According to a Grand View Research report, the global secure access service edge market is estimated to grow at 36.4% CAGR from 2021 to 2028 driven by remote working conditions that have accelerated the demand for a robust security framework that can potentially ensure secure access to data on the go. Cloud security provider Zscaler (Nasdaq: ZS) is benefiting from this high growth trend.

Zscaler’s Financials

Revenues for the third quarter grew 63% to $286.8 million, ahead of the market’s forecast of $271.8 million. GAAP net loss was $101.4 million, compared with a net loss of $58.5 million a year ago. Non GAAP EPS was $0.17 compared with the Street’s forecast of $0.11.

Among key metrics, calculated billings for the quarter grew 54% to $345.6 million. Deferred revenues grew 65% to $818.7 million.

For the fourth quarter, Zscaler expects revenue of $304-$306 million and an EPS of $0.20-$0.21. The market was looking for revenues of $291.47 million and an EPS of $0.17. Zscaler expects to end the current year with revenues of $1.078 billion and an EPS of $0.64-$0.65. The Street had forecast revenues of $1.05 billion and an EPS of $0.55.

Zscaler’s Product Upgrades

Zscaler is now expanding its focus on offering zero-trust security for public cloud workloads and applications. Known as Workload Communications, the service was released late last year. But over the last quarter, Zscaler has been adding capabilities to the service. The global pandemic had accelerated the adoption of cloud transformation for organizations. Companies are seeing challenges in the specific communication needs of their public cloud workloads. Workload Communications is a part of Zscaler’s larger Cloud Protection feature and automates protection for workloads on and between any cloud platform.

Most security service providers offer point products for cloud-native apps. Instead, Zscaler’s Workload offering allows a workload to access only the workload components necessary to attain zero trust security. Workload Communications secures application-to-internet communications, application-to-application communications across multi-cloud environments, and workload-to-workload communications inside a cloud, virtual private cloud, or data center.

Zscaler is also leveraging AI / ML capabilities along with several partner integrations to deliver an improved digital user experience. The system automatically figures out the location and type of performance issues, and also provides information about the quality of voice, video, and screen through its integration with Microsoft Teams and Zoom. It has also integrated ZDX with ServiceNow to ensure that customer end user support is more efficient. ZDX also got certified and became available on its Federal Cloud. Its threat labs security research team is getting better reconnaissance about the tools and behavioral patterns and delivering a higher order threat intelligence. The specific threat intel, coupled with a cloud effect from over 240 billion transactions and 300 trillion signals per day, enables Zscaler to deliver better threat protection.

Meanwhile, Zscaler continues to build on its partner network. It recently announced its partnership with Siemens that will combine the Zscaler Zero Trust Exchange cloud security platform with Siemens’ devices to help customers with Operational Technology (OT) infrastructures accelerate their secure digital transformation initiatives. With the partnership, customers will have the ability to obtain the Zscaler Remote Access for OT alongside Siemens’ flexible local processing platform SCLANACE LPE. The solution allows customers to securely manage, control quality assurance, and analyze production OT infrastructures and its applications from any workplace, regardless of location.

Zscaler’s products are getting positive reviews from the market. According to a recent Gartner 2022 Magic Quadrant for Security Service Edge, the company was tagged as the leader in the market. Netscape and McAfee were the only other companies that made it to this quadrant. Gartner believes that Zscaler’s API integrations with more SaaS applications and data security features have helped it improve its standing in the last year. Its cloud-native security offerings, coupled with a track record of innovation, and access to a single agent for steering traffic help it stand ahead of its competitors. But the security services market is highly competitive, and a very active one. The continuing mergers across the industry – such as Google’s Mandiant acquisition, Microsoft’s RiskIQ, and CloudKnox acquisitions – will necessitate that Zscaler continues innovating to ensure that it stands ahead of the crowd.

Its stock is currently trading at $153.09 with a market capitalization of $21.6 billion. It hit a 52-week low of $125.12 earlier this month and a 52-week high of $376.11 in November last year.