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Tuesday, 12 September 2023

After strong start to 2024, Zscaler (ZS) sees stable growth ahead

by Rose White

Cybersecurity company Zscaler, Inc. (NASDAQ: ZS) wrapped up the fiscal year on a high note, delivering strong numbers for the fourth quarter and issuing an optimistic outlook for 2024. The company bets on the growing demand for advanced cybersecurity solutions as companies modernize their legacy security systems.

After strong start to 2024, Zscaler (ZS) sees stable growth ahead

Shares of Zscaler have more than halved in the past two years, as it entered a downward spiral after hitting a record high. They changed course and regained momentum after hitting a three-year low a few months ago but continue to outperform the market. The uptrend is likely to continue in the coming months, considering the company’s stable performance at a time when some key players in the market are experiencing a slowdown due to macroeconomic uncertainties.

Zero Trust Model

Zscaler’s zero-trust architecture promises advanced security that is capable of addressing modern-day cyber threats. Currently, the company is investing in product innovation to position itself to tap into opportunities created by the ongoing digital transformation. Recently, the company introduced new services like Zscaler Risk360 and Zero Trust Branch Connectivity, strengthening its Zero Trust Exchange cloud security platform. The cloud-native model is cheaper compared to on-site services, which the company does not do, and makes it easier to scale as the business expands.

From Zscaler’s Q4 2023 earnings call transcript:

“Cybersecurity remains the No. 1 IT priority, and having the right security architecture is fundamental to reducing cyber risk. According to our latest Zscaler ThreatLabZ VPN risk report, nearly half of enterprises reported they were targeted by cyber attackers who exploited a VPN vulnerability, and a third of enterprises fell victim to ransomware attacks within the past year. Growing cyber threats, including ransomware, are driving IT leaders to transform security from legacy network security to zero trust architecture.”

Q4 Outcome

In the fourth quarter of 2023, Zscaler’s earnings, excluding special items, more than doubled to $0.64 per share from $0.25 per share in the same period of the prior year. The positive outcome reflects a 43% jump in revenues to $455.0 million. At $719.3 million, calculated billings were up 38% year-over-year. The bottom line also benefitted from the recent cost-cutting measures. Both earnings and the top line far exceeded consensus estimates – interestingly the headline numbers topped expectations in every quarter since the company started reporting quarterly results around five years ago.

Deferred revenue, a measure of money received for goods/services that have not yet been delivered, was $1.44 billion, which is up an impressive 41% from last year. Meanwhile, on an unadjusted basis, the company reported a net loss of $30.67 million or $0.21 per share, which marked an improvement from the year-ago quarter when it incurred a loss of $97.7 million or $0.69 per share.

Outlook

For fiscal 2024, the management expects revenues to grow and come in the range of $2.050 billion to $2.065 billion, and calculated billings in the $2.52-$2.56 billion range. Nevertheless, the projection indicates a slower growth compared to the prior year. It is looking for adjusted profit between $2.20 per share and $2.25 per share.

On Monday, ZS began the session higher after closing the previous session lower. In the past six months, the stock moved up around 46%.

The post After strong start to 2024, Zscaler (ZS) sees stable growth ahead first appeared on AlphaStreet.

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