Zscaler Inc

Part I

Overview

We anticipate, secure and simplify the experience of doing business, transforming today and tomorrow. We were incorporated in 2007, during the early stages of cloud adoption and mobility, based on a vision that the internet would become the new corporate network, as the cloud became the new data center. We predicted that with rapid cloud adoption and increasing workforce mobility, traditional perimeter security approaches would prove to be inadequate in protecting users and data and result in poor user experience. We pioneered a cloud platform, the Zscaler Zero Trust Exchange TM platform, which represents a fundamental shift in the architectural design and approach to networking and security.

Enterprise applications are rapidly moving to the cloud to achieve greater IT agility, a faster pace of innovation and lower costs. Organizations are increasingly relying on internet destinations for a range of business activities, adopting new external software as a service, or SaaS, applications for critical business functions and moving their internally managed applications to the public cloud, infrastructure as a service, or IaaS, or platform as a service, or PaaS. Users now expect to be able to seamlessly access applications and data, wherever they are hosted, from any device, anywhere in the world. We believe these trends are indicative of the broader digital transformation agenda, as businesses increasingly succeed or fail based on their IT outcomes.

We believe that securing the corporate network is becoming increasingly irrelevant in a cloud and mobile-first world where organizations depend on the internet, a network they do not control and cannot secure, to access critical applications that power their businesses. We pioneered a unique approach that securely connects users, devices and applications using business policies, regardless of the network. Our Zero Trust Exchange platform eliminates the need for traditional on-premises security appliances that are difficult to maintain and require compromises between security, cost and user experience. Our purpose-built, multi-tenant, distributed cloud platform incorporates the security functionality needed to enable users, applications and devices to safely and efficiently utilize authorized applications and services based on an organization’s business policies.

Our cloud-native platform, the Zscaler Zero Trust Exchange, enables customers to secure and connect users, workloads and IoT/OT devices across three core products:

•Zscaler for Users — leverages our comprehensive cloud platform to provide users secure, fast and reliable access to the internet, including SaaS applications, via Zscaler Internet Access TM, or ZIATM, and provides Zero Trust Network Access to internally hosted or managed applications via Zscaler Private Access TM, or ZPATM, in each case, regardless of device, location or network and also regardless of whether the users are internal or external. Our unique ZPA technology not only provides secure access to applications, but also secures the applications themselves. We do this all while optimizing end-to-end user experience with Zscaler Digital Experience TM, or ZDXTM, which allows an organization to identify and isolate issues negatively impacting its users. In addition to enabling secure access to the internet and internal applications, our Zscaler Data Protection™ solution secures customers’ proprietary data that is traversing the public internet (data-in-motion) and data that is stored in the public cloud applications (data-at-rest).

•Zscaler for Workloads – leverages Zscaler’s Zero Trust Exchange to secure workloads, whether in a public cloud or in private data centers, using our cloud-native zero trust access service to provide fast and secure app-to-internet (via ZIA) and app-to-app (via ZPA) connectivity across multi- and hybrid cloud environments. Our Posture Control solutions automatically identify and remediate cloud service, application and identity misconfigurations for assets deployed in public cloud infrastructure. The core elements of Zscaler for Workloads address the key security and operations challenges that must be overcome to secure deployment of public cloud platforms such as Microsoft Azure, or Azure, Amazon Web Services, or AWS, and Google Cloud Platform, or GCP.

•Zscaler for IoT/OT – leverages the complete suite of Zscaler solutions to reduce the risk of cyberattacks and data loss as well as to improve user and facility safety by providing zero trust security for connected IoT and OT devices in branch offices. We provide secure internet communications for IoT and OT devices, privileged access to IoT and OT devices (e.g. for maintenance), secure access to production applications (e.g. on a factory floor) and deception technology to provide active defense.

Before our Zero Trust Exchange, the corporate data center served as the central hub of IT security, with a physical network perimeter used to separate corporate users, devices and applications from the internet. This traditional network perimeter approach relies on appliances that have become fundamentally less effective as applications, data, users and devices rapidly move off the corporate network, making the notion of a corporate perimeter obsolete. In a world where companies are shifting their most critical IT assets to the cloud, a zero trust architecture is required. Our architecture is vastly different from the legacy “hub-and-spoke” corporate network, where traffic from branch offices is routed to centralized data centers for security scanning and policy enforcement before reaching its destination. In contrast, our Zero Trust Exchange acts as an intelligent switchboard that uses business policies to securely connect users, devices and applications over any network and protect against cyberthreats and data loss. We provide our solutions at scale, processing over 500 billion internet transactions per day. Our Zero Trust Exchange eliminates the requirement for organizations to buy and manage a variety of high-cost appliances that need to be maintained by a large number of highly skilled security personnel, who are expensive and in increasingly short supply. We are integrating our proprietary large language models, or LLMs, with our Zero Trust Exchange to leverage our data lake built on our more than 500 billion daily transactions. Analyzing this volume of high-quality data can continuously improve our LLMs, artificial intelligence, or AI, and machine learning, or ML, models to deliver ever-more powerful security outcomes for our customers.

Our cloud native, multitenant architecture is distributed across more than 160 data centers globally which brings security and business policy close to users and devices in over 185 countries and provides fast, secure and reliable access. Each day, we block over 150 million threats and perform over 250,000 unique security updates. Our customers benefit from the cloud security effect of our ever-expanding ecosystem, enhanced by our advanced AI and ML capabilities, because once a new threat is detected, it can be blocked across our customer base within minutes.

