Zscaler this week revealed it is acquiring Red Canary, a provider of a managed detection and response (MDR) service that will be incorporated into the portfolio of offerings delivered via a zero-trust cloud platform for accessing applications.
Expected to close in August, Red Canary MDR service has been mainly adopted by security operations center (SOC) teams looking to combine behavioral analytics and artificial intelligence (AI) to identify and remediate cybersecurity threats.
Zscaler CEO Jay Chaudhry, during a call with industry analysts, said Zscaler opted to acquire Red Canary because it fits well with a data fabric platform designed specifically for cybersecurity workflows that the company gained last year with the acquisition of Avalor.
It’s not clear precisely how many existing Red Canary customers will continue to use the MDR service once the merger is complete. Zscaler executives said that only roughly half of the organizations using the Red Canary MDR are in the core markets served by the company.
All told, the Zscaler service is now being relied on to ensure that more than 50 million end users are only able to access applications they have specific permission to invoke, said Chaudhry.
The data collected from those end users will be further augmented using threat intelligence data collected via the Red Canary service to further train the artificial intelligence (AI) models and agents that Zscaler began rolling out last year, he added.
In general, Zscaler expects to soon pass a $5 billion in billable revenue mark even as organizations become more cautious about making cybersecurity investments in an uncertain economic climate, said Chaudry. Many of those organizations are looking for a platform that enables them to consume cybersecurity services as needed using the same platform they are relying on to enforce zero-trust policies across the entire organization, he added.
For the third quarter, Zscaler this week reported revenues of $678.0 million, representing a 23% increase year-over-year. GAAP loss from operations was $25.4 million, or 4% of revenue, compared to $3.0 million, or 1% of revenue, in the third quarter of fiscal 2024. Non-GAAP income from operations was $146.7 million, or 22% of revenue, compared to $121.8 million, or 22% of revenue, in the third quarter of fiscal 2024.
It’s not clear to what degree organizations are centralizing the management of cybersecurity, but a Futurum Group report forecasts there will be a compound annual growth rate (CAGR) of 11.6% from 2024 to 2029 to reach $287.6 billion in revenue as investments are spread across multiple classes of technologies and solutions.
Less clear is the impact AI might have on how cybersecurity tools, platforms and services are delivered and consumed, but, as always, there is going to be pressure to contain the cost of cybersecurity. At the same time, cyberattacks in the age of AI will only continue to increase in terms of both volume and sophistication. As such, the real challenge remains determining where and how to best thwart those attacks within the context of a limited set of resources that, hopefully, will soon include large doses of AI augmentation.
