Podcast Summary: Bloomberg Talks

Episode: Zscaler CEO Jay Chaudhry Talks Earnings, AI Trade
Date: February 27, 2026
Host: Bloomberg
Guests: Jay Chaudhry (Founder, Chairman & CEO, Zscaler), Mandeep Singh (Bloomberg Intelligence, Global Head of Technology Research)

Overview

This episode delves into the challenging week for Zscaler, the cybersecurity company, amid volatile stock performance and broader industry turbulence. Host and analysts are joined by Jay Chaudhry to discuss Zscaler’s latest earnings, the AI-driven shifts in cybersecurity, sovereign cloud trends, competition from hyperscalers, and the case for Zscaler’s long-term value proposition. The tone is direct, informative, and focused on current investor and enterprise concerns around AI, operational shifts, and security efficacy.

Key Discussion Points & Insights

1. Zscaler’s Earnings & Stock Volatility

• Zscaler shares dropped approximately 13% after Q2 results, with a 36% YTD decline and more than 60% since November 2021 (00:29–00:48).
• Although Q2 numbers beat estimates, the market found them insufficient to shift negative sentiment toward software names (00:48–01:13).
• Multiple analysts have since lowered price targets.

2. The AI Opportunity and Security Risks

• Jay Chaudhry emphasizes the growing importance (and risks) of AI agents in enterprise environments (01:52–02:30).
  • “AI is a massive opportunity because what AI is doing is bringing lots of AI agents in the enterprise ... Now AI agents are becoming the weakest link. How do you secure them?” – Jay Chaudhry [01:52]
• Zscaler’s “zero trust exchange” is positioned to protect both human users and AI agents, with fine-tuned, one-to-one access controls.

3. Addressing Billings Numbers & Growth Focus

• Mandeep Singh queries whether soft billings reflect slower seat growth or broader market contraction (02:32–02:55).
• Chaudhry maintains that billings is “a secondary number” and stresses ARR and revenue growth as key metrics:
  • Revenue +26% YoY
  • ARR +25%
  • Free cash flow +18%, operating margin +22% (02:55–03:36)
  • Z Flex program (multi-year deals) impacts billings, but shows strong customer commitment.

4. Impact of AI on Company Operations

• On operational use of AI: Zscaler leverages AI to boost productivity (especially engineering) and customer support, but doesn’t expect drastic headcount reduction as claimed by others, e.g., Block (Square) (04:12–05:20).
  • “We are increasing productivity of our engineering team by using all this stuff. But … in some of these critical areas you need people. I am hiring more developers for AI development for example.” – Jay Chaudhry [04:12]
• The proliferation of agents (not just users) will expand Zscaler’s total addressable market.

5. Sovereign Clouds & Global Expansion

• Singh brings up the trend of sovereign nations rolling out their own AI clouds (05:20–05:46).
• Chaudhry explains Zscaler’s architecture supports sovereign data requirements (locality, compliance) and sees such initiatives as “a positive development” (05:46–06:43).
  • “Our sovereign security cloud will make sure they can access the model whether it’s sovereign or non sovereign. So overall it’s a positive thing for us.” – Jay Chaudhry [06:15]

6. Competition with Hyperscalers & Security “Bundling”

• The episode addresses rising investment and offerings from hyperscalers like Amazon and Google (06:43–07:12).
• Chaudhry asserts that hyperscalers aren’t a direct threat; Zscaler remains the neutral “Switzerland” in zero trust network connections (07:12–08:09).
  • “We become the Switzerland that connects right party to right party … the more models they create, the more agents that get built, the more opportunities Zscaler has.” – Jay Chaudhry [07:47]

7. Enterprise Value Proposition vs. Bundled Security

• Zscaler’s global infrastructure (160+ locations) and policy enforcement are core differentiators (08:17–09:58).
  • “Zscaler is not a piece of code that you bundle ... Zscaler is a globally distributed infrastructure sitting in 160 locations around the globe ... we become the switchboard, the policy enforcement for that [traffic].” – Jay Chaudhry [09:10]
• 45%+ of the Fortune 500 rely on Zscaler.

8. Government Business and Pipeline

• Federal market remains strong; last year saw some changes, but now back on track (09:58–10:19).
  • “13 of the 14 cabinet level agencies use Zscaler to secure themselves.” – Jay Chaudhry [10:19]

9. Closing Confidence on AI

• AI seen as an opportunity, not a threat, with security for “agentic technology” a top CIO concern (10:37–11:02).
  • "Securing agentic technology is the number one thing. CIOs want to make sure they can do it. That's holding them back from larger rollout and we become enablers of it." – Jay Chaudhry [10:42]

Notable Quotes & Memorable Moments

• “[With AI] agents are becoming the weakest link. That requires a global infrastructure ... That’s why we are very bullish about our future.” – Jay Chaudhry [01:52]
• “Billings is a secondary number for us … Z Flex … gives some flexibility in billings so billings can get impacted. But … customers are doing multi year, four or five year deals with us.” – Jay Chaudhry [02:55]
• “We are increasing productivity of our engineering team by using all this stuff. But … in some of these critical areas you need people. I am hiring more developers for AI development for example.” – Jay Chaudhry [04:12]
• “Our sovereign security cloud will make sure they can access the model whether it’s sovereign or non sovereign.” – Jay Chaudhry [06:15]
• “We become the Switzerland that connects right party to right party … the more models they create, the more agents that get built, the more opportunities Zscaler has.” – Jay Chaudhry [07:47]
• “Zscaler is a globally distributed infrastructure ... we become the switchboard, the policy enforcement for that [traffic].” – Jay Chaudhry [09:10]
• “13 of the 14 cabinet level agencies use Zscaler to secure themselves.” – Jay Chaudhry [10:19]
• "AI is an opportunity for our business. Not a threat at all." – Jay Chaudhry [10:42]

Timestamps for Key Segments

• 00:29–01:13: Host introduction, stock/earnings context
• 01:52–02:30: Chaudhry on AI agents & security
• 02:32–03:36: Discussion of billings and focus on growth metrics
• 04:12–05:20: AI’s impact on Zscaler operations & hiring
• 05:46–06:43: Handling sovereign clouds globally
• 07:12–08:09: Competition with hyperscalers and the “Switzerland” analogy
• 08:17–09:58: Zscaler’s infrastructure and unique value proposition
• 09:58–10:19: Strength of U.S. federal business
• 10:37–11:02: Recap: AI is an opportunity, not a threat

Final Takeaway

Zscaler’s leadership projects confidence in weathering stock volatility and rising AI challenges, positioning the firm as an indispensable “zero trust” security provider—both for human and AI actors—amid growing regulatory, operational, and competitive pressures. AI is framed throughout as a catalyst for expansion, not contraction, further reinforcing Zscaler’s differentiated value and global market position.