Many of the largest enterprises and government agencies in the world rely on our solutions to help them accelerate their move to the cloud. We have over 8,650 customers across all major geographies, with an emphasis on larger organizations, and we currently count approximately 35% of the Forbes Global 2000 as customers. Our customers span every major industry, including financial services, healthcare, insurance, manufacturing, automotive, airlines and transportation, conglomerates, consumer goods and retail, media and communications, public sector and education, energy, technology and telecommunications services.

We have experienced significant growth, with revenue increasing from $1,090.9 million in fiscal 2022 to $1,617.0 million in fiscal 2023 to $2,167.8 million in fiscal 2024, representing year-over-year revenue growth of 48% and 34%, respectively. We experienced net losses of $57.7 million, $202.3 million and $390.3 million in fiscal 2024, fiscal 2023 and fiscal 2022, respectively. We expect we will continue to incur net losses for the foreseeable future.

Our Zero Trust Exchange Platform

Our Zero Trust Exchange cloud security platform delivers our core products; Zscaler for Users, Zscaler for Workloads and Zscaler for IoT/OT, through the deployment of our comprehensive and integrated solutions, each built natively in the cloud to power digital transformation.

Secure Internet and SaaS Access - Zscaler Internet Access

ZIA, provides users, workloads, IoT and OT devices secure access to externally managed applications, including SaaS applications and internet destinations regardless of device, location or network. ZIA provides inline content inspection and firewall access controls across all ports and protocols to protect organizations and users from external threats, secure data while at rest and prevent data from leaking out to unauthorized sites. Policies follow the user to provide identical protection on any device, regardless of location; any policy changes are enforced for users worldwide. Our cloud security platform provides full inline content inspection to assess and correlate the risk of the content to protect against sophisticated attacks, including ransomware and phishing. The cloud platform applies AI and ML across our over 500 billion daily transactions to quickly identify and block unknown threats and to identify and categorize unknown destinations.

ZIA enables the following capabilities:

Cyberthreat Protection – Our threat prevention functionality enables protection against threats using a range of approaches and techniques. Our threat prevention capabilities provide multiple layers of protection to prevent sophisticated ransomware, phishing and zero-day cyberattacks. We provide functionality that traditionally has been offered by disparate, stand-alone products. Our core cloud platform threat prevention services include:

•Advanced Threat Protection: Our advanced threat protection functionality uses techniques including AI/ML, signatures and reputation to deliver real-time protection from malicious internet content like browser exploits, scripts, zero-pixel iFrames, malware and botnet callbacks. Over 250,000 unique security updates are performed every day to the Zscaler cloud to keep users protected. Once we detect a new threat to a user, we block it for all users. We call this the “cloud security effect.”

•Sandbox: Our cloud sandbox enables enterprises to block zero-day exploits and advanced persistent threats by analyzing unknown files for malicious behavior, and it can scale to every user regardless of location. Our cloud sandbox was designed and built to be multi-tenant and allows customers, using AI among other analytics, to determine which traffic should be sent for detonation. As an integrated cloud security platform, customers can set policies by users and destinations to prevent patient-zero scenarios and to analyze, hold and detonate suspicious files in the cloud sandbox before they are sent to a user.

•Browser Isolation: Our cloud browser isolation functionality creates an isolated browsing session that enables users to access any webpage on the internet without downloading any of the web content served by the webpage onto a local device or the corporate network. With cloud browser isolation, users are not directly accessing active web content; instead, only a safe rendering of pixels is delivered to the user. Malicious code that may be hidden in the web content is kept at bay. Customers can select and isolate traffic based on specific policies and/or automatically based on our AI enabled risk determination. The combination of cloud browser isolation and cloud sandbox enables administrators to perform content disarm and reconstruction to flatten, sanitize and securely deliver files free of active content.

Data Protection – Our data protection functionality enables enterprises to prevent unauthorized sharing or exfiltration of confidential information across users, devices, servers and workloads, thereby reducing business and compliance risks for our customers. We provide inline monitoring of data flows between users and applications, workload to workload, API to

API and applications to LLMs, reducing the risk of inadvertently transmitting sensitive data and intellectual property. Core cloud platform data protection services include:

•File Type Controls: Our AI-enabled data classification solution enables enterprise chief information officers to gain visibility of file types across all their IT environments. Our file type control functionality allows our customers to define policies to control which file types are allowed to be downloaded and uploaded based on application, user, location and destination.

•Advanced Data Classification: Our data classification engines leverage a variety of technologies and techniques to identify customer sensitive data. Predefined, custom dictionaries and automated AI discovery tools identify sensitive customer data by leveraging efficient pattern-matching algorithms, regular expressions, AI-based training models and keywords. Additional advanced classification techniques including exact data match, index document match and ML-based Optical Character Recognition functionalities, further identity sensitive data and enable our customers to populate their own custom databases scaling to billions of unique fields, including structured and unstructured documents.

•Data Loss Prevention: Our data loss prevention, or DLP, technology enables enterprises to alert and/or block transmission or sharing of sensitive data across exfiltration channels. This includes inline data in motion to external internet destinations and unmanaged endpoints, data at rest in SaaS environments through out-of-band API integrations, securing public cloud infrastructure data in Azure, AWS and GCP and protecting endpoints by preventing printing or copying to local storage, including USB devices. Additionally, our Email DLP solutions secure corporate email traffic, including Microsoft Exchange and Gmail.

