ZS Stock Tumbles After-Hours As Q4 Revenue Guidance, Cash-Flow Margin Cuts Dent Sentiment

• Q3 revenue rose 25% year-over-year to $850.5 million, beating estimates. 
• ZS’ adjusted earnings per share increased to $1.08 from $0.84 a year ago, beating expectations. 
• 40 out of 48 analysts rate the stock ‘buy’ and eight rate ‘hold,’ as per Koyfin data. 

Zscaler (ZS) share price tumbled nearly 20% after-hours on Tuesday after the cybersecurity firm’s revenue outlook for the quarter ending July fell short of expectations, while lower full-year cash flow margin guidance also pushed shares lower. 

The cybersecurity company posted adjusted earnings of $1.08 a share, compared with 84 cents a share a year ago and above expectations of $1.01 a share. Revenue grew 25% to $850.5 million, topping the analyst consensus of $835.6 million, according to Fiscal.ai. 

“Zscaler is ideally positioned as the cybersecurity platform for the AI era,” said CEO Jay Chaudhry in an earnings statