Zscaler CEO Jay Chaudhry on Battling Global Cyber Threats

Summary

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Bloomberg Businessweek Podcast Summary

Episode: Zscaler CEO Jay Chaudhry on Battling Global Cyber Threats

Date: December 2, 2025
Hosts: Carol Massar, Tim Stenovec (occasionally referred to as Tim Stankevicius)
Guests: Jay Chaudhry (Founder, Chairman & CEO, Zscaler), Mandeep Singh (Global Head of Tech Research, Bloomberg Intelligence)

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Episode Overview

This episode dives deep into the evolving landscape of global cybersecurity, with a focus on Zscaler, a leading cloud security firm. Jay Chaudhry, Zscaler’s CEO, joins the hosts to address recent market moves, growth forecasts, and the increasing role of Artificial Intelligence (AI) in both cyber threats and defensive strategies. The discussion also covers Zscaler’s business model evolution, their approach to zero trust security, and how the company is leveraging vast data to power next-generation security.

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Key Discussion Points & Insights

1. Zscaler’s Performance & Market Concerns

• Stock Volatility: Despite being up nearly 40% YTD, Zscaler’s shares were recently downgraded by Bernstein due to growth concerns, causing market jitters. (01:53–02:43)
• Jay’s Response:
  • "Not at all. We had an outstanding quarter.… We beat all the metrics that Wall street was looking for." (Jay Chaudhry, 03:11)
  • Stresses strong ARR and revenue growth (both 26%), free cash flow margin at 52%, and operating margin at 22%.
  • Combines cash flow and revenue growth for a “rule of 40” score of 78%, placing Zscaler amongst a select few software firms at $3B+ scale.
  • Notes, "Investors get it wrong from time to time. This is one of those." (Jay Chaudhry, 04:04)

2. Zscaler’s Innovation & Approach to Security

• Zero Trust Philosophy:
  • Innovating with zero trust architecture—moving beyond traditional firewalls and VPNs.
  • “Those innovations started with zero trust architecture which has changed the world of old school firewalls and VPNs.” (Jay Chaudhry, 04:26)
  • Over 45% of Fortune 500 companies rely on Zscaler.
• AI Security's Emergence:
  • AI security is "becoming a big concern" and Zscaler’s zero trust foundation positions them well against emerging threats.

3. Business Model Evolution for the AI Era

• From Seat-Based to Hybrid Models:
  • Initially, Zscaler’s security offering was billed per user.
  • Expanded to cloud workloads (workload- and traffic-based billing).
  • With AI agents proliferating, there will be even more digital “users” (agents) to secure.
  • “I believe every company will have scores of agents for every single employee and they need to be secure and we are extremely well positioned to handle that.” (Jay Chaudhry, 06:39)

4. Competition & Market Focus

• On Competitors & Integration:
  • Zscaler prefers an integrated platform over acquiring a multitude of "point solutions."
  • “We not only provide secure and reliable experience, we make sure that it is fast and you can troubleshoot those things.” (Jay Chaudhry, 07:40)
• On Observability & Identity:
  • Observability is provided “where it matters to our customers,” not as a broad area.
  • For identity, Zscaler federates with leading providers (Microsoft, Okta, AWS, Google) rather than aiming for ownership:
    • “Our philosophy is to federate those identity providers...I do not need to own everything. I need to do some of the things I do the best and integrate with partners with proper API integration.” (Jay Chaudhry, 08:44)

5. The Role of Large Language Models (LLMs) in Security

• Custom Security LLMs:
  • “Yes. The answer is yes. We are actually working on building our security focused LLM and I do not need to have the large, large language model. Security is very focused set of high quality data.” (Jay Chaudhry, 10:07)
  • Zscaler processes over half a trillion transaction logs daily, leveraging anonymized customer data to surface and respond to threats in near real time.
  • The Red Canary acquisition adds advanced agentic AI tech to their platform.