•Unified SaaS Security: Our cloud access security broker, or CASB, SaaS security posture management and our SaaS supply chain security combine to discover and control known and unknown applications, identify SaaS misconfigurations, find and mitigate potentially risky third-party connections into those SaaS applications and scan data residing in those applications for threats and data protection violations. By doing transport layer security inspection at scale, we provide malware protection, data loss prevention and CASB functions that can be performed both inline and out-of-band, for specific sanctioned and unsanctioned applications. Business policies can be defined with granular access control for specified cloud applications, such as the ability to upload or download files or post comments on videos based on different user or group identity.

•Browser Isolation: With cloud browser isolation, users do not directly access active web content; instead, only a safe rendering of pixels is delivered to the user. This approach prevents sensitive data from being downloaded to unauthorized devices in bring-your-own-device environments, as well as offers an alternative to virtual desktop infrastructure, or VDI, for employees, contractors and B2B partners, by effectively keeping sensitive data entirely within a managed environment.

Secure Local Internet Breakouts – Our local internet breakout capability means traffic destined for the cloud no longer needs to be routed over a private multiprotocol label switching, or MPLS, network to the data center. Traffic is now routed locally over the internet and directly to the cloud, providing for a faster experience and a significant reduction in MPLS network costs. Our core cloud platform services for local internet breakouts include:

•Firewall: Our cloud firewall was designed to protect users by inspecting internet traffic on all ports and protocols, and it offers user level policies, application identification with deep packet inspection and intrusion prevention.

•Bandwidth Control: Our bandwidth control and traffic shaping capabilities ensure that business critical applications are prioritized over non-business critical applications, improving productivity and user experience. By enforcing quality of service in the cloud, our platform enables the optimization of “last-mile” utilization of a customer’s network.

•DNS: Our domain name system, or DNS, filtering solution provides a local DNS resolver and enforces acceptable use policies.

Secure Private Application Access - Zscaler Private Access

ZPA provides Zero Trust Network Access to secure access to internally managed applications, either hosted internally in data centers or hosted in private or public clouds. ZPA is designed around four key tenets that fundamentally change the way users access internal applications:

•connect users to applications without bringing users on the network;

•never expose applications to the internet;

•segment access to applications without relying on the traditional approach of network segmentation; and

•provide remote access over the internet without virtual private networks, or VPNs.

ZPA enforces a global policy engine that manages access to internally managed applications regardless of location. If access is granted to a user, our ZPA solution connects the user’s device only to the authorized application without exposing the identity or location of the application. As a result, applications are not exposed to the internet, further limiting the external attack surface. This results in reduced cost and complexity, while offering better security and an improved user experience.

Our ZPA solution includes broad functionality, which we categorize by the following areas:

•Cyberthreat Protection and Data Protection: Our ZPA solution delivers the same cyberthreat protection and data protection functionality that is applied to internet traffic via our ZIA solution.

•Secure Application Access: Since our ZPA solution delivers seamless connectivity to internally managed applications and assets whether they are in the cloud, enterprise data center or both, administrators can set global policies from a single console, enabling policy-driven access that is agnostic to the network the users are on. By creating seamless access to applications regardless of a user’s network, our ZPA solution eliminates the need for traditional remote access VPNs, reverse proxies and other similar products.

•Application Discovery: Similar to CASB application discovery reports for internet hosted SaaS applications, our ZPA solution provides granular discovery of internally managed applications to aid in the creation and oversight of segmentation policies. Because our ZPA solution sits on the application layer and is name-based or domain-based, organizations can quickly and seamlessly identify their internally-managed applications and then easily provision appropriate policies.

•Application Segmentation: Our architecture provides capabilities that enable user and application level segmentation, a vast improvement over traditional network segmentation. As each user-to-application connection is segmented with microtunnels, each of which is a temporary session between a specific user and a specific application, lateral movement across the network is prevented, significantly reducing security risk. Since users are granted access only to applications for which they have permission and are not granted full access to the network, microtunnels eliminate the need for an internal firewall.

•Application Protection: Our ZPA solution initiates outbound-only connections between authenticated users and internally managed applications using microtunnels. Access is provided to users without bringing them onto the corporate network and without exposing applications to the internet. Internally managed applications are not discoverable or identifiable. With no inbound connections and no public IP addresses, there is no inbound attack surface and therefore no threat of distributed denial-of-service, or DDoS, attacks. For allowed connections, our ZPA solution also provides Web Application Firewall functionality, including OWASP Top 10 protections for threats, such as Structured Query Language injection and cross-site scripting, to block common attack vectors.

•Reduce Attack Surface: Our architecture utilizes inside out connections that are outbound from users to the Zero Trust Exchange platform, which allows customers to deny all inbound connections. This reduces their attack surface by not exposing IP addresses of all devices, applications, appliances or workloads to the internet. Reduced attack surface results in lower exposure to zero-day application vulnerabilities and eliminates the need for DDoS mitigation.

