Investment Thesis for ZS

Zscaler: The Zero Trust Exchange

Zscaler, Inc. operates as a cloud security company worldwide. The company provides Zscaler Internet Access solution that provides users, servers, operational technology, Internet of Things device secure access to externally managed applications, including software-as-a-service (SaaS) applications and Internet destinations; and Zscaler Private Access solution, which is designed to provide access to managed applications hosted internally in data centers, and private or public clouds. It also offers Zscaler Digital Experience that measures end-to-end user experience across business applications, as well as provides an easy to understand digital experience score for each user, application, and location within an enterprise. In addition, the company provides workload segmentation solutions comprising Zscaler Cloud Security Posture Management that identifies and remediates application misconfigurations in SaaS, infrastructure as a service, and platform as a service to reduce risk and ensure compliance with industry and organizational benchmarks; and Zscaler Cloud Workload Segmentation, which is designed to secure application-to-application communications inside public clouds and data centers to stop lateral threat movement, as well as prevents application compromise and reduces the risk of data breaches. Its platform modules include Zscaler Central Authority, Zscaler Enforcement Node, and Zscaler Log Servers. It serves customers in airlines and transportation, conglomerates, consumer goods and retail, financial services, healthcare, manufacturing, media and communications, public sector and education, technology, and telecommunications services industries. The company was formerly known as SafeChannel, Inc., and changed its name to Zscaler, Inc. in August 2008. Zscaler, Inc. was incorporated in 2007 and is headquartered in San Jose, California.

The Thesis

Zscaler kills the VPN.

In the old world (Castle & Moat), you connected to the corporate network. In the new world (Zero Trust), you connect to nothing; you connect through Zscaler to a specific app. The thesis is that Zscaler is the Switchboard of the Internet for enterprise traffic, sitting between the user and the application, inspecting every packet.

Product Deep Dive: The Exchange

1. ZIA (Internet Access)

The Product: Secure Web Gateway. Protecting employees browsing the internet (blocking gambling sites, malware downloads).
The Moat: Proxy Architecture. Zscaler runs inline (Man-in-the-Middle). This is hard to build at scale (150 data centers).

2. ZPA (Private Access)

The Product: VPN Replacement.
The Magic: The user never touches the corporate network. Zscaler spins up a dark connection to the app (AWS/Data center). Even if the user is hacked, the attacker can't "move laterally" to other servers.

3. ZDX (Digital Experience)

The Product: Monitoring why "Zoom is slow."
The Value: Since Zscaler sits in the middle, they know if the lag is the WiFi, the ISP, or the Zoom server. IT loves this.

The Business Model

User-Based Licensing: Priced per user/per year (e.g., Business bundle).
Upsell: Moving customers from "ZIA only" to "ZIA + ZPA + ZDX."
: High CAC, but very high LTV.

Zscaler: The Zero Trust Exchange

The Thesis

Product Deep Dive: The Exchange

1. ZIA (Internet Access)

2. ZPA (Private Access)

3. ZDX (Digital Experience)

The Business Model

Risks

Conclusion

ZS Valuation Model

Investment Thesis: Zscaler, Inc. (ZS)

Zscaler, Inc. (ZS)

Investment Idea: Zscaler (ZS)

Investment Thesis: Zscaler, Inc. (ZS)

Investment Thesis: Zscaler, Inc. (ZS)

Zscaler, Inc. (ZS)

INVESTMENT PRIMER

Zscaler: The Zero Trust Exchange