DEF 14A: Zscaler Reports Strong FY25 Growth, Proposes Director Elections

Zscaler's latest proxy statement highlights robust fiscal year 2025 financial performance, including significant revenue and billings growth, ahead of its virtual annual stockholder meeting.

Summary

• Zscaler, Inc. will hold its 2025 Annual Meeting of Stockholders virtually on Monday, January 12, 2026, at 1:00 p.m. Pacific Time.
• Stockholders of record as of November 14, 2025, are entitled to vote on proposals including the election of three Class II directors, ratification of PwC as the independent auditor, advisory votes on executive compensation and its frequency, and a stockholder proposal to declassify the board.
• Fiscal year 2025 was a strong year with revenue growth of 23% year-over-year to $2.67 billion and calculated billings growth of 24% year-over-year to $3.25 billion.
• Non-GAAP income from operations grew 31% year-over-year to $580.1 million.
• The company increased its large customers (>$1M ARR) by 18% year-over-year, adding 664 enterprises.
• Annual Recurring Revenue (ARR) reached over $3.0 billion, growing over 22% year-over-year.
• Over the five-year period ending July 31, 2025, revenue increased 520% (44% CAGR), non-GAAP income from operations increased 1420% (72% CAGR), and stock price increased 120% (17% CAGR).
• Named Executive Officers (excluding the CEO) received an aggregate of 100.9% of their target bonus amounts for fiscal 2025, based on revenue, calculated billings, and non-GAAP income from operations targets.
• The board of directors recommends 'FOR' the election of Andrew Brown, Scott Darling, and David Schneider as Class II directors, 'FOR' the ratification of PwC, 'FOR' the advisory vote on executive compensation, and 'ONE YEAR' for the frequency of future Say-on-Pay votes.
• The board recommends 'AGAINST' the stockholder proposal to declassify the board, citing benefits of a classified board for long-term focus, continuity, customer confidence, and orderly board refreshment.

Sentiment

Score: 8

Explanation: The filing presents a highly positive outlook, emphasizing strong financial performance, strategic growth, and robust corporate governance. The company's key financial metrics show significant year-over-year and long-term growth, and management expresses confidence in its strategy and leadership structure. The tone is optimistic regarding market position and future prospects.

Positives

• Fiscal 2025 revenue grew 23% year-over-year to $2.67 billion.
• Calculated billings increased 24% year-over-year to $3.25 billion.
• Non-GAAP income from operations saw a 31% year-over-year increase, reaching $580.1 million.
• The company added 664 large enterprise customers (>$1M ARR), representing an 18% year-over-year growth.
• Annual Recurring Revenue (ARR) surpassed $3.0 billion, demonstrating over 22% year-over-year growth.
• Over five years (FY2020-FY2025), revenue grew 520% (44% CAGR), non-GAAP income from operations grew 1420% (72% CAGR), and stock price increased 120% (17% CAGR).
• Executive compensation is strongly linked to performance, with a significant portion being variable and at-risk, aligning with stockholder interests.
• Named Executive Officers (excluding CEO) achieved 100.9% of their target cash bonuses for fiscal 2025.
• All non-employee directors and Named Executive Officers exceed the company's stock ownership guidelines.

Risks

• The classified board structure may have the effect of delaying or preventing changes in control of the Company, which could be viewed negatively by some stockholders seeking immediate changes.
• The labor market remains extremely competitive for skilled executives, posing a risk to attracting and retaining top talent.
• The company operates in a highly competitive and emerging market, requiring aggressive growth targets and continuous innovation to maintain market share.
• The company's reliance on cloud-based solutions means it faces risks related to cybersecurity, data privacy, and the need to continuously strengthen product security against evolving threats.

Future Outlook

The company anticipates continued growth in the cloud-based security and networking market, focusing on aggressive growth and profitability targets to deliver sustained stockholder value. Long-term incentive equity compensation is tied to multi-year Annual Recurring Revenue (ARR) growth targets, with staggered targets designed to incentivize continuous ARR expansion. The company expects to maintain its current board leadership structure and classified board to prioritize long-term, sustainable growth and ensure continuity.

Management Comments

• "I am pleased to invite you to attend the 2025 Annual Meeting of Stockholders..."
• "On behalf of the Board of Directors, I would like to express our appreciation for your support of, and interest in, Zscaler."
• "We believe that as organizations continue to embrace cloud-based business solutions, they are still in the early stages of adopting the security and networking solutions, including our platform, that are necessary to secure and manage cloud-based operations."
• "To be successful in this emerging market, we believe that delivering growth, capturing market share and delivering annual operating profitability are paramount."
• "Since we strongly believe that establishing and meeting aggressive growth targets in both the short term and the long term is the best way to deliver sustained stockholder value in a highly competitive and emerging market, we focus our performance metrics for our annual executive cash bonuses on achieving growth in each fiscal year but also include performance metrics focused on non-GAAP income from operations."
• "For our long-term incentive equity compensation, we focus our performance metrics on multi-year annual recurring revenue, or ARR, growth targets."
• "Fiscal 2025 was a strong year for us marked by significant achievement and growth across all of our key metrics."
• "We believe that our board leadership structure is appropriate for our Company, particularly where we have a majority of independent directors who are all actively involved in board meetings."
• "We feel that the anti-takeover measures, that have been deemed reasonable and appropriate by both our management and board of directors, support this long-term stability, which is increasingly seen as vital by our customers, partners and employees."
• "Our classified board structure enables our directors to prioritize long-term, sustainable growth, supports our customer relationships and long-term innovation commitments and promotes orderly board refreshment."

