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

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 Zcaler. Kevin, good afternoon. I know you've had a very busy day, so thank you for setting aside the time to speak with us. Uh 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. Yeah, we had a thank you by the way for having me on today. Uh we had an opportunity to uh speak with investors this morning and spent uh that time going through the opportunity that Zcaler has uh in front of us. Uh AI is the biggest opportunity uh for this company that that we've seen to date. So we're very excited about uh our ability to to win in this market. Uh we talked about the platform story that we have our go to market engine and all of that then ultimately wrapped up in our uh reaffirming our Q1 and 27 guidance as well as providing a point of view of what this business can look like over uh the longer term. >> And I think that what it can look like over the longer term was something that uh 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 Zcaler from roughly 4.4 billion where you are now to that 10 billion target? >> Yeah. So as we think about uh that path to 10 billion it it really rests on uh a few things. So first of all uh we have a $3 billion install base in our zerorust sassy for user business. Uh within that piece of the business, we have our branch in cloud which are significantly higher growth uh components at about 250 million all as of uh fiscal 26. And then we have really strong momentum building in our data security products, our security for AI and our recently uh announced integrated uh agentic sec ops business. So as we think forward uh we see an opportunity for our user business to continue uh to grow double digits. Uh but we see really significant opportunity with security for AI data security uh and our branching cloud uh components of the zerorust uh sassy everywhere business. And so uh all of that taken together we think is is a really really uh strong set of of platform capabilities and opportunity going forward. Kevin, I want to talk about consolidation in the cyber security space because, you know, we talked to a lot of analysts, some of which cover your company. They do see this is a headwind for Zcaler 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 inquisitive 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 as still limited, what do you say to that? How did you reassure investors today? >> Yeah. So, I think our point of view is a little bit different. We don't believe that going out and buying uh adjacent businesses that are not, you know, fully integrated into the offering is what customers are looking for today. Quite frankly, uh we have a highly integrated broad platform that we walked investors through this morning. Uh many of the components I actually just kind of walked through as well. And we think that's highly differentiated. We, you know, the c the companies that we speak to, the CEOs, CIOS, and boards, they are looking for solutions that are tightly integrated can broadly support uh their business needs. And 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 uh to do to protect your business is reduce your attack surface and eliminate lateral movement. And buying a bunch of disconnected uh businesses to help consolidate invoicing in our opinion is not really providing uh that integrated platform experience. And so uh we have been highly focused on the areas that we have a right to win uh and that are truly integrated in our platform and that's where and that's where we uh we make our investments and uh those are the conversations that we have with our customers. >> And in those conversations Kevin uh what are your customers actually spending on money today? Like what are they what are they buying with AI? You called AI just a moment ago the largest demand tailwind you've ever seen at Zcaler. what specifically are they looking to buy? Because Sam and I have 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? >> So, there's really two components, right? There's what are the risks and exposures that exist to my business as a result of AI uh from threat actors being able to infiltrate my environment. That's number one. There's a lot of focus and attention there. uh we have done over 400 assessments with customers and prospects to be able to help them understand uh what that threat landscape looks like for them and we have uh a series of AI related solutions that are designed uh to help protect that as well as just the fundamental uh zerorust exchange which provides uh a secondary barrier if you will uh to AI threats and then there is how do I safely deploy AI in my organ organization uh such that I can achieve the business value that I'm seeking and uh we have a series of solutions that are designed to help companies uh be able to do just that. So they can um know with confidence that I can give my organization AI technology and tools and I can put guard rails around uh what that means. I can protect my sensitive data from from leaking to the internet. I can make sure only the right individuals uh entities, devices, agents can access uh my different resources so that I don't further expose myself while still trying to get uh all the advantages of AI. So uh we have an ability to address both the inbound risk that AI poses as well as the internal risk of deploying AI and both of those dynamics are being purchased by customers today. >> When we look at this global and it's not just a national conversation anymore it really has gone international on AI safety. I'm wondering how you folks in the business of cyber security where it obviously poses an enormous opportunity for you are really thinking about those guard rails and some of the companies that are behind the technology and how they're talking about it right now. Look, at the end of the day, our job is to be able to provide security and confidence to our customers that they can take advantage of these technologies without introducing additional risks to their businesses. Uh, and that is what we do, right? We offer uh what we believe to be is the best cyber security in the world. uh as it relates to, you know, AI threats um only providing specific untrusted access uh within an organization. And so that's where we're focused is really being able to provide the highest level of security uh and confidence to our customers. >> Kevin, we really appreciate you taking the time to speak with us today following your investor day in this nice move of five plus percent to the upside for Zcaler. Again, Kevin Rubin, CFO of Zcaler, thanks again for being with us.