Zscaler CEO: AI Is Opportunity, Not Threat, For Our Business

So AI is a massive opportunity because what it is doing is bringing lots of agents and enterprise agents. For someone like people, it traditionally has been the weakest link for cybersecurity. Now agents are becoming the weakest link. How do you secure them? Well, you need to make sure that you can do one-to-one connection. That means an agent can only access certain applications and nothing more. That requires the global infrastructure that Zscaler has built in the form of zero trust exchange. That's why we are very bullish about our future.

So billings is a secondary number for us. The number one area of focus is our growth and revenue growth. Our revenue grew 26% year over year, ARR 25%, free cash flow 18%, operating margin 22%. All in great numbers. Now we have a Z-Flex program that gives some flexibility in billings, so billings can get impacted. But with Z-Flex, customers are doing multi-year, four or five-year deals with us committing to Zscaler, which is a very strong sign. So I don't think that billings should be viewed in a negative light. Our growth business is very strong.

Well, everyone should and need to use AI. We use AI to make sure we can deliver better customer support to our employees. The agents are helping us. We are increasing the productivity of our engineering team by using all this stuff. But I think the numbers that Block shared, they seem way out of line that anyone else is saying out there. We are seeing some reduction in additional hiring. But I do think that in some of these critical areas you need people. I am hiring more developers for AI development, for example. And for us, many times customers think that as the number of employees may not grow, that means it impacts our user base pricing. The user base may slow down from a growth point of view, but we are actually securing all the agents, traffic, all the agents. When we have millions of users, we'll have billions of agents to secure. That provides an opportunity for us to secure enterprises and monetize it.

I can see sovereign clouds as a positive development, an opportunity for us. We built Zscaler architecture where the data that we store, which is essentially metadata and logs, can stay in that country. We have had a cloud that's built for EU and is EU with data in EU for a long time now. Many of the large countries also want to operate the cloud in that country as well. We are working with many large countries to really provide them a sovereign security cloud that will access the data wherever that data is. So there are two aspects. There may be a model sitting in India or France or Germany, but our sovereign security cloud will make sure they can access the model when sovereign or non-sovereign. So overall, it's a positive thing for us. It's our architecture that allows us to build sovereign security clouds.