Zscaler Stock Slumps Following Q1 Beat But Retail Turns Increasingly Bullish

Shares of cybersecurity vendor Zscaler, Inc. ($ZS) pulled back below the $200 threshold following the release of a beat-and-raise quarter, as traders focused on the lukewarm guidance and a slowdown in key operating metrics.

The San Jose, California-based company reported fiscal year 2025 first-quarter non-GAAP earnings per share (EPS) of $0.77. The bottom-line performance bettered the year-ago number of $0.55 and the consensus estimate of $0.63.

Revenue climbed 26% year-over-year (YoY) to $628 million, versus the consensus estimate of $605.2 million and the guidance of $604 million-$606 million.

Among operational metrics, deferred revenue - the amount received in advance for products/services yet to be delivered, rose 27% YoY to $1.78 billion. Calculated billings grew 13% to $516.7 million. Both metrics grew at a slower pace relative to the June quarter, which saw 32% and 27% growth, respectively

Jay Chaudhary, Chairman and CEO of Zscaler, said, “Growing customer engagements and strong sales execution drove a solid Q1 with all metrics exceeding our guidance

“The combination of Zero Trust and AI is creating exciting new opportunities, which we are well positioned to capture with our large and expanding platform.”

Zscaler ended the quarter with cash, cash–equivalents, and short-term investments of $2.71 billion. 

Looking ahead, the company guided second-quarter non-GAAP EPS to $0.68-$0.69 and revenue to $633 million-$635 million. This compares to the consensus estimate of $0.69 and $634.31 million, respectively.

It updated the full-year  non-GAAP EPS guidance from $2.81-$2.87 to $2.94-$2.99, and revenue guidance from $2.60 billion-$2.62 billion to $2.623 billion-$2.643 billion and the 

Wall Street analysts expect the metrics to be $2.95 and $2.63 billion, respectively.

In a filing with the SEC, the company said its CFO Remo Canessa informed the company of his decision to retire upon appointing a successor. “His decision to retire is not the result, in whole or in part, of any disagreement with the Company on any matters relating to the Company’s operations, policies or practices,” it said.

ZS sentiment and message volume December 3, 2024, as of 6:32 am ET | Source: Stocktwits

Retail, however, is optimistic. On Stocktwits, retailers’ mood was ‘extremely bullish’ (96/100), an improvement from the ‘bullish’ sentiment that prevailed a day ago. Message volume spiked to ‘extremely high.’

In premarket trading, as of 6:32 a.m. ET, Zscaler shares fell 8.09% to $191.65. The stock has fallen about 5.89% for the year-to-date period.

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