6. AI–Empowered Threats & Defensive Innovations

• AI Makes Attackers Faster & Smarter:
  • Attackers harness AI for rapid vulnerability scanning, crafting personalized phishing emails, and automating attacks inside networks.
  • “You can go to ChatGPT and say, Tell me all the firewalls and VPNs that have vulnerabilities and give it to me in a nice tabular format…under 60 seconds.” (Jay Chaudhry, 12:09)
  • AI improves the social engineering aspect—tailoring phishing to mimic legitimate figures.
• Zscaler’s Defensive Edge:
  • "We hide your attack surface. Your applications are hidden behind our cloud. Bad guys can't even find you. They can't find you, they can’t attack you.” (Jay Chaudhry, 12:51)
  • Contrasts this to the “castle” model of perimeter-based firewalls.

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Notable Quotes & Memorable Moments

• On Growth Perception:

  • “I think investors get it wrong from time to time. This is one of those.”
    — Jay Chaudhry, CEO (04:04)

• On AI’s Impact in Security:

  • “Those innovations started with zero trust architecture which has changed the world of old school firewalls and VPNs. And now as AI security is coming, AI security is becoming a big concern. And zero trust that we pioneered is the foundation of it.”
    — Jay Chaudhry (04:26)

• On LLMs and Data:

  • “Security is very focused set of high quality data...AI is only as good as the data that powers it and we have the best data and we believe we can help identify some of these threats and in almost near real time.”
    — Jay Chaudhry (10:12)

• On Attackers Using AI:

  • “Now you can go to ChatGPT and say, Tell me all the firewalls and VPNs that have vulnerabilities and give it to me in a nice tabular format under 60 seconds. You can get that.”
    — Jay Chaudhry (12:09)

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Segment Timestamps

• [01:53] Market discussion, Zscaler’s stock moves, and analyst reactions
• [03:11] Jay Chaudhry on Zscaler’s financial strength and growth metrics
• [04:26] Innovation focus: zero trust & AI security
• [05:26] Business model adaptation for AI workloads
• [06:39] The rise of AI agents and implications for security
• [07:07] Discussion on observability and integration philosophy
• [08:28] Role of identity providers and partnership strategy
• [10:07] Building a custom security-focused LLM
• [11:56] Real-world examples of attackers using AI and Zscaler’s response
• [12:51] Zscaler’s "attack surface hiding" advantage

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Tone and Language

The conversation strikes an optimistic, confident tone regarding Zscaler’s strategy, financial position, and technological leadership, particularly in the context of rapid industry changes and new AI-driven security challenges. Jay Chaudhry is direct yet measured, emphasizing innovation, focus, and strategic partnerships over tech “land grabs.”

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Summary for New Listeners

This episode delivers a robust overview of Zscaler’s pivotal role and strategy in an era where AI is transforming both cyber threats and defenses. The CEO’s insights paint a picture of a company confident in its unique platform approach, adaptability to new security paradigms, and commitment to leveraging data and AI as both shield and sword. Key industry concepts—zero trust, identity management, LLMs, and observability—are discussed with clarity, making the conversation valuable to tech and business leaders focused on modern cybersecurity.

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End of Summary

Transcript

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[Carol Massar]

News. You're listening to Bloomberg Businessweek with Carol Massar and Tim Stanvak on Bloomberg.

[Tim Stankevicius]

Radio. Shares of the more than $39 billion cloud security and software company Zscaler are easily outperforming both the S&P 500 and NASDAQ 100. Today the stock is up nearly 40% year to date. And yet we did see shares under pressure today, dropping nearly 4% after Bernstein downgraded the software company to market perform from outperform on growth concerns. Bernstein, by the way, setting its price target on the stock to 264 for a share. That's a 5% increase from the Friday close. I should point out that initially, Bernstein, when the company reported earnings last week, they initially maintained their outperform rating. So there's been a lot of movement analysts in general, Tim, a flurry of them weighing in, some raising their price targets on the stock, others lowering them. And we should point out the stock did drop about 13% last week. That was on Wednesday following their.

