Key Takeaways
- Zscaler’s stock jumped significantly after reporting strong third-quarter financial results.
- Revenue and adjusted earnings beat market expectations, largely due to demand for AI security and its zero-trust platform.
- The company issued an optimistic earnings forecast for the upcoming quarter.
- Zscaler announced Kevin Rubin as its new Chief Financial Officer.
Shares of Zscaler, a cloud security company, climbed about 10% on Friday. This surge followed the release of better-than-expected earnings for its third fiscal quarter, boosted by artificial intelligence trends and strong adoption of its zero-trust security platform.
CEO Jay Chaudhry stated, “The proliferation of AI in all aspects of business is increasing the need for our AI security.” He added that Zscaler helps customers safely use both public generative AI applications and their own private AI tools, and the company is boosting its investments in this area.
The company’s revenue grew 23% to $678 million, up from approximately $553 million in the same period last year. This figure surpassed the $666 million estimate compiled by LSEG. Zscaler reported adjusted earnings of 84 cents per share, also topping LSEG’s expectation of 75 cents per share. Billings, an indicator of future revenue, rose 25% to about $785 million, ahead of a $760 million estimate from StreetAccount, as CNBC reported.
Zscaler’s positive report offers a hopeful sign for the cybersecurity industry, which has seen some areas of weakness amidst unpredictable economic conditions. For instance, SentinelOne’s stock dropped after it lowered its outlook, and Palo Alto Networks saw its shares decline after missing targets on gross margin.
Keith Weiss of Morgan Stanley wrote that Zscaler’s report “echoes the strength we noted in our preview, and begins to prove out the reacceleration story that the company has been pointing to over the past few quarters.”
For the quarter, Zscaler reported a net loss of $4.1 million, or 3 cents per share. This contrasts with the same quarter last year when the company posted a net income of $19.1 million, or 12 cents per share.
Looking ahead, Zscaler provided upbeat guidance for its fiscal fourth quarter. The company expects adjusted earnings to be between 79 cents and 80 cents a share. This forecast is above the 77 cents per share anticipated by LSEG.
Alongside its financial results, Zscaler also announced the appointment of Kevin Rubin as its new Chief Financial Officer.
