Zscaler Inc (ZS)

History and Background

Zscaler Inc. was founded in 2007 by Jay Chaudhry and Kailash Kailash. The company pioneered the security service edge (SSE) architecture and went public in 2018. It evolved from a cloud-based web security gateway to a comprehensive platform for secure access and data protection.

Core Business Areas

• Zscaler Internet Access (ZIA): Provides secure internet and web access, protecting users from threats regardless of location. It serves as a cloud-delivered security stack, replacing traditional appliances.
• Zscaler Private Access (ZPA): Offers zero trust network access, connecting users to private applications without the need for a VPN. It reduces the attack surface and improves user experience.
• Cloud Firewall: The cloud firewall segment helps organizations to secure their networks and infrastructure by inspecting traffic and applying security policies in the cloud
• Workload Protection: A cloud-native application protection platform (CNAPP) to secure workloads in AWS, Azure, and GCP, offering end-to-end security for cloud-native applications.

Leadership and Structure

Jay Chaudhry is the Chairman and CEO. The organizational structure is based on functional teams aligned with product development, sales, marketing, and customer success. Key leaders include Dali Rajic (COO), Remo Canessa (CFO).

Key Offerings

• Zscaler Internet Access (ZIA): Cloud-delivered security stack providing secure web and internet access. Market share is significant, but specific figures fluctuate; Zscaler is considered a market leader in secure web gateways. Competitors include Palo Alto Networks (PANW) and Cisco (CSCO). Revenue from this product accounts for a significant percentage of Zscaler's total revenue.
• Zscaler Private Access (ZPA): Zero trust network access solution providing secure access to private applications. Competitors include Palo Alto Networks (PANW), Akamai (AKAM), and Cloudflare (NET). ZPA is a high-growth area for Zscaler and has the most demand.
• Cloud Firewall: Cloud firewall for network and infrastructure security. Competitors include Palo Alto Networks, Check Point Software, Cisco
• Workload Protection: Cloud-native application protection platform (CNAPP) to secure workloads. Competitors include Wiz, Orca Security and Palo Alto Networks.

Industry Overview

The cybersecurity industry is experiencing rapid growth driven by the increasing frequency and sophistication of cyber threats, the shift to cloud computing, and the growing adoption of remote work. The market is competitive with many vendors offering various security solutions.

Positioning

Zscaler is positioned as a leader in cloud-delivered security, offering a comprehensive platform for secure access and data protection. Its competitive advantage lies in its purpose-built cloud architecture and zero trust approach.

Total Addressable Market (TAM)

Estimated at $72 billion for cloud security, Zscaler is well-positioned to capture a significant portion of this market with its comprehensive SSE platform and growing customer base.

Key Competitors

• PANW
• NET
• AKAM
• FTNT
• CRWD
• CHKP

Competitive Landscape

Zscaler has a competitive edge in the cloud-delivered security space, particularly with its zero trust architecture. However, it faces intense competition from larger, more established cybersecurity vendors like Palo Alto Networks and emerging players like Cloudflare. Zscaler distinguishes itself by exclusively focusing on cloud-native security.

Smokescreen Technologies

• Year: 2021
• Acquisition Price (USD millions): 25
• Strategic Rationale: Acquired Smokescreen Technologies to enhance its deception technology capabilities and improve threat detection.

ShiftRight

• Year: 2022
• Acquisition Price (USD millions): 25
• Strategic Rationale: ShiftRight uses the cloud native security and application development teams of organizations to improve security.

Historical Growth: Zscaler has experienced rapid growth since its IPO, driven by strong demand for its cloud security solutions. Revenue growth has been impressive and consistently above 30% year-over-year

Future Projections: Analysts project continued strong revenue growth for Zscaler, driven by the increasing adoption of cloud security and the company's expanding product portfolio. Profitability is expected to improve as the company achieves greater scale.

Recent Initiatives: Recent initiatives include expanding into new markets, developing new products such as Workload Protection, and strengthening partnerships with other technology vendors.

Zscaler is a strong player in the cloud security market, offering a robust zero-trust platform. The company's high growth and innovative solutions are working well, reflected in its substantial market share. However, its high valuation and intense competition require continuous innovation. It needs to closely monitor emerging threats and potential economic downturns.

Data Sources:

• Company Filings (10-K, 10-Q), Analyst Reports, Industry Research Reports, Company Website, third-party data providers.

Disclaimers:

The information provided is for informational purposes only and does not constitute financial advice. Investment decisions should be based on individual research and consultation with a financial advisor. Market share data is approximate and subject to change.