Zscaler Discloses Layoffs For 3 Percent Of Employees

The cuts come after the cybersecurity vendor’s headcount surged over the past 18 months, and Zscaler undertook a review on how to better align its resources to ‘strategic priorities,’ CEO Jay Chaudhry said Thursday.


Cybersecurity firm Zscaler has adopted a restructuring plan that will include layoffs affecting 3 percent of its workforce, or about 177 employees, the company disclosed Thursday.

Over the past 18 months, Zscaler — known for its cloud-based security tools including in the zero trust security space — “doubled the size of our team to approximately 5,900 employees as we invested aggressively based on strong market momentum,” Zscaler CFO Remo Canessa said Thursday during the company’s quarterly call with analysts.

[Related: 10 Cybersecurity Companies Making Moves: February 2023]

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Amid the challenging economic environment, Zscaler has undertaken a “targeted optimization initiative to address inefficiencies in certain job functions and projects,” leading to the 3-percent workforce reduction, Canessa said.

The disclosure came as the company reported results for the second quarter of its fiscal 2023, ended Jan. 31. Zscaler’s stock price fell 11.8 percent in after-hours trading Thursday, to $118.32 per share.

“After significantly growing our teams in recent years, we took a fresh look at our organization and found opportunities to streamline operations and to align people, roles and projects to our strategic priorities,” Zscaler Founder and CEO Jay Chaudhry said during the quarterly call.

“As a result of the review, we initiated our targeted cost optimization plan to drive additional operational efficiency that best positions us to deliver profitable growth,” Chaudhry said.

Zscaler is considered by Gartner to be one of just three “leaders” in the area of security service edge (SSE), which is focused on helping to provide secure remote access to applications and data. Security tools that fall under SSE include zero trust network access (ZTNA), considered a more-secure alternative to VPN, and a category in which Zscaler is among the largest and best-known players.

Zscaler is joining numerous other companies in the cybersecurity industry, as well as in the tech industry overall, in cutting back on staff amid a difficult economy. Other publicly traded cybersecurity vendors to cut staff have included Okta, which laid off 300 employees with a 5-percent workforce reduction in February, and Sophos, which reportedly laid off 450 staff members in January.

A filing with the U.S. Securities and Exchange Commission indicates that the restructuring plan was adopted on Wednesday. Zscaler has “committed to a plan to restructure and reduce the company’s workforce as a part of its planned efforts to streamline operations and to align people, roles and projects to the company’s strategic priorities,” the company said in the filing.

Looking ahead, “we‘ll continue to hire the best candidates in high-priority areas,” Canessa said during the call Thursday.

For Zscaler’s fiscal Q2, revenue jumped 52 percent year-over-year to $387.6 million, slightly above the Wall Street analyst consensus estimate. Non-GAAP net income was 37 cents per share, beating analyst estimates by 8 cents per share.

Product Expansion

Zscaler has continued expanding its product portfolio in recent months. On Feb. 1, the company announced the launch of Zscaler Resilience, which provides new capabilities that aim to keep interconnections to apps intact even in the event of a major security incident. Such “black swan” events can include nation-state attacks, natural disasters and digital vandalism, Zscaler said in a news release, which have created a dire need for greater “cloud resilience” for organizations.

The Zscaler Resilience offering includes disaster recovery capabilities that allow customer operations to directly connect to Zscaler’s Private Service Edge in the event of a serious incident, allowing updated security policies to continue to be followed.

Following up on that launch, in mid-February Zscaler announced an agreement to acquire Canonic Security, a startup focused on protecting against attacks that target software-as-a-service. Financial terms of the acquisition deal were not disclosed. Canonic’s technology aims to “prevent organizations’ growing risks of SaaS supply chain attacks,” Zscaler said in a news release.

Zscaler said it will integrate Canonic’s capabilities into a data protection offering that was announced in October 2022, including by enhancing its cloud access security broker (CASB) solution as well as its SaaS security posture management (SSPM) tool.