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March 6, 2025
The Zero Trust Path - Zscaler and the Evolution of Enterprise Security
By
Kristal Investment Desk
How an overlooked security pioneer is redefining enterprise architecture while Wall Street finally takes notice
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In 1994, John Gage of Sun Microsystems uttered the now-famous phrase: "The network is the computer."
This seemingly simple observation captured a profound shift in computing architecture, signaling the rise of connected systems over isolated machines. Twenty years later, most enterprises still secured their networks as if the opposite were true – as if the corporate network was a castle to be protected by a moat, with firewalls standing sentry at the gates.
The problem was becoming increasingly clear. Once attackers breached the perimeter, they could move laterally throughout corporate networks with relative ease. The moat-and-castle approach created a false sense of security.
It wasn't a question of if the walls would be breached, but when. ⚠️
This was the problem Jay Chaudhry set out to solve when he founded Zscaler in 2007, building on his experience founding four previous security companies.
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His radical premise: what if we eliminated the corporate network altogether? What if nothing was trusted by default?
Fast forward to today, and Zscaler's recent earnings calls reveal how profoundly this vision is reshaping enterprise security.
📈 The company just reported Q2 FY2025 revenue of $648 million, up 23% year-over-year.
💰 The more telling number is billings growth accelerating to 18%.
✅ This validates management's earlier predictions of a second-half surge.
The market has responded favorably, with the stock up significantly following the earnings report. But the financial metrics only tell part of the story. The more interesting narrative lies in how Zscaler is fundamentally redefining what enterprise security means.
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This isn't merely cosmetic rebranding – it reflects a substantive expansion of their strategic vision from securing internet traffic to securing all enterprise communications, regardless of source or destination.
In the Q2 earnings call, CEO Jay Chaudhry articulated this vision clearly:
"For a customer to be Zero Trust Everywhere, they need Zero Trust users, where users are untrusted and never put on the corporate network. Zero Trust Cloud, where workloads are untrusted and can communicate only through our exchange. And Zero Trust Branch, where branches, factories, warehouses or IoT, OT devices, islands of their own."
What makes this approach revolutionary is how it inverts the fundamental premise of enterprise networking. Traditional security vendors start with the assumption that networks exist, and then build products to secure them.
This inversion has profound implications for the competitive landscape.
During the Q2 call, when an analyst asked about competition in the branch security space, Chaudhry's response was telling:
"Our competition is legacy. Lots of firewall vendors, in some case in a branch, NAC vendors, VLAN vendors, none of that is needed."
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Legacy vendors are selling better moats; Zscaler is arguing that moats themselves are obsolete.
The most compelling evidence of this approach's efficacy comes from a survey Chaudhry cited during the call: at a CXO exchange summit, 96% of all attendees indicated readiness to embrace the concept of branches as "like a cafe without any firewall and any other stuff." Five years ago, such widespread acceptance of this model would have been unthinkable among security professionals.
Zscaler's technology vision aligns perfectly with its business model.
☁️ As a cloud-native platform charging on a per-user basis, Zscaler benefits when companies simplify their security infrastructure and consolidate vendors. Their economic interests align with their technological approach – simpler architectures mean higher margins and stickier customer relationships.
This alignment is validated by their improving -
🔆 Net retention rate (now at 115%)
🔆 The fact that 65% of new annual contract value is coming from upsells rather than new logos. Once customers adopt the basic platform, they tend to expand both in user count and in product scope.
The power of this expansion vector is evident in Zscaler's product strategy. They've evolved from a secure web gateway provider to offering:
💡 Comprehensive solutions for data protection (growing 40% year-over-year),
⚙️ Digital experience monitoring (with their ZDX product showing 45% growth in Advanced Plus tier), and
🛠️ Branch transformation
The rise of generative AI has introduced a new dynamic. Enterprise adoption of AI tools like Microsoft Copilot and other large language model applications has created an urgent demand for securing these systems, which operate fundamentally differently than traditional applications.
Zscaler has responded by developing specific solutions for AI security, including an LLM proxy that can analyze prompt queries and detect potential data leakage or prompt injections.
🛡️ This approach naturally extends their zero-trust philosophy to a new domain where traditional security tools are ill-equipped.
One particularly revealing example cited by Chaudhry was a "Global 2000 technology services customer [who] purchased our AI-powered data protection solution, which accounted for 50% of the seven-figure ACV deal." When half of a major contract is dedicated to securing AI systems, it signals how quickly this need has evolved from theoretical to essential.
The most striking aspect of Zscaler's Q2 earnings wasn't the numbers themselves but the shift in tone from both management and analysts. Gone was the cautious, measured language of previous quarters, replaced by confident assertions about future growth and ambitious targets like tripling the number of "Zero Trust Everywhere" customers within 18 months.
This confidence stems from validation of Zscaler's architectural approach.
❓The biggest remaining question isn't whether enterprises will adopt zero-trust architectures, but how quickly the transition will occur and which vendors will capture the largest share of this shift. Zscaler's positioning as the pioneer of this approach gives them significant advantages, but competition is intensifying as other vendors recognize the paradigm shift underway.
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The fact that 96% of CXOs now express readiness for "branches like cafes" suggests this psychological barrier has largely been overcome. We are witnessing not just a company's growth story, but the culmination of a fundamental rearchitecting of enterprise security.
In 1994, "the network is the computer" captured the essence of a computing revolution. In 2025, "Zero Trust Everywhere" may well capture the essence of how we secure that computing environment.
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Disclaimer: The views in the post are for for informational purposes only and should not be considered as investment advice. Please contact your RM or Kristal.AI for investment advise.
By
Kristal Investment Desk
March 6, 2025
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March 6, 2025
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We are licensed in Singapore, Hong Kong and India. Kristal Advisors (SG) Pte. Ltd. presently operates under the CMS license by the Monetary Authority of Singapore (MAS). Kristal Advisors (HK) Ltd is licensed and regulated by the Securities and Futures Commission (SFC) to carry out Type 4 and Type 9 regulated activities and is not involved in the discretionary management of any collective investment scheme. Kristal Advisors Private Ltd. presently operates as a Registered Investment Advisor under the jurisdiction of the Securities and Exchange Board of India (SEBI).
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Copyright © 2023 Kristal Advisors (SG) Pte. Ltd. UEN: 201711235E
WE ARE LICENSED IN SINGAPORE, HONG KONG, ABU DHABI, AND INDIA. KRISTAL ADVISORS (SG) PTE. LTD. PRESENTLY OPERATES UNDER THE CMS LICENSE BY THE MONETARY AUTHORITY OF SINGAPORE (MAS). KRISTAL ADVISORS (HK) LTD IS LICENSED AND REGULATED BY THE SECURITIES AND FUTURES COMMISSION (SFC) TO CARRY OUT TYPE 4 AND TYPE 9 REGULATED ACTIVITIES AND IS NOT INVOLVED IN THE DISCRETIONARY MANAGEMENT OF ANY COLLECTIVE INVESTMENT SCHEME. KRISTAL ADVISORS PRIVATE LTD. PRESENTLY OPERATES AS A REGISTERED INVESTMENT ADVISOR UNDER THE JURISDICTION OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI). KRISTAL.AI MIDDLE EAST LIMITED IS LICENSED AND REGULATED BY THE FINANCIAL SERVICES REGULATORY AUTHORITY (FSRA) FOR CAT 3 A LICENSE.
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