Zscaler (ZS) risk factors, FY2025 10-K

Risks Related to Our Growth

1. 01We have a history of annual net losses and may not be able to achieve or sustain profitability in the future30% rewritten
2. 02If organizations do not adopt our cloud platform, our ability to grow our business and operating results may be adversely affected
3. 03If we are unable to attract new customers, our future results of operations could be harmed30% rewritten
4. 04If our customers do not renew their subscriptions for our services and add additional users and services to their subscriptions, our future results of operations could be harmed36% rewritten
5. 05acquisitions involving our customers, competition and deteriorating or uncertain general economic conditions, which may result in reductions in IT budgets and lower employee headcountsNew
6. 06We have experienced rapid revenue and other growth in recent periods, which may not be indicative of our future performance
7. 07If we fail to effectively manage our growth, we may be unable to execute our business plan, maintain high levels of service, adequately address competitive challenges or maintain our corporate culture, and our business, financial condition and results of operations would be harmed
8. 08Our operating results may fluctuate significantly, which could make our future results difficult to predict and could cause our operating results to fall below expectations
9. 09Our business and growth depend in part on the success of our relationships with our channel partners

Risks Related to Our Products and Services

1. 10We face intense and increasing competition and could lose market share to our competitors, which could adversely affect our business, financial condition and results of operations48% rewritten
2. 11vendors. As a result, these organizations may prefer to purchase from their existing suppliers rather than add or switch to a new supplierNew
3. 12If the delivery of our services to our customers is interrupted or delayed for any reason, our business would suffer
4. 13If we fail to develop or introduce new enhancements to our cloud platform on a timely basis, our ability to attract and retain customers, remain competitive and grow our business could be impaired
5. 14If our global network of data centers, which deliver our services, was damaged or otherwise failed to meet the requirements of our business, our ability to provide services to our customers and maintain the performance of our cloud platform could be negatively impacted, which could cause our business to suffer37% rewritten
6. 15If our cloud platform or internal networks, systems or data are or are perceived to have been breached, our solution may be perceived as insecure, our reputation may be damaged and our financial results may be negatively impacted65% rewritten
7. 16perceived or purported security breaches of our cloud platform could result in actual, perceived or purported breaches of our customers’ networks and systemsNew
8. 17Any of the above could materially and adversely affect our business, financial condition and results of operations
9. 18If our cloud platform does not interoperate with our customers’ network and security infrastructure or with third-party products, websites or services, our cloud platform may become less competitive and our results of operations may be harmed

Risks Related to Our Sales and Operations

1. 19If we are not able to maintain and enhance our brand, our business and results of operations may be adversely affected
2. 20If we do not effectively develop and expand our sales and marketing capabilities, we may be unable to add new customers or increase sales to our existing customers, and our business will be adversely affected
3. 21Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense
4. 22Because we recognize revenue from subscriptions for our services over the term of the subscription, downturns or upturns in new business may not be immediately reflected in our operating results and may be difficult to discern
5. 23We provide service level commitments under our customer contracts. If we fail to meet these contractual commitments, we could be obligated to provide credits for future service and our business could suffer
6. 24We rely on our key technical, sales and management personnel to grow our business, and the loss of one or more key employees or the inability to attract and retain qualified personnel could harm our business
7. 25Our business depends, in part, on sales to the public sector and significant changes in the contracting or fiscal policies of public sector organizations could have an adverse effect on our business and operating results25% rewritten
8. 26Our international operations expose us to significant risks, and failure to manage those risks could materially and adversely impact our business
9. 27Future acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and adversely affect our operating results, financial condition and prospects
10. 28If we are unable to effectively manage certain risks and challenges related to our India operations, our business could be harmed22% rewritten
11. 29Our failure to raise additional capital necessary to expand our operations and invest in new solutions could reduce our ability to compete and could harm our business

Risks Related to Information Technology, Intellectual Property, Data Security and Privacy