•Browser Isolation: Our cloud browser isolation is used with our ZPA solution to provide isolated sessions to internal web applications without allowing data to transfer down to unmanaged devices or active content to be uploaded into sensitive internal applications. Combining cloud browser isolation with browser-based access provides a simplified, more cost-effective alternative to VDI for employees, contractors and B2B partners, by effectively keeping sensitive data off unmanaged devices.

The primary use cases for our ZPA solution include:

•remote workforce access to private applications without legacy VPN, providing zero trust from office to data center;

•deliver user-to-application segmentation, thus eliminating the risk of lateral threat propagation enabled by legacy Firewall and VPN based security architecture;

•providing non-employees with secure access to internal applications;

•securely connecting business-to-business, or B2B, customers, service providers and supplier access to applications typically deployed as business to business portals in an extranet;

•direct-to-cloud access to internally managed applications hosted in public cloud environments, such as Azure, AWS and GCP; and

•access to applications following a merger or acquisition by providing named users with access to named applications, without the need to merge networks.

Experience Management - Zscaler Digital Experience

ZDX is designed to measure end-to-end user experience across key business applications, providing an easy to understand digital experience score for each user, application and location within an enterprise. As users have become mobile and applications have moved to the cloud, traditional network performance monitoring tools have become increasingly irrelevant. Enterprises can no longer collect performance metrics or indicators along the traditional network path as they could when they owned the network and applications ran in their own data centers. When a user's experience is suffering or an event is negatively impacting user experience, ZDX utilizes AI-enabled root cause analysis to allow an organization to isolate where in the network path an issue is occurring and whether it is caused by a user’s device, the WiFi connection, the local internet connection, a service provider in the path or the destination application itself. With ZDX, enterprises can quickly determine if an issue is associated with a single user, application or location or indicates a broader issue potentially impacting other users, applications or locations all via a simple visual workflow without a need for additional hardware or software.

Zscaler Posture Control TM – Cloud Applications and Workload Data Security

Zscaler data security posture management, or DPSM, extends our cloud security capabilities to protect data in public cloud environments. DSPM provides granular visibility into cloud data, classifies and identifies data and access and offers context around data exposure and security posture. This empowers organizations and security teams to prevent and remediate cloud data breaches at scale. The functionality leverages a unified DLP engine to ensure consistent data protection across all channels. Data classification is integrated with cloud security posture management, or CSPM, to understand data exposure and address cloud misconfigurations. The vulnerability management module enhances cloud risk assessment by identifying vulnerabilities in cloud workloads. Additionally, cloud infrastructure entitlement management, or CIEM, provides deep granularity into identity and privilege access management, ensuring that the right users and entities have access to the appropriate data. Zscaler DSPM ensures highly correlated alerts by combining these multiple modules to generate high-fidelity and actionable insights.

Zero Trust Networking

We believe that zero trust technology should not just be between remote users and the applications they use, but should be applied to all connectivity into and within an enterprise's environment. This connectivity includes workload-to-workload communication and IoT/OT-to-application, as most IoT and OT devices cannot load agents.

Our Zero Trust Networking solution includes broad functionality, which we categorize by the following ideas:

•Workload Segmentation. Our Workload Segmentation solution secures application-to-application communications inside public clouds and data centers to stop lateral threat movement, preventing application compromise and reducing the risk of data breaches. Our Workload Segmentation solution utilizes an innovative, AI-enabled approach that is simpler to deploy and operate than traditional segmentation solutions and improves the security of east-west communication by verifying the identity of the communicating application software, services and processes to achieve a zero trust environment. This reduces the attack surface, resulting in lower risk of application compromise and data breaches.

•Zero Trust SD-WAN. Our Zero Trust SD-WAN solution provides branches and data centers with fast, reliable access to the internet and private applications with our Direct-to-Cloud TM architecture that provides strong security and operational simplicity, with the ability to deploy locally by virtual machine or by purchasing a plug-and-play appliance. Our Zero Trust SD-WAN solution eliminates lateral threat movement by connecting users and IoT/OT devices to applications through the Zscaler Zero Trust Exchange platform. Branch traffic can be securely forwarded directly to the Zero Trust Exchange, where ZIA or ZPA policies can be applied for full security inspection and access identity-based control of branch and data center communications.

•Zero Trust Device Segmentation. Our Zero Trust Device Segmentation solution provides agentless segmentation for enterprise IT and OT environments, creating a "network of one" where even devices on the same network can only communicate with each other if authorized. The combination of Zero Trust SD-WAN with Zero Trust Device Segmentation extends the Zero Trust Exchange to protect east-west traffic in branch offices, campuses, factories and plants with critical OT infrastructure, eliminating the need for east-west firewalls, network access controls and traditional microsegmentation solutions, while simultaneously delivering operational simplicity.

Risk Management

Due to increased prioritization of cybersecurity and cyber risk at the executive and board of directors level, it is increasingly a top priority for organizations to drive a cyber risk quantification and holistic risk management strategy. By monitoring risk more systematically in their environment, organizations can drive broader cybersecurity strategies and remediation projects, including key cybersecurity architectural capabilities such as data protection, as well as risk-based asset and vulnerability management.

Our Risk Management solutions include broad and differentiated functionality, which we categorize by the following areas:

•Risk 360. Zscaler Risk360 is a risk quantification and visualization framework for identifying cybersecurity risk across the stages of a potential cyber attack. It ingests data from external sources, Zscaler product sources and proprietary security research from our ThreatLabz team to generate a detailed profile of an enterprise’s risk posture. Zscaler Risk360 leverages over 100 factors within an enterprise’s cybersecurity environment to help customers estimate potential financial losses (derived from industry data), highlight top cyber risk drivers, recommend investigative workflows, show trends and peer comparisons and provide actionable information to be shared across the enterprise, including at the executive and board level.

