Zscaler's (ZS) had a "strong" fiscal Q2 driven by progress in revenue diversification, solid order growth and improvement in upsell capabilities, BofA Securities said in a note emailed Friday.

The company's billings and revenue growth surpassed Wall Street expectations as upsell strategies and larger deal sizes contributed to the outperformance, according to the note.

The firm said that Zcaler's operating margin improved slightly, while a strong portfolio, particularly in Zero Trust security and data initiatives, further bolstered results.

Competition in the company's core products, which still contribute to 80% of its revenue, is intensifying and the H2 billing target poses an execution challenge requiring significant sequential growth, BofA added. Zcaler's revamped sales organization must demonstrate efficiency improvements to support growth targets.

The brokerage upgraded its rating on Zcaler's stock to buy from neutral and raised the price objective to $240 from $215.

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