[Interviewer/Host]

Earnings. Yeah, the forecast was annual revenue that was only slightly above estimates from one the company we're joined by Jay Chaudhry, founder, chairman and CEO of zscaler. He joins us from San Diego, also San Jose. Excuse me. Also with us is somebody who knows this company very well, Bloomberg Intelligence is global head of tech research Mandeep Singh. He joins us here in the studio. Jay, I just want to start with you. The growth concerns, the disappointment over the annual revenue forecasts that was only slightly above estimates. Is growth.

[Jay Chaudhry]

Slowing? Not at all. We had an outstanding quarter. Our ARR growth 26% revenue growth 26% free cash flow margin 52% operating margin 22%. We beat all the metrics that Wall street was looking for. In fact, if you take our free cash flow margin and add it to our revenue growth, that's 78%. That beats the rule of 40 that many investors look for very, very well. And this is at scale of $3 billion or higher. There are only about five pure play enterprise SaaS, companies that are in that unique class. So we've done extremely well. We are very proud of what we delivered and we passed a meaningful beat. We did and raised our annual target. So I think we're very pleased with it. I think investors get it wrong from time to time. This is one of those.

[Tim Stankevicius]

Times. That's what I was going to ask. You know what, you think investors just got it wrong? Because I mean 13% is a pretty big hit. So you think, I mean that's not like them wavering at all. They really wanted more from you guys. I mean the expectations were certainly.

[Jay Chaudhry]

High. Look, markets do what they do. I have one focus. Keep on innovating and serving our customers. Those innovations started with zero trust architecture which has changed the world of old school firewalls and VPNs. And now as AI security is coming, AI security is becoming a big concern. And zero trust that we pioneered is the foundation of it. So we have amazing interest from our customers. That's why we're able to deliver these strong numbers. Over 45% of Fortune 500 companies trust us, depend upon us. So I'm very bullish about our.

[Mandeep Singh]

Future. So talking about security, I mean you have a business model that's reliant on companies hiring more people and you have a seed based model. How does that change with AI security? Because I, you know what we are seeing out there is more consumption based. So how does that impact you and your.

[Jay Chaudhry]

Business? It's a good question. So we started out with bringing zero trust for users so users can access applications without being on the company network and natural pricing for that Is user based. Then we move the model to the architecture. The next thing Hobart Zero trust communication for workloads, cloud workloads, that's actually based on number of workloads and actually amount of traffic. So it's not just user based. If you think about AI security, there are many facets of AI security where one of the biggest thing our customers look for is as every company starts using a lot of agents, these agents are somewhat like repo. They need to access certain applications, they need to talk to other agents. So we are extending our zero trust exchange that are designed for users and workloads and branches now to agentic exchange so that right agent can talk to right agent and right application. So obviously there's an opportunity for us to secure that communication. Yes, the number of users may not grow significantly, but I believe every company will have scores of agents for every single employee and they need to be secure and we are extremely well positioned to handle.

[Mandeep Singh]

That. And talking about agents, it sounds like one of your biggest competitors is doubling down on observability and identity, especially on the browser side. As an area of focus for agent tech AI is that something you feel is very important to roll out.

[Jay Chaudhry]

Agents? So some companies try to go and buy. Many companies to create collection of things. We are very focused on what we want. We were focused on zero trust and then we focused on AI. Regarding observability, we actually do observability for the areas that matter to our customers. We sit between the user and the application. So today we have a sizable business, hundreds of millions of dollar business with a product we call Zscaler Digital Experience where we can tell our customers if any user is having performance issues as they try to access those applications. It's integrated with our platform. While many companies have many point products and they are separate, we like to have integrated platform that serves our customers. So we not only provide secure and reliable experience, we make sure that it is fast and you can troubleshoot those things. But I'm not going into broad observability which has become a broad area. We are focused on the areas that are relevant to our.