•Deception. Our deception solution augments our customers' ability to detect the presence of an adversary in their network by deploying decoys and lures. These decoys can be leveraged to disrupt the adversary by detecting their presence in the network and initiating mitigation using automatic orchestration via the Zscaler platform and other third party solutions. Customers can quickly deploy these capabilities by leveraging a diverse library of built-in decoys including various types of applications, network components and IoT services. The high-fidelity low-volume alerts allow customers to implement meaningful automation workflows to prevent lateral spread.

•Unified Vulnerability Management. Our unified vulnerability management solution provides dynamic and customizable prioritization, streamlined reporting, zero-copy analytics and contextualized, risk-based assessment of a customer’s threat landscape. This solution is powered by our data fabric for security, added through our 2024 acquisition of Avalor Technologies, which utilizes more than 150 data connectors, built for all major security platforms, to ingest, normalize and unify data across enterprise security and business systems to deliver actionable insights, analytics and operational efficiencies. This enables our customers to significantly enhance and fully automate analytics and decision-making in real-time without the complexity of data aggregation and collection.

•Identity Protection. Attackers commonly target users and identities as the point of entry and use that access to escalate privileges and move laterally. Our Identity Protection capability provides continuous visibility into identity misconfigurations and at risk permissions by scanning common identity providers. Identity Protection augments this visibility with guidance in the form of scripts, commands and tutorials to remediate these issues and reduce customers’ internal attack surface. In addition to preventive capabilities, Identity Protection also provides high-fidelity detection for identity-based attacks like stolen credentials, multi-factor authentication bypasses and privilege escalation techniques that typically pass through existing defenses in cases of identity compromise.

Our Technology and Architecture

We are driven by technology and innovation. We developed a highly scalable, multi-tenant, globally distributed cloud capable of providing inline inspection of internet and SasS traffic, securing access to private applications, protecting cloud applications, managing digital experience and scanning for exposures and misconfigurations. We designed a purpose-built three-tier architecture starting with our core operating system and adding layers of security and networking innovations over time. Our cloud platform is protected by more than 580 issued and pending patents in the United States and other countries. Our cloud is distributed across more than 160 data centers on five continents and processes over 500 billion requests per day from users across over 185 countries.

Our platform is designed to be resilient, redundant and high-performing. It is built as software modules that run on standard x86 platforms without dependency on custom hardware. The platform modules are split into the control plane (Zscaler Central Authority), the enforcement plane (Zscaler Enforcement Nodes) and the logging and statistics plane (Zscaler Log Servers) as described below:

•Zscaler Central Authority: The Zscaler Central Authority monitors our entire security cloud and provides a central location for software and database updates, policy and configuration settings and threat intelligence. The collection of Zscaler Central Authority instances together act like the brain of the cloud, and they are geographically distributed for redundancy and performance.

•Zscaler Enforcement Nodes: Customer traffic is directed to the nearest Zscaler Enforcement Node, where security, management and compliance policies served by the Zscaler Central Authority are enforced. The Zscaler Enforcement Node also incorporates our differentiated authentication and policy distribution mechanism that enables any user to connect to any Zscaler Enforcement Node at any time to ensure full policy enforcement. The Zscaler Enforcement Node utilizes a full proxy architecture and is built to ensure data is not written to disk to maintain the highest level of data security. Data is scanned in RAM only and then erased. Logs are continuously created in memory and forwarded to our logging module.

•Zscaler Log Servers: Our technology is built into the Zscaler Enforcement Node to perform lossless compression of logs, enabling our platform to collect over 130 terabytes of unique raw log data every day. We do not collect customer data other than logs, and those logs are encrypted and transmitted to our log server at a destination of choice selected by the customer without ever writing to disk at the enforcement nodes. Logs are transmitted to our logging servers over secure connections and multicast to multiple servers for redundancy. Our dashboards provide our customers visibility into their traffic to enable troubleshooting, policy changes and other administrative actions. Our analytics capabilities allow customers to interactively mine billions of transaction logs to generate reports that provide insight on network utilization and traffic. We do not rely on batch reporting; we continuously update our dashboards and reporting and can stream logs to a third-party security information and event management, or SIEM, service as they arrive. Regardless of where users are located, customers can choose to have logs stored in the United States or the European Union/Switzerland. Customer data is isolated as part of our multi-tenant architecture.

Our platform is a critical integration point positioned in the data path providing secure access to the internet, cloud and internal applications. We complement and interoperate with key technology and cloud vendors across major market segments, including identity and access management device and endpoint management, as well as SIEM for reporting and analytics. Many of these vendors, like us, were developed in the cloud and together provide a foundation for a modern access and security architecture.

Growth Strategies

The growing use of the internet and the increasing adoption of the cloud and mobility are driving network and application transformation. As a provider of a fully integrated, multi-tenant cloud security solution, we enable our customers to accelerate this secure transformation to the cloud and believe we are uniquely positioned to maximize value as they undertake these transitions. Key elements of our growth strategy include:

•Continue to win new customers. We believe that we have a significant opportunity to expand our customer base, both in the United States and internationally. We have invested significantly in our sales and marketing organization to execute against this opportunity.

