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Zscaler (ZS) to Report Q1 Earnings: What's in The Cards?

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·5 min read
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  • ZS
  • SNOW
  • LULU

Zscaler ZS is slated to report first-quarter fiscal 2022 results on Nov 30.

For the first quarter, Zscaler projects total revenues between $210 million and $212 million. The Zacks Consensus Estimate for the same is pegged at $212.3 million, suggesting growth of 48.9% from the year-ago quarter.

Zscaler anticipates non-GAAP earnings to be approximately 12 cents per share. The Zacks Consensus Estimate for the same stands at 12 cents per share, indicating year-over-year decline of 14.3%.

The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 82.1%.

Zscaler, Inc. Price and EPS Surprise

Zscaler, Inc. Price and EPS Surprise
Zscaler, Inc. Price and EPS Surprise

Zscaler, Inc. price-eps-surprise | Zscaler, Inc. Quote

Factors to Note

Zscaler’s first-quarter results are likely to reflect continued solid demand for its security and networking products, given the healthy environment of the global security market.

Particularly, solid adoption of Zscaler’s Zero Trust Exchange platform owing to the on-going digital transformation across enterprises is likely to have acted as a key catalyst. The company during its last quarterly conference call noted that more than 5,600 enterprises, consisting of 35% of Fortune 500 companies, currently trust Zscaler to secure their digital transformation process.

With work from anywhere being the new normal amid the ongoing pandemic, an increasing number of people have been logging into employers' networks through off-premises locations, which has prompted the need for greater security. This trend is anticipated to have spurred demand for Zscaler’s products in the quarter under review.

Zscaler’s existing core products, especially the ZIA (“Zscaler Internet Access”) and the ZPA (“Zscaler Private Access”), have been driving strong customer retention. The addition of new capabilities to its Zero Trust Exchange, such as Cloud Access Security Broker, Cloud Browser Isolation, Cloud Protection, Zscaler Digital Experience (“ZDX”) and Cloud Security Posture Management (“CSPM”) for Software-as-a-service (“SaaS”) applications are likely to drive its product portfolio expansion and aid customer acquisition.

Increased adoption of Software-Defined Wide Area Network (“SD-WAN”) solutions might have acted as a key growth driver in the quarter to be reported. Per research firm Futuriom, the market size for SD-WAN solutions is estimated to reach $3.5 billion by 2022 and $4.6 billion by 2023, witnessing a CAGR of 34%.

As there are only a few vendors that offer security and SD-WAN solutions, Zscaler is expected to have been capitalizing on the increasing opportunities in the market. The company’s collaboration with both VMware and Silver Peak is helping it secure SD WAN deployments. This is likely to have positively impacted Zscaler’s first-quarter performance.

Nonetheless, during its fourth-quarter fiscal 2021 earnings conference call, Zscaler had warned that some of its emerging products, including ZDX, Workload Segmentation and CSPM might report lower gross margins than its core products in the fiscal first quarter. Also, it continues to expect no material impacts on its quarterly top-line performance from Trustdome and Smokescreen start-up buyouts.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Zscaler this season. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Zscaler currently has a Zacks Rank #3 and an Earnings ESP of 0.00%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combinations

Per our model, Lululemon Athletica LULU, Snowflake SNOW and Bank of Nova Scotia BNS have the right combination of elements to post an earnings beat in their upcoming releases.

Lululemon is set to report third-quarter fiscal 2022 results on Dec 9. The stock has a Zacks Rank #2 and an Earnings ESP of +1.44%. Lululemon’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 25.2%.

The Zacks Consensus Estimate for quarterly earnings is pegged at $1.39 per share, suggesting year-over-year improvement of 19.8%. Its quarterly revenues are estimated to increase 28.1% year over year to $1.43 billion.

Snowflake has a Zacks Rank #3 and an Earnings ESP of +1.82%. The company is scheduled to report third-quarter fiscal 2022 results on Dec 1. Its earnings have surpassed the Zacks Consensus Estimate in one of the trailing four quarters and missed thrice, the average negative surprise being 2.5%.

The Zacks Consensus Estimate for Snowflake’s third-quarter bottom line is pegged at a loss of 6 cents per share, suggesting an improvement from the year-ago quarter’s loss of 28 cents. The consensus mark for revenues stands at $304 million, suggesting year-over-year growth of 90.5%.

Bank of Nova Scotia has a Zacks Rank #3 and an Earnings ESP of +1.48%. The company is scheduled to report fourth-quarter 2021 results on Nov 30. Its earnings have outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 14.9%.

The Zacks Consensus Estimate for Bank of Nova Scotia’s fourth-quarter bottom line is pegged at $1.52 earnings per share, indicating year-over-year improvement of 38.2%. The consensus mark for revenues stands at $6.24 billion, suggesting year-over-year growth of 9.9%.


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