The planned acquisition of MDR provider Red Canary, which consists of $675 million in cash as well as equity, aims to ‘accelerate our vision’ in meeting Security Operations Center needs for customers, Chaudhry said Thursday.
Zscaler’s planned acquisition of MDR provider Red Canary aims to “accelerate our vision” in expanding within the massive market for Security Operations Center (SOC) tools and services, Zscaler Founder and CEO Jay Chaudhry said Thursday.
Chaudhry made the comments two days after Zscaler disclosed a deal to acquire Red Canary, a 12-year-old company that is widely known as a trailblazer in the fast-growing category of MDR (managed detection and response). The acquisition agreement consists of $675 million in cash as well as equity for Red Canary, the company disclosed Thursday as part of its latest quarterly financial report.
[Related: Zscaler CEO Jay Chaudhry: Firewall Vendors ‘Can’t Really Do Cost Reduction’]
With the Red Canary deal, which is expected to be completed in August, Zscaler is poised to “accelerate our vision to become a leading player in the SOC market,” Chaudhry said during the company’s quarterly call with analysts.
Notably, Red Canary offers a number of advantages compared to other vendors in the crowded MDR market, he said.
The company’s technology is highly complementary to Zscaler’s existing SOC technology from its acquisition of “security data fabric” provider Avalor in March 2024, Chaudhry said. He’s also been “impressed” with Red Canary’s early efforts around AI agents.
“To my surprise, they have developed a very sophisticated agentic AI technology for reasoning and workflow, and this is being used today,” Chaudhry said. “They’re using it to support a large number of customers.”
Many other vendors have claimed to already be making major strides in agentic, but it’s often exaggerated — unlike with Red Canary, which has “had real stuff in production,” he said.
Overall, the planned addition of Red Canary also addresses a common request that customers have been making for years, according to Chaudhry.
While Zscaler’s zero-trust security tools gather a huge amount of log data, customers must then feed that data to a third-party platform and pay for the storage in that platform, he noted.
Customers have thus been asking, “‘Shouldn’t you naturally expand in that space and provide me a closed feedback [loop], so things discovered in your security operation solutions can be fed back to Zscaler’s zero-trust exchange?’” Chaudhry said. “Those are the discussions over the past several years that took us to move in [the SOC] direction.”
Zscaler’s stock price climbed Thursday evening after the company reported financial results for the third quarter of its fiscal 2025, ended April 30, which saw the company exceed Wall Street expectations on revenue and earnings.
The company reported Thursday that its fiscal third-quarter revenue grew 23 percent from the same period a year earlier, reaching $678 million and surpassing the analyst consensus estimate of $667.1 million.
Zscaler’s stock was up 3.8 percent in after-hours trading Thursday evening to $260.75 a share.
Red Canary, which Forrester has ranked as a “leader” in MDR for the past three years, recently disclosed that its annual recurring revenue (ARR) had surpassed $140 million as of the end of January, up from $100 million in ARR as of April 2023.
In a blog post Tuesday, Red Canary Co-Founder and CEO Brian Beyer said he looks forward to “revolutionizing security operations together” with Zscaler. The planned combination will notably bring “access to 500 billion daily transactions of data and threat intelligence processed on Zscaler’s Zero Trust Exchange and exposure management data,” Beyer wrote in the post.
“This will significantly enhance our ability to detect threats faster and more accurately,” he wrote. “The innovation this will bring is going to be incredible.”
