through what led you to that.

Kevin Rubin (0:29)

Yeah, we had a thank you, by the way, for having me on today. We had an opportunity to speak with investors this morning and spent that time going through the opportunity that Zscaler has in front of us.

AI is the biggest opportunity for this company that we've seen to date. So we're very excited about our ability to win in this market.

We talked about the platform story that we have, our go-to-market engine, and all of that then ultimately wrapped up in our reaffirming our Q1 and 27 guidance, as well as providing a point of view of what this business can look like over the longer term.

SPEAKER_3 (1:10)

And I think that what it can look like over the longer term was something that I noticed in a lot of the notes and coverage coming out of your investor day, specifically this path towards $10 billion in ARR. What are the key growth engines that you're looking at, Kevin, in terms of getting Zscaler from roughly $4.4 billion where you are now to that $10 billion target?

Kevin Rubin (1:32)

Yeah, so as we think about that path to $10 billion, it really rests on a few things. So first of all, we have a $3 billion install based in our Zero Trust SASE for user business.

Within that piece of the business, we have our branch and cloud, which are significantly higher growth components at about $250 million, all as of fiscal 26 Then we have really strong momentum building in our data security products, our security for AI, and our recently announced integrated agentic SecOps business. So as we think forward, we see an opportunity for our user business to continue to grow double digits. But we see really significant opportunity with security for AI, data security, and our branch and cloud components of the Zero Trust, SASE everywhere business. And so all of that taken together, we think is a really, really strong set of platform capabilities and opportunity going forward.

SPEAKER_1 (2:40)

Kevin, I want to talk about consolidation in the cyber security space, because we talked to a lot of analysts, some of which cover your company. They do see this as a headwind for Zscaler, and that is because others are branching out into other areas of the space in cyber security at a time when buyers are really looking for consolidation in their own spending, in their IT budgets, looking for that one-stop shop. You have been acquisitive in the past. We know that with Red Canary, which gives you broader exposure here. But I'm just wondering if the street sees your business is still limited, what do you say to that? How did you reassure investors today?

Kevin Rubin (3:19)

Yeah. So, I think our point of view is a little bit different. We don't believe that going out and buying adjacent businesses that are not fully integrated into the offering is what customers are looking for today, quite frankly. We have a highly integrated broad platform that we walked investors through this morning. Many of the components I actually just walked through as well. We think that's highly differentiated.

The companies that we speak to, the CEOs, CIOs and Boards, they are looking for solutions that are tightly integrated, can broadly support their business needs. When you think about the risks that are being introduced with AI in particular, the two biggest things that you need to be able to do to protect your business is, reduce your attack surface and eliminate lateral movement, and buying a bunch of disconnected businesses to help consolidate invoicing, in our opinion, is not really providing that integrated platform experience. So, we have been highly focused on the areas that we have a right to win, and that are truly integrated in our platform, and that's where we make our investments, and those are the conversations that we have with our customers.

SPEAKER_3 (4:41)

And in those conversations, Kevin, what are your customers actually spending on money today? Like, what are they buying with AI? You called AI just a moment ago, the largest demand tailwind you've ever seen at Zscaler. What specifically are they looking to buy? Because Sam, I've had lots of conversations about increased security budgets and what we're spending, but what are you seeing specifically from clients about where their concerns lie?