Zscaler's Q4 Earnings Beat Expectations but Stock Takes a Hit: What Investors Need to Know
Investing.com – Zscaler (NASDAQ: ZS), the cloud security titan, delivered impressive fourth-quarter results, yet its stock nosedived over 15% in premarket US trading on Wednesday. The culprit? Disappointing profit guidance for the upcoming fiscal year.
Key Financial Highlights:
- Adjusted EPS: $0.88, outpacing analyst expectations of $0.70.
- Quarterly Revenue: $592.9 million, marking a 30% year-on-year surge and exceeding the $567.46 million consensus estimate.
- FY 2025 EPS Guidance: $2.81 to $2.87, falling short of the anticipated $3.01.
- FY 2025 Revenue Guidance: $2.60 billion to $2.62 billion, aligning with market expectations.
- Q1 FY 2025 Revenue Forecast: $604 million to $606 million, slightly above consensus.
- Q1 FY 2025 Adjusted EPS Forecast: $0.62 to $0.63, below the expected $0.73.
CEO Insights:
During the post-earnings call, CEO Jay Chaudhry acknowledged the "challenging" macroeconomic landscape and emphasized that buyers are increasingly focused on cost-saving capabilities. This sentiment mirrors the broader caution among cybersecurity customers amid market uncertainties and higher interest rates.
Chaudhry, however, lauded Zscaler's 2024 performance, highlighting robust customer adoption of its Zero Trust Exchange platform, designed to securely connect devices across networks.
Analyst Reactions:
Bernstein analysts noted the "disappointing" 2025 guidance but maintained a positive outlook, suggesting that "[s]ales effectiveness is already increasing, and new customer demand won’t remain muted by poor macro forever."
Breaking Down the Impact:
What This Means for Investors:
- Short-Term Volatility: Expect Zscaler's stock to experience some turbulence as the market digests the lower-than-expected profit guidance.
- Long-Term Potential: Despite near-term challenges, Zscaler's strong product adoption and strategic positioning in the cybersecurity market suggest potential for recovery and growth.
- Market Sentiment: Investor sentiment is likely to be cautious in the short term, driven by macroeconomic uncertainties and cost-saving trends among IT buyers.
How It Affects You:
- Current Investors: If you're holding Zscaler stock, brace for potential short-term dips but consider the company's long-term growth prospects.
- Potential Investors: Now might be an opportune moment to buy at a lower price point, assuming you believe in the company's long-term value.
- General Market Impact: Zscaler's performance and forecasts can serve as a bellwether for the broader cybersecurity sector, influencing investment strategies across similar stocks.
In summary, Zscaler's Q4 earnings exceeded expectations, but its conservative guidance for fiscal 2025 has rattled investors. While the short-term outlook appears shaky, the firm's innovative security solutions and market position offer promising long-term prospects.