Zscaler Inc. (NASDAQ: ZS), a global leader in cloud-native cybersecurity solutions, saw its stock jump by approximately 10% after releasing its Q3 fiscal 2025 earnings report, which exceeded expectations across virtually every metric. The results showcased robust top-line growth, improved profitability, and continued momentum in customer adoption and platform expansion—prompting a renewed wave of investor confidence and bullish analyst sentiment.

Outperformance Across the Board

For the third fiscal quarter, Zscaler reported revenue of $678 million, representing 23% year-over-year growth, and exceeding its guidance range of $665–$667 million. Operating profit came in at $147 million, surpassing expectations and yielding a non-GAAP operating margin of 21.6%. Meanwhile, earnings per share (EPS) reached $0.84, up 18% year-over-year and well above the consensus forecast of $0.75–$0.76.

Strong Growth Metrics Fuel Investor Optimism

Zscaler also delivered calculated billings of $785 million, a quarterly sequential increase of 600 basis points, and calculated current billings of $760 million, reflecting 24% growth compared to the prior year. The company’s Annual Recurring Revenue (ARR) reached $2.9 billion, growing 23% year-over-year. These figures reflect the increasing demand for Zscaler’s cybersecurity solutions and its ability to secure larger, longer-term enterprise contracts.

Expansion into High-Growth Categories

A major growth driver this quarter came from the company’s three strategic focus areas: Zero Trust Everywhere, Data Security Everywhere, and Agentic Operations. Combined, these new categories have reached nearly $1 billion in ARR, growing at a faster pace than Zscaler’s overall ARR. Notably, 59% of customers adopting “Zero Trust Branch” were entirely new logos—a signal of meaningful market penetration.

Strategic Acquisition Enhances AI Security Capabilities

Zscaler announced the acquisition of Red Canary for $675 million in cash, a move aimed at accelerating the company’s development of an AI-powered Security Operations Center (SoC). Red Canary’s advanced agentic AI capabilities and experienced go-to-market team are expected to shorten Zscaler’s time-to-market by 12 to 18 months, bolstering its competitive edge in the enterprise SecOps landscape.

Upward Revision of Full-Year Guidance

Following the strong quarterly performance, Zscaler raised its fiscal 2025 guidance. Full-year revenue is now expected to be in the range of $2.659–$2.661 billion (about 23% YoY growth), up from prior guidance of $2.640–$2.654 billion. EPS guidance was lifted to $3.18–$3.19, and free cash flow margin is now forecast between 25.5% and 26%, versus a prior estimate of 24.5%–25%.

Operating at the Rule of 52%

Zscaler now operates under what it calls the “Rule of 52,” combining 24% revenue growth with an 18% free cash flow margin—well above the SaaS industry benchmark “Rule of 40.” This performance signals operational excellence and an effective balance between growth and profitability.

Conclusion: Fundamentals Support the Rally

Zscaler’s post-earnings rally is firmly grounded in financial and operational strength. The company is not only delivering on growth and profitability but also showing strong execution across its go-to-market strategy, platform innovation, and customer expansion. With its reinforced guidance and transformative acquisition strategy, Zscaler is positioning itself as a frontrunner in the next phase of enterprise cloud security—justifying the market’s positive reaction.