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Zscaler Stock Flat After Company Posts Strong Revenue Growth, Guidance

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  • ZS
  • CRWD

by Daniel Shvartsman

Investing.com - Zscaler’s stock (NASDAQ:ZS) is trading flat after the cyber-security software provider posted an earnings beat.

Zscaler reported $230.5M in revenue for their quarter ended October 31, 62% above last year’s numbers, their strongest year-over-year growth quarter since coming public in 2019. Non-GAAP income came in at $.14/share. Both were ahead of analyst estimates.

CEO and Chairman Jay Chaudhry said, “CISOs and CIOs are looking to phase out legacy network security in favor of zero trust architecture, due to increasing cyber and ransomware risks and accelerating digital transformation. This architecture shift continues to drive strong demand for our Zero Trust Exchange platform.” He also reported the company crossed the $1B annual recurring revenue (ARR) mark, with a focus on reaching $5B over time.

Zscaler shares opened up 7% pre-market at $371/share, though they may have dropped as part of the 'reopening trade' momentum today. Investors appeared to be initially impressed guidance and the billings numbers as promising signs for the security provider. Billings were up 71% year over year, ahead of revenue. Zscaler’s guidance for Q2 2022 (their fiscal year runs August-July) is for $240-242M revenue and $.11/share non-GAAP net income. They raised full-year guidance to $1B in revenue and $1.3B in billings, from $930-950M and $1.23-1.25B previously. Current analyst expectations for Q2 are for revenue of $225M.

Morgan Stanley and JMP Securities are among the sell-side firms who raised their price targets on Zscaler in response to the report, to $330 and $400/share respectively. In total, 12 analysts hiked price targets in response to the beat and raise, as well as the acceleration in growth this quarter.

Crowdstrike (NASDAQ:CRWD) was up 2% pre-market, perhaps in sympathy, though that high-flying security stock has come down 25% from 52-week highs on valuation concerns, and currently trades down 1.6% in early morning trading.

(Published at 5:00am ET, updated at 10:30am ET).

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