•Expand in existing customers. We leverage a land-and-expand approach with our existing customers to sell subscriptions for additional users, additional solutions and premium solution bundles that contain more functionality.

•Leverage channel partners to participate in cloud transformation initiatives. We have invested in establishing long-standing relationships with global telecommunications service providers and are expanding our network of global system integrators and regional telecommunications service providers and cloud-centric value-added resellers and public cloud marketplaces.

•Expansion and innovation of services. We continue to invest in research and development and acquire new technologies and products to add new and differentiated solutions to our existing product portfolio and to improve the overall functionality, reliability, availability and scalability of our cloud security platform.

•Expansion into additional market segments. We are targeting the expansion of our immediate addressable market into additional market verticals. For example, we are expanding into U.S. federal government agencies as well as into government agencies outside the U.S. We are also targeting our expansion into new geographies in the Asia Pacific and Latin America regions.

We sell to enterprises of all sizes. As of July 31, 2024, we had over 8,650 customers, including approximately 35% of the Forbes Global 2000. Many of our customers include major global enterprises that send virtually all of their internet traffic through our cloud security platform. Our customers operate in a variety of industries, including automotive, airlines and transportation, conglomerates, consumer goods and retail, energy, financial services, healthcare, insurance, manufacturing, media and communications, public sector and education, technology and telecommunications services. Approximately 50% of our revenue was from customers outside the United States for all periods presented. No end customer contributed more than 10% of our revenue in fiscal 2024, fiscal 2023 and fiscal 2022.

Sales and Marketing

Although we have a channel sales model, we use a joint sales approach in which our sales force develops relationships directly with our customers, and together with our channel account teams, works with our channel partners on account penetration, account coordination, sales and overall market development. Our customer care and success teams maintain high-touch relationships with our customers to deploy and manage our cloud platform, identify, analyze and resolve performance issues and respond to security threats. We believe customer service touchpoints are opportunities to further develop our relationship with our customers and potentially generate incremental revenue through the addition of new users and services.

Our channel partners consist of global telecommunications service providers, system integrators, value-added reseller partners and public cloud marketplaces, and we leverage their relationships to expand our reach, improve procurement and accelerate customer fulfillment.

We enter into agreements with our channel partners in the ordinary course of business. The contracts typically have a one-year term and renew automatically, subject to cancellation by either party upon 90 days’ notice. These agreements contain standard commercial terms and conditions, including payment terms, billing frequency, warranties and indemnification. Our channel partners generally place purchase orders with us after receiving orders from customers. We generally maintain privity of contract with customers through end user subscription agreements.

We expect to continue investing in our channel partners as we provide them with education, training and programs, including supporting their independent sales of our solutions. We believe that such investment, and investments in our sales force, will lead to significant expansion in our customer base, which will materially impact our business and results of operations.

Our marketing strategy is focused on platform and brand awareness, which drives our opportunity pipeline and customer demand. This strategy is account-based, enabling us to pursue targeted marketing activities across both digital and non-digital channels. We anticipate increasing our marketing team headcount and are investing in programs designed to elevate our brand in the market and engage new enterprise accounts. We also participate in a number of cloud and security industry events. In addition, we have a deeply integrated ecosystem of channel partners, with whom we engage in joint marketing activities.

Data Center Operations

We operate our services across more than 160 data centers around the world, which are built to be highly resilient, have multiple levels of redundancy and provide failover to other data centers in our network. Our data centers are co-located within top-tier internet interconnection hubs that have direct connectivity, known as peering, to major telecommunication service providers, SaaS providers, public cloud providers, internet content providers and popular internet destinations. A number of our data centers are also located with our service provider partners.

Compliance

Since successful completion of an initial independent third-party assessment in 2014, our platform has received numerous industry standard and internationally recognized certifications upon successful completion of further independent third-party assessments, including ISO 27001, ISO 27701, ISO 27018, ISO 27017, SOC2, CSA-STAR, HIPAA and NIST 800-63C.

We also built a leading U.S. and international government compliance portfolio. We are authorized at the FedRAMP High level and Impact Level 5 with the DOD for ZPA. In addition, in the U.S. we are authorized at both the FedRAMP Moderate and high levels for ZIA and ZPA. We also hold ITAR, FIPS, CJIS and VPAT 508 in our U.S. Government portfolio. We also became the first cloud-based SaaS security company to achieve StateRamp for state and local governments. Internationally, we are IRAP Protected and APRA in Australia, Cyber Essentials and G-Cloud in the UK, C5 in Germany, “in process” for ITSG-33 Prob B in Canada, ISMAP in Japan, MTCS in Singapore and, most recently, Spain Gov CPSTIC catalog listing and ENS-High.

Our research and development organization is responsible for the design, architecture, operation and quality of our cloud platform. In addition to improving on our features and functionality, this organization works closely with our cloud operations team to ensure that our platform is reliable, available and scalable. ThreatLabZ, our internal team of security experts, researchers and network engineers, analyzes the global threat landscape, works to eliminate threats across our cloud platform and reports on emerging security issues.

Research and development expense was $499.8 million, $349.7 million and $289.1 million for fiscal 2024, fiscal 2023 and fiscal 2022, respectively. Our research and development leadership team is predominantly located in San Jose, California, and we also maintain research and development centers internationally, including in India, Canada, Israel and Spain.