[Mandeep Singh]

Customers. And identity. Is that something you care about? The identity on the.

[Jay Chaudhry]

Browser? Identity is important. Think about identity for users. We have been working from day one with all leading ID provider for users whether it's Microsoft and Okta and others. Now when it comes to identity of agents, I believe there'll be many contenders. Microsoft, Google, aws, Okta of the world. Our philosophy is to federate those identity providers use that identity and we are the zero trust exchange, the switchboard to make sure the right AI agent talks to right agent in this world. I do not need to own everything. I need to do some of the things I do the best and integrate with partners with proper API integration so our customers get the biggest benefit. We believe in doing a few things, but do them extremely well and partner with.

[Tim Stankevicius]

Others. So I do feel like we're all learning as we go. And of course Mandeep and Jay, you guys are ahead of us in a big way. But when they talk Mandeep, about zero trust, this never trust, always verify. I think about digital touch points, thinking that there are threats within an organization and outside and you've got to make sure there's security.

[Mandeep Singh]

Everywhere. Yeah. No matter where you are. And that's where, you know, sassy is a term that gets thrown a lot. And Zscaler is in the leading position in that magic quadrant. So I have one other question, Jay, for you. So given the amount of data in the world of security and you know, you guys generate trillions of data points, will the security world have its own.

[Jay Chaudhry]

LLM? Yes. The answer is yes. We are actually working on building our security focused LLM and I do not need to have the large, large language model. Security is very focused set of high quality Data with over 8,000 customers and 45% of Fortune 500 companies. We generate over half a trillion transaction logs a day. Those logs are anonymized, but they can give us an idea of where the threats are coming from. We can find a needle in a haystack and help all of our customers. So AI is only as good as the data that powers it and we have the best data and we believe we can help identify some of these threats and in almost near real time and provide a closed loop system so that the threats can't really exploit our customers and provide them benefit at a much faster ways. That's why we are focused on AI powered security operations. And our acquisition of Red Canary is part of that strategy because they built some very, very good agentic AI technology that we're integrating with our.

[Interviewer/Host]

Platform. The use of AI to make the system more robust certainly makes sense. But I got to tell you, Mandeepa and I are actually moderating some panels next week at a Bloomberg Live event that's focused on cybersecurity. And in the prep that we're doing for that, what I keep hearing from these chief security officers, from these chief information security officers, is the concern about how AI has made the attackers just more robust and the attacks more robust. Can you point to specific instances where hackers have actually used AI to enhance their attacks and did it.

[Jay Chaudhry]

Work? Yes, there are many, many examples. Let me give you a few simple ones. Every attack starts by finding your attack surface where you are and public IP address is the starting point. Every firewall, every vpn, every application portal is an attack surface. In the past, a hacker may have taken weeks to identify it. Now you can go to ChatGPT and say, Tell me all the firewalls and VPNs that have vulnerabilities and give it to me in a nice tabular format under 60 seconds. You can get that. Now the second part hackers would do is these phishing emails. Now they can ask AI to say, write an email that looks like a CFO's writing style, no typos, make it very targeted. That's number two. Third, hackers are using automation that AI provides. Once they are on the network, automation can find the key applications and try to encrypt that data. A lot of that is happening. What does Zscaler do in this case? Number one, we hide your attack surface. Your applications are hidden behind our cloud. Bad guys can't even find you. They can't find you, they can attack you. And the second is own the network. The biggest problem with firewalls and VPNs is they are trying to protect the castle and we actually make it zero.

[Tim Stankevicius]

Trust. Jay, we've got to run. This was so informative and so enlightening in terms of air security. We so appreciate it. Jay Choudry, he's founder, chairman, CEO of Zscaler. And of course our own Mandy Singh of.

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