ZS

Zscaler is a high-quality, category-leading SaaS franchise that the GAAP headline numbers understate. FY2025 revenue grew 23.3% to $2.67B with a 76.9% gross margin, continuing a multi-year ramp from $673M in FY2021. The business serves over 9,400 customers in 185+ countries on a subscription, per-user model recognized ratably, which gives durable, recurring revenue. While the company still reports a net loss (-$41.5M) and slightly negative operating income (-$128M), the loss has shrunk dramatically from -$262M (FY2021) and -$202M (FY2023), and operating cash flow is robustly positive at $972M (+24.7% YoY) on just $164M of capex.

The cash-generation story is the crux of the bull case: the GAAP loss is driven by heavy stock-based compensation and aggressive sales/R&D investment (R&D up 34.5% to $672M), not by an unviable model. The balance sheet is strong — $2.39B cash (+67.9%), $1.80B equity, and current assets ($4.89B) double current liabilities ($2.43B). Management is explicit that it 'continues to focus primarily on long-term growth' and expects continued net losses as it invests, which is a deliberate land-grab in a market it argues 'most organizations have yet to fully make these investments' in.