Competition

The market for security solutions is defined by changing technologies, an evolving threat landscape and complex enterprise needs. Our competitors and potential competitors include legacy on-premises appliance vendors and other vendors across a number of categories:

•independent IT security vendors, which offer a broad mix of network and endpoint security products;

•large networking and other vendors, which offer security appliances and/or incorporate security capabilities in their networking products and other services;

•companies with point solutions that compete with some of the features of our cloud platform, such as proxy, firewall, CASB, sandboxing and advanced threat protection, data loss prevention, encryption, load balancing and VPN; and

•other providers of IT security services that offer, or may leverage related technologies to introduce, products that compete with or are alternatives to our cloud platform.

The principal competitive factors in the markets in which we operate include:

•delivering security from the cloud regardless of location of the user;

•platform features, effectiveness and extensibility;

•platform reliability, availability and scalability;

•rapid development and delivery of new capabilities and services;

•ability to integrate with other participants in the security and networking ecosystem;

•price, total cost of ownership and network cost savings;

•brand awareness, reputation and trust in the provider’s services;

•strength of sales, marketing and channel partner relationships; and

•quality of customer support.

We believe we are positioned favorably against our competitors based on these factors. Our cloud platform integrates many of the point products offered by our competitors and potential competitors, which is a key differentiator. However, many of our competitors have substantially greater financial, technical and other resources, greater brand recognition, larger sales forces and marketing budgets, broader distribution networks, more diverse product and services offerings and larger and more mature intellectual property portfolios. They may be able to leverage these resources to gain business in a manner that discourages users from purchasing our services, including through selling at zero or negative margins, offering concessions, product bundling or maintaining closed technology platforms. Further, many organizations have invested substantial personnel and financial resources to design and operate their appliance-based network security architecture and may not be willing or ready to abandon those historical investments. As our market grows and rapidly changes, we expect it will continue to attract new companies, including smaller emerging companies, which could introduce new products and services. In addition, we may expand into new markets and encounter additional competitors in such markets.

Intellectual Property

Our success depends in part upon our ability to protect and use our core technology and intellectual property rights. We rely on a combination of patents, copyrights, trademarks, trade secret laws, contractual provisions and confidentiality procedures to protect our intellectual property rights. As of July 31, 2024, we had more than 580 issued patents and pending patent applications, including more than 260 issued patents in the United States and other countries. Our issued patents expire between 2028 and 2043 and cover various aspects of our cloud platform. In addition, we have registered “Zscaler” as a trademark in the United States and other jurisdictions, and we have registered other trademarks and filed other trademark applications in the United States. We are also the registered holder of a variety of domestic and international domain names that include “Zscaler” and similar variations. In addition to the protection provided by our intellectual property rights, we enter into confidentiality and invention assignment or similar agreements with our employees, consultants and contractors. We further control the use of our proprietary technology and intellectual property rights through provisions in our subscription and license agreements. Despite our efforts to protect our trade secrets and proprietary rights through intellectual property rights, licenses and confidentiality agreements, unauthorized parties may still copy or otherwise obtain and use our software and technology. In addition to our internally developed technology, we also license software, including open source software, from third parties that we integrate into or bundle with our cloud platform.

Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation based on allegations of patent infringement or other violations of intellectual property rights. We believe that competitors will try to develop products and services that are similar to ours and that may infringe our intellectual property rights. Our competitors or other third-parties may also claim that our platform infringes their intellectual property rights. In particular, companies in our industry have extensive patent portfolios. From time to time, third parties, including certain of these companies and non-practicing entities, have in the past and may in the future, assert claims of infringement, misappropriation and other violations of intellectual property rights against us or our customers or channel partners, with whom our license or other agreements may obligate us to indemnify against these claims. Successful claims of infringement by a third-party could prevent us from offering certain services or features, require us to develop alternate, non-infringing technology, which could require significant time and during which we could be unable to continue to offer our affected subscriptions or services, require us to obtain a license, which may not be available on reasonable terms or at all, or force us to pay substantial damages, royalties or other fees. As we face increasing competition and gain an increasingly higher profile, the possibility of intellectual property rights claims against us grows. We cannot assure you that we do not currently infringe, or that we will not in the future infringe, upon any third-party patents or other proprietary rights. See “Risk Factors—Risks Related to Our Business—Claims by others that we infringe their proprietary technology or other rights, or other lawsuits asserted against us, could result in significant costs and substantially harm our business, financial condition, results of operations and prospects” for additional information.

Government Regulation

Our business activities are subject to various federal, state, local and foreign laws, rules, and regulations. Compliance with these laws, rules and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods. Nevertheless, compliance with existing or future governmental regulations, including, but not limited to, those pertaining to global trade, business acquisitions, consumer and data protection, privacy, employment, labor and taxes, could have a material impact on our business in subsequent periods. For more information on the potential impacts of government regulations affecting our business, see “Item 1A - Risk Factors.”

Human Capital

As of July 31, 2024, we had a total of 7,348 employees, including 4,595 employees located outside the United States, with the majority of non-U.S.-based employees located in India. None of our U.S.-based employees are represented by a labor union or covered by a collective bargaining agreement. We have not experienced any work stoppages and we consider our relations with our employees to be positive and collaborative.