Industry Context

Zscaler operates in the rapidly evolving cloud security and networking industry, which is still in its early stages of widespread adoption. The company positions itself as a critical provider of solutions for securing and managing cloud-based operations, emphasizing aggressive growth and market share capture. The industry is highly competitive, requiring continuous innovation and strong financial performance to deliver sustained stockholder value. Zscaler's focus on Zero Trust Exchange cloud security platform and its global data center presence aligns with the increasing demand for secure, compliant, and efficient cloud-based solutions.

Comparison to Industry Standards

• Zscaler's classified board structure is aligned with a significant portion of its peer companies; 16 out of 21 (over 75%) of its compensation peer group companies also have classified boards, indicating a common practice in its industry for supporting long-term strategic oversight, continuity, and stability.
• The company's executive compensation program, with its emphasis on at-risk, performance-based incentives tied to revenue, billings, and ARR growth, is designed to be competitive within the technology industry for attracting and retaining highly skilled executives.
• The company's Zero Trust Exchange cloud security platform, distributed over 160+ data centers and processing 500+ billion transactions daily across 185+ countries, demonstrates a significant global scale and reach compared to many competitors, aiming to meet rigorous customer requirements for secure and compliant services.

Management Changes

Corporate Governance

Related Party Transactions

• The Vanguard Group, a greater than 5% beneficial holder of common stock, was provided with services and products exceeding $120,000 in fiscal year 2025. This transaction was negotiated on an arms-length basis and approved under company policy.
• Raj Krishna, son-in-law of CEO Jay Chaudhry, was employed as Senior Vice President, Product New Initiatives, with compensation exceeding $120,000 in fiscal year 2025.
• Raj Judge, Executive Vice President of Corporate Strategy and Director, was a senior partner at Wilson Sonsini Goodrich & Rosati, the company's outside corporate counsel. Legal expenses incurred by the company for services from this firm exceeded $120,000 in fiscal year 2025, conducted on an arms-length basis.
• Indemnification agreements have been entered into with each director and officer, providing for indemnification for certain expenses and liabilities incurred in connection with their service.

Stakeholder Impact

• **Shareholders:** The company's strong financial performance (revenue, billings, non-GAAP income growth, ARR) and long-term stock price appreciation directly benefit shareholders. Executive compensation is designed to align with shareholder value creation. The board's recommendation against declassification aims to protect long-term shareholder value by ensuring board stability and strategic focus.
• **Employees:** The company's focus on growth and profitability, along with competitive compensation packages (including equity awards), aims to attract, motivate, and retain high-quality talent. Employee development resources and a positive workplace culture (recognized as a 'Best Workplace') contribute to employee engagement. The 401(k) plan with employer matching benefits all eligible employees.
• **Customers:** The company's commitment to securing trust, platform certifications, robust cybersecurity risk management, and user privacy are critical for customer confidence. The board believes that anti-takeover provisions, including the classified board, enhance customer confidence in the company's long-term stability, which is vital for service levels and innovation.
• **Suppliers/Vendors:** The company has implemented a supplier code of conduct to communicate ethical expectations, indicating a commitment to responsible supply chain practices.
• **Creditors:** Strong financial performance and prudent management of expenses, as evidenced by non-GAAP income from operations, contribute to the company's financial health and ability to meet its obligations.

Next Steps

• Stockholders to vote on proposals at the Annual Meeting on January 12, 2026.
• Election of three Class II directors to serve until the 2028 annual meeting.
• Ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm for fiscal year ending July 31, 2026.
• Advisory vote on Named Executive Officer compensation.
• Advisory vote on the frequency of future stockholder advisory votes on executive compensation (board recommends 'ONE YEAR').
• Consideration of a non-binding stockholder proposal requesting board declassification.
• The compensation committee will continue to monitor stockholder opinions and feedback when making future executive compensation decisions.
• The board of directors will continue to review the company's governance structure, including the classified board, and assess its effectiveness.

Key Dates

Recommendation

The filing is a routine proxy statement for an annual meeting, primarily detailing corporate governance, executive compensation, and a review of past fiscal year performance. While the financial highlights for FY2025 show strong growth and positive trends, this information is generally already public through prior earnings reports. There are no new, unexpected material financial disclosures or strategic shifts that would significantly alter the company's valuation or warrant an immediate 'buy' or 'sell' recommendation based solely on this document. The governance proposals are largely in line with current practices or board recommendations, and the debate over board declassification is a known ongoing discussion. Therefore, a 'hold' recommendation is appropriate as this filing reinforces the existing investment thesis without introducing new catalysts for significant price movement.

Keywords

Zscaler, SEC Filing, Proxy Statement, Corporate Governance, Executive Compensation, Annual Meeting, Cloud Security, Zero Trust, Financial Performance, Revenue Growth, Billings Growth, ARR, Non-GAAP Income, Director Election, Board Declassification, Cybersecurity, SaaS