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Investing.com -- Zscaler (NASDAQ:ZS) posted strong Q3 results, outperforming expectations on virtually every metric and underscoring the success of its sales transformation and platform expansion strategy.
Amidst a cybersecurity earnings season marked by uneven results and macroeconomic headwinds, Zscaler stood out as the first major cybersecurity vendor to execute cleanly through April.
Revenue for the quarter reached $678 million, growing 23% year-over-year and beating the midpoint of guidance by 1.8%.
Calculated billings increased 26% year-over-year to $785 million, a significant increase from 18% in the prior quarter.
This performance was underpinned by Zscaler’s transition to account-based selling, a move analysts at Bernstein credited with driving deeper expansion within its existing customer base.
They remarked, “The expansion in existing customers showed the benefit of their sales strategy transformation,” highlighting that even though NRR slightly dipped to 114%, the quality and scale of upsell opportunities improved.
Average contract value for new customers grew 40% year-over-year, a clear sign that the fewer but larger deals strategy is bearing fruit.
Morgan Stanley (NYSE:MS) emphasized that this quarter begins to validate the reacceleration story that Zscaler has been guiding toward in recent quarters.
They noted, “Zscaler has demonstrated strong win rates with new logos,” supported by the fact that the company now boasts 642 customers with over $1 million in ARR, and more than 3,300 with over $100,000, both reflecting healthy compound annual growth rates.
Jefferies echoed this sentiment by pointing to traction in Zscaler’s emerging product categories, Zero Trust Everywhere, Data Security Everywhere, and Agentic Operations, which now combine for nearly $1 billion in ARR.
According to Jefferies, “ZS continues to see the remaining $2B in ARR as an opportunity to cross-sell its broader platform,” signaling that the platform still has ample room for expansion.
Stifel added that Zscaler’s strength is particularly noteworthy in the context of broader market volatility.
“We are pleased to see no impact from the uneven macro, as Zscaler’s leading portfolio helps improve an organization’s security posture, drives vendor consolidation, and reduces costs,” they stated.
This resilience, combined with improved go-to-market execution and operational discipline, led management to raise full-year guidance for billings, revenue, operating income, and EPS, all by more than the Q3 beat.
Yet not all views were entirely bullish. Piper Sandler downgraded Zscaler to "neutral" with a price target of $260, despite acknowledging the company’s strong fundamentals.
They cautioned, “We don’t think investors should chase what has been solid performance (fundamentals and stock) and should look for more compelling entry points.”
Their concerns centered on the stock’s recent 30% run-up, integration risks related to the $675 million Red Canary acquisition, and upcoming changes in guidance methodology toward ARR, which could dip below the 20% threshold, and general market uncertainty amid ongoing Fed signals.
Adding to the mix, Zscaler announced the appointment of Kevin Rubin as its new CFO, a seasoned executive with prior experience at BetterUp and Alteryx (NYSE:AYX).
This leadership transition, alongside the introduction of Z-Flex, a new flexible consumption model aimed at reducing friction in the sales cycle, signals a continued push for scalable, customer-friendly growth.