Zscaler CEO Jay Chaudhry joins Yahoo Finance Live to talk about the state of cybersecurity, why more people are showing interest in zero trust security, and the outlook for his company in 2023.
- A new study out today from Zscaler finds less than half of organizations in America feel fully confident in their use of cloud infrastructure. Joining us now to discuss the outlook for cloud services and the rest of the cybersecurity industry is Jay Chaudhry, Zscaler CEO. You're with me, Jay?
JAY CHAUDHRY: Indeed. Thank you for the opportunity.
- Good to have you here. What do you make of that revelation? Less than half of organizations in America feel fully confident. Why so? And what's your takeaway from that?
JAY CHAUDHRY: Well, because the security technologies we have been using were built some 30 years ago. This is around firewalls and VPNs. The bad guys have moved on at a rapid pace. So companies are worried. CSOs are worried. In fact, it's so pathetic that nowadays CSOs have to think that they have a breach, they just don't know.
I think the world has to move to adapt new technologies, like zero trust. That's the real answer. Many companies are making progress. And many are behind.
- Yeah, Jay, certainly many companies are making progress. But many of those companies that have even shown an interest in this aren't using it to their full potential. Talk about engagement and the opportunity there for your company in terms of growth.
JAY CHAUDHRY: Yeah. Tremendous opportunity. If you see our company, Zscaler, has been growing 70%, 80% year-over-year for the past several years. Even last year, over 60% growth. We just announced our Q1 earnings, 54% year-over-year revenue growth.
So what we did was when I started this company in 2008, I had no legacy security boxes to worry about. I could start from a clean slate. Think about doing security the new way, just like Tesla thought of doing cars in a clean way with electric engines rather than traditional engines.
The challenge you generally face is you have to educate the market. Inertia is a powerful thing. Many times customers are used to what they know. Our job is to make sure they understand the new technology, the benefit, so they are able to better protect their corporations. And more important, our country is able to protect our critical infrastructure and national interests.
- So you mentioned those most recent numbers, revenue and billings up 54% and 37%. And yet we're seeing the stock down 60% this year and down another 4% today. What is the investor disconnect?
JAY CHAUDHRY: Well, we are one of those companies where the market has high expectations. We delivered pretty good numbers. But the market does what it does. I have one focus, to really build innovative products and solve customers' problems. If we do that, all the stock stuff gets taken care of in the long run. That's what I focus on.
- Jay, the risk of a recession, though, slowing macro landscape, you would think that would have an impact on some of your clients' spending plans. How are you navigating this pretty uncertain time?
JAY CHAUDHRY: Back row is slowing things down. There's a lot more deal scrutiny out there. But there are a couple of things in Zscaler's favor. First of all, cyber is far more resilient than typical IT spend because every CIO and CSO knows that it needs to be done.
Secondly, while there is focus on reducing cost on CIOs, Zscaler actually reduces cost by eliminating a lot of point products and some of the extra costs. So when we talk to CIOs, the discussion turns to what all point products, what all legacy products can you eliminate to really reduce my cost and improve my security and user experience? Since we do all these three things, we actually have a high degree of interest across enterprises. So there's a strong pipeline, strong engagement. But there is higher scrutiny, where the deals that used to get approved by CIOs, now they go to CFO. And there's more scrutiny on the deals.
- But Jay, you're not just studying who is using your products, but how and where. What are you seeing in terms of the numbers, remote/hybrid work? And how will that impact the need for cyber as we move forward?
JAY CHAUDHRY: Yeah, the way Zscaler was designed, it was assumed that the user could be working from anywhere and applications could be in data center, in factory. It's all in the cloud. So it doesn't matter because in the zero-trust architecture, we don't put users on the network. We connect them like a switchboard, from place A to an application B. It's totally independent. That's really what brings us security.
Now, having said that, when COVID happened and people have to work from home, we were the solution that is designed for stuff like that. So we had a lot of customer growth. Now, customer saw the benefit of zero-trust technology that Zscaler pioneered. And they embraced us big time. So that's why over 40% of Fortune 500 companies depend upon Zscaler.
And our business has been growing. And we have been running a very profitable business. We have been doing significant positive cash flow, which many of the high-flying companies don't do. So we are balancing our growth along with the bottom line.
- Congrats on that. Jay Chaudhry, Zscaler CEO, great to have you here, sir. Really appreciate it.