Zscaler's vision is to create a world in which the exchange of information is always secure and seamless. Specifically, ensuring that our people and culture are aligned with this vision is critical to our success. In order to continue to innovate and to execute our business strategy, we must attract, develop and retain skilled employees, particularly in the areas of product development, engineering, sales and customer success.

We understand the importance of human capital so investing in our culture, employee development, compensation and benefits, and diversity and inclusion is essential.

Our Culture

Our culture is about creating an environment where our globally diverse workforce can contribute their best work to help our customers and our business succeed. Zscaler's cultural values are:

•Teamwork

•Ownership

•Passion

•Innovation

•Customer Obsession

We build this culture through the feedback we receive from our employees through surveys as well as informal feedback channels throughout the year. We are proud to again be certified as a 2024 “Great Place to Work” in 11 countries, including the U.S. We ultimately view and measure the success of our culture by our ability to sustain great business results.

Employee Development

We invest in our employees through a suite of programs from their first day of employment to develop their talent and skills as our business grows. Our leadership approach establishes clear expectations, enables measurement and actionable feedback, and ensures that our people managers have access to learning and resources that help them to embody our leadership principles.

In addition, new employees in our customer care and success teams are enrolled in structured sales and product training to build their knowledge. Our technical teams have access to live and online training resources and participate in frequent company tech talks where training on best practices and latest developments are shared. We build the skills and capabilities of our senior leaders through intentional investment in their development and opportunities for them to network, collaborate and problem solve together.

To supplement our internal resources, we partner with external development organizations and tools. We partner with leading executive coaching organizations to offer focused development for key leaders, as well as targeted offerings on important topics. We offer tuition reimbursement for eligible employees to further enhance their career growth through higher education.

Compensation and Benefits

We provide competitive compensation and benefits packages to attract and retain our talent. In addition to base pay, employees may be eligible for annual bonuses that are tied to our financial performance and long-term equity incentives that vest subject to continued service. Certain employees may also need to achieve defined performance metrics for parts of their long-term incentives to vest. Our employee performance management program aligns individual achievement and corporate goal attainment with compensation. Employees are assessed on both what was achieved and how they achieved it to help build a high-performance culture that delivers for our customers and is aligned to our cultural values.

We offer an employee stock purchase plan, which allows employees to contribute a percentage of their wages to purchase our stock at a discount. In addition to cash and equity compensation, we offer our employees a robust portfolio of benefits, such as health, wellbeing, parental leave and retirement programs, to meet their individual and family needs.

Diversity, Equity, Inclusion and Belonging

We are committed to an inclusive culture. We strive to foster a workplace that promotes mutual respect, open and effective communication, and a sense of belonging for all employees. We ensure that our employees’ voices are heard and are always working on ways to improve their experience.

We believe that a diversity of backgrounds, experiences and thinking contributes to creating a culture that enables innovation, execution and performance. At the end of fiscal 2024, women represented 23% of our global workforce in 29 countries and underrepresented racial and ethnic minorities represented 10% of our U.S.-based employees.

We have taken steps to address the diversity challenges that we face in the cybersecurity industry because we believe diverse representation and development of our talent enriches our industry. Our recruiters strive to build a diverse talent pipeline at the top of the hiring funnel, through proactive outreach to candidates from underrepresented groups.

Our People and Culture team partners with senior leadership to develop and advance our global diversity, equity, inclusion and belonging strategy. The company supports six employee resource groups that provide a safe community where employees can celebrate what makes them unique while also connecting with colleagues who share and embrace their identity.

To further support our efforts, we offer training on topics such as managing bias. We have invested in a cohort-based leadership program that builds the capabilities of the next generation of women leaders at Zscaler. Our foundational leadership programs emphasize the role of diversity in building high-performing teams.

Health, Safety and Wellbeing

The health and safety of our employees is our top priority. We recognize the need to create a flexible working environment that balances collaboration, innovation and connectivity with personal preferences for employees to do their best work. Our employee wellness program, Wellbeing at Z, supports employees across four pillars: physical, emotional, social and financial. The program is designed to meet the health needs of our employees through connection and support with flexibility for local and targeted needs. We will continue to review and invest in programs to provide for the health, safety and wellbeing of our employees.

Corporate Information

We were incorporated in the state of Delaware in September 2007 as SafeChannel, Inc., and in August 2008, we changed our name to Zscaler, Inc. Our principal executive offices are located at 120 Holger Way, San Jose, CA 95134, and our telephone number is(408) 533-0288. Our website address is www.zscaler.com. Information contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statement, and all amendments to these filings, are available free of charge from our investor relations website (https://ir.zscaler.com/financial-information/sec-filings) as soon as reasonably practicable following our filing with or furnishing to the SEC of any of these reports. The SEC’s website (https://www.sec.gov) contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Zscaler investors and others should note that we announce material information to the public about our company, products and services and other issues through a variety of means, including our website (https://www.zscaler.com), our investor relations website (https://ir.zscaler.com), our blogs (https://www.zscaler.com/blogs), press releases, SEC filings, public conference calls and social media, in order to achieve broad, non-exclusionary distribution of information to the public. We encourage our investors and others to review the information we make public in these locations as such information could be deemed to be material information. Please note that this list may be updated from time to time.

The contents of any website referred to in this Form 10-K are not intended to be incorporated into this Annual Report on Form 10-K or in any other report or document we file.