Zscaler posts wider quarterly loss on higher spending; shares down 9%

Zscaler on Thursday posted a wider net loss in the second quarter, citing higher spending on sales, marketing, and research and development in a competitive market, sending shares of ‌the cloud ⁠security firm ⁠down roughly 9% in extended trading.

The results come when IT budgets remain tight and clients spend ​cautiously on large deals amid economic uncertainty, even though cybersecurity budgets face less pressure ​than general capital outlays.

Zscaler provides cloud-based zero trust security, which is designed to eliminate the need for legacy firewalls and virtual private networks (VPNs) by authenticating each ​connection rather than granting broader network access.


Shares of cybersecurity ⁠companies, including ‌CrowdStrike and Zscaler, have fallen in recent days as investors assessed ​the potential ​impact of AI startup Anthropic's Claude Code Security tool on ⁠the industry.

Zscaler, which competes with Palo Alto Networks ​and Cloudflare, reported a net loss of $34.3 million in the quarter ​ended January 31, widening sharply from a net loss of $7.7 million a year earlier.

Total operating expenses rose to $676.3 million in the second quarter, compared with $539.5 million in the year-ago period, driven by sales, marketing and research and development expenses.

"While CIOs (chief information officers) care about the budget, but they're doing ‌two things: they do want to embrace AI and they want to do it securely. So, AI is driving demand ​for security," Zscaler CEO ​Jay Chaudhry said.

Businesses ⁠spend on tools offered by companies such as Zscaler amid a wave of high-profile cyberattacks that has hit companies, including F5.

Zscaler said its second-quarter revenue rose ​26% to $815.8 million, beating analysts' average estimate of $798.8 million, according to LSEG-compiled data. Its adjusted profit per share of $1.01 exceeded estimate of 90 cents.

The company forecast third-quarter adjusted earnings per share of $1.00 to $1.01, above analysts' estimates of 95 cents, and revenue of $834 million to $836 million, topping expectations of $831.9 million.