Zscaler's AI-driven growth potential in data protection and firewall markets
2023-09-08
Zscaler, a cloud security company, recently held a call meeting to discuss their progress in the broader channel, particularly in the traditional two-tier cloud marketplace GSI. During the meeting, the company emphasized the importance of strengthening relationships with channel partners and integrating their solution into system integrators' advisory services. Zscaler expressed satisfaction with their progress and direction.
One of the key topics discussed in the meeting was the company's new product portfolio and its expected growth in fiscal '24. Zscaler sees significant upsell opportunities with their AI capabilities, as they continue to innovate and address the challenges associated with data security. They believe that AI can bring numerous benefits such as unlocking insights, improving employee productivity, and solving complex problems. However, they also acknowledged the risks associated with data loss and data sovereignty, which are currently limiting the full potential of AI.
To address these concerns, Zscaler has already implemented data protection capabilities to prevent sensitive data leakage through AI prompts. Their browser isolation session, for example, restricts employees from entering any sensitive information into AI prompts, ensuring secure usage of AI within enterprises. Furthermore, Zscaler's engineering teams have been actively developing new AI-driven functionality that is available in their premium price bundles. These features include auto classification of unstructured data for advanced data protection and auto segmentation of applications for zero trust access.
The market outlook for Zscaler is positive, with a strong sales pipeline and growth potential in various product areas. The company's sales team is confident, with a record pipeline and deals. The emerging product portfolio is expected to represent over 20% of new business in fiscal '24, with a faster growth rate than the overall growth rate. Areas of strong demand highlighted by Zscaler include data protection, workload protection, and ZDX. The company also sees a growing market opportunity, with new customers seeking better security and expansion into the public sector and federal market. Their flagship products, ZIA and ZPA, are performing well, contributing to the positive market outlook.
During the meeting, Zscaler discussed their plans for product and service development. They are focusing on sales and growth, developing and promoting new products, enhancing security, expanding product offerings in data protection, workload protection, and ZDX, providing secure solutions for better security, targeting the public sector and federal market, expanding market coverage, and expecting bigger deals as customers increasingly buy their platform and flagship products. They have also factored in good growth.
In terms of the competitive landscape, Zscaler is gaining traction and replacing traditional firewall vendors such as Palo Alto, Fortinet, and Checkpoint in the evolving firewall market. Their zero trust architecture is being deployed in branches, eliminating the need for firewalls in those locations. This shift towards zero trust and away from traditional firewalls and VPNs is impacting the sales and demand for firewalls. Zscaler's position in the high-end market has solidified, and they believe the shift to zero trust will continue. In the area of data protection, Zscaler is replacing vendors like Symantec in data loss prevention (DLP) and CASB (Cloud Access Security Broker). Their comprehensive platform, including features like end-point DLP, email DLP, and supply chain data protection, is gaining traction and making them a strong competitor in the market.
The meeting also highlighted several key performance indicators (KPIs) for Zscaler. The company's record pipeline indicates a strong potential for future sales and revenue growth. The achievement of record deals reflects successful sales efforts and increased business opportunities. The emerging product portfolio, which represented 18% of new business in fiscal '23 and is expected to contribute more than 20% in fiscal '24, demonstrates their focus on innovation and the potential for revenue growth from new products. Additionally, the growth rate of new products was mentioned to be faster than the overall growth rate of new Annual Contract Value (ACV), indicating the company's ability to introduce and scale new products successfully. Market share was also mentioned as a key KPI.
Looking ahead, Zscaler's outlook for the quarter and year appears positive. The Chief Financial Officer mentioned that new and upsell bookings were up year over year for the fourth quarter, indicating a good quarter. The CFO expressed confidence in the company's pipeline for new and upsell opportunities, highlighting strong execution and a strong quarter. Despite uncertainties in the global macro environment, Zscaler feels well positioned to perform well in the future. The Founder, Chairman, and CEO expressed optimism, mentioning the company's ability to reduce costs while reducing business risk, which attracts customers even in a tight macro environment. The company also closed a record number of $1 million deals in Q4, further strengthening their outlook.
In conclusion, the call meeting attended by key executives of Zscaler and analysts from various financial institutions discussed the company's financial performance and future prospects. Zscaler is focused on utilizing AI to improve various aspects of their business, with data protection capabilities already implemented and new AI-driven functionality being developed. The company's market outlook is positive, with strong sales pipeline, growth potential, and a competitive position in the evolving firewall and data protection markets. With a positive outlook for the quarter and year, Zscaler is well positioned for future growth and success.