What happened
Shares of Zscaler (ZS 0.50%) are losing ground in Wednesday's trading on fears that a resource-rich competitor is moving in on its turf. The cybersecurity company's share price was down 6.3% as of 1:15 p.m. ET, according to data from S&P Global Market Intelligence.
Microsoft (MSFT 0.57%) published a press release yesterday announcing that it will be debuting new capabilities for its Azure cloud service and moving into secure-service-edge (SSE) offerings. With the move, the software giant appears to be encroaching on Zscaler's turf.
So what
SSE software is a core offering for Zscaler and involves a collection of cloud-based network security services. These services are broken down across three categories -- secure web gateways (SWGs), cloud access security brokers (CASBs), and zero trust network access (ZTNA) frameworks.
NASDAQ: ZS
Key Data Points
Yesterday, Microsoft announced Microsoft Entra Internet Access and Microsoft Entra Prive Access -- service offerings that will bring it into closer competition with Zscaler.
Entra Internet is an identity-centric SWG that protects access to the internet and software-based services, while Entra Private is a ZTNA that protects private apps and resources. Along with Microsoft Defender for Cloud Apps, the company's new service offerings now comprise a full-fledged SSE offering and could threaten Zscaler's growth opportunities.
Now what
Microsoft has been making a big push into the cloud-based cybersecurity tech and has strong foundations to offer a wider range of more specialized services across its infrastructure. The company's Azure cloud infrastructure platform is already the second-largest overall provider in cloud services, and building out its cybersecurity services is a way to attract new customers and expand relationships with those already using its services. Given the company's massive resources and early lead in artificial intelligence technologies, the tech giant could pose a significant threat to Zscaler.
