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Zscaler drops after making mild earnings forecast


Jay Chaudry, founder and chief executive officer of Zscaler Inc.

David Paul Morris | Bloomberg | beautiful pictures

Cybersecurity software manufacturer Zscaler saw its shares fall as much as 18% on Thursday after the company issued quarterly earnings guidance that was slightly below analysts’ expectations.

This move is more than erasing the 10% increase in regular trading, like Cybersecurity stocks trade higher because of concerns about cyberattacks related to the Russia-Ukraine conflict and as the overall market plays out end of day rally after an early plunge.

Here’s how the company did it:

  • Income: 13 cents/share, adjusted, compared with 11 cents/share as analysts had predicted, according to Refinitiv.
  • Revenue: $255.6 million, compared with $242 million as analysts expected, according to Refinitiv.

Zscaler said revenue grew nearly 63% in the quarter ended January 31, according to a report declare. That’s the fastest growth the company has achieved in three years, CEO Jay Chaudhry said in the statement. But it reported a net loss of $100.4 million, up from $67.5 million the previous quarter.

Existing customers are spending more on Zscaler products. “Once we get in, almost every time we win,” Chaudhry said in a meeting with analysts.

At the same time, new customers are coming in as well — the company added more than 560 customers paying more than $100,000 annually over the past 12 months, Remo Canessa, the company’s chief financial officer, said on the call. Chaudhry said part of the growth came from purchasing Zscaler software through Amazon and Microsoft’s cloud marketplaces.

For guidance, Zscaler called for 10 cents to 11 cents per share in adjusted fiscal Q3 earnings and $270 million to $272 million in revenue. Analysts polled by Refinitiv had expected adjusted earnings per share of 11 cents and revenue of $256.7 million.

For the full fiscal year, Zscaler said it saw adjusted earnings of 54 cents to 56 cents per share and revenue of $1.045 billion to $1.05 billion, representing revenue growth of nearly 56 percent in the middle of the range. That compares with the Refinitiv consensus of 52 cents in adjusted earnings per share and $1.01 billion in revenue.

For the year, despite the after-hours move, Zscaler is down 18%, compared with a 10% drop in the S&P 500.

WATCH: Wedbush’s Dan Ives names Zscaler, Palo Alto, and Tenable as top cybersecurity picks in 2022



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