1. 30The actual or perceived failure of our cloud platform to block malware or prevent a security breach or incident could harm our reputation and adversely impact our business, financial condition and results of operations
2. 31Any of the above results could materially and adversely affect our business, financial condition and results of operations
3. 32Issues in the development, use and execution of AI and ML, combined with an uncertain regulatory environment, may harm our business48% rewritten
4. 33We incorporate technology from third parties into our cloud platform, and our inability to obtain or maintain rights to the technology could harm our business
5. 34Some of our technology incorporates "open source" software, and we license some of our software through open source projects, which could negatively affect our ability to sell our platform and subject us to possible litigation34% rewritten
6. 35Claims by others that we infringe their proprietary technology or other rights, or other lawsuits asserted against us, could result in significant costs and substantially harm our business, financial condition, results of operations and prospects56% rewritten
7. 36discovery required in connection with patent and other intellectual property rights litigation, there is a risk that some of our confidential information could be compromised by the discovery processNew
8. 37The success of our business depends in part on our ability to protect and enforce our intellectual property rights
9. 38Adverse economic conditions or reduced IT security spending may adversely impact our revenue and profitability32% rewritten
10. 39result of the increased interest income we earn on our cash and investments, but a reduction of interest rates in the future would reduce this incomeNew

Risks Relating to Legal, Regulatory, Accounting and Tax Matters

1. 40Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties
2. 41If we were not able to satisfy data protection, security, privacy and other government- and industry-specific requirements or regulations, our business, results of operations and financial condition could be harmed37% rewritten
3. 42We are subject to governmental import and export controls and trade and economic sanctions and other trade controls including tariffs that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws
4. 43We are exposed to fluctuations in currency exchange rates, which could negatively affect our operating results29% rewritten
5. 44these hedging activities may not be successful in effectively mitigating the potentially adverse impact on our financial statements due to unfavorable movements in foreign currency exchange rates
6. 45We are subject to counterparty default risks
7. 46Our corporate structure and intercompany arrangements are subject to the tax laws of various jurisdictions, and we could be obligated to pay additional taxes, which would harm our results of operations46% rewritten
8. 47Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited31% rewritten
9. 48Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our operating results

Risks Related to the Ownership of Our Common Stock

1. 49The concentration of our stock ownership with insiders will likely limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring stockholder approval24% rewritten
2. 50Certain provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove members of our board of directors or current management and may adversely affect the market price of our common stock
3. 51The market price of our common stock may be volatile, and you could lose all or part of your investment37% rewritten
4. 52We do not intend to pay dividends in the foreseeable future. As a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock
5. 53If industry or financial analysts issue inaccurate or unfavorable research regarding our common stock, our stock price and trading volume could decline
6. 54Our amended and restated certificate of incorporation further provides that the federal district courts of the United States are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933, as amended

Risks Related to the 2028 Notes

1. 55Servicing our debt will require a significant amount of cash, which may impact our cash available for working capital, capital expenditures and other corporate purposesNew
2. 56fundamental change repurchase date for such 2028 Notes. If the 2028 Notes have not previously been converted or repurchased, we will be required to repay the 2028 Notes in cash at maturityNew
3. 57The capped call transactions may affect the value of our common stock57% rewritten
4. 58We are subject to counterparty risk with respect to the capped call transactions

General Risks

1. 59Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events, and to interruption by man-made problems such as power disruptions, computer viruses, acts of war, international conflicts, terrorism and security breaches or incidents81% rewritten
2. 60component suppliers or other third-party providers, including our network bandwidth and SaaS solution providers, this could materially and adversely affect our ability to provide services in a timely or cost-effective mannerNew
3. 61We are subject to anti-corruption, anti-bribery and similar laws, and noncompliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation22% rewritten
4. 62If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired79% rewritten
5. 63recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officersNew
6. 64If our estimates or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our results of operations could be adversely affected
7. 65We rely on third parties for certain essential financial and operational services, and a failure or disruption in these services could materially and adversely affect our ability to manage our business effectively
8. 66We may become involved in litigation that may materially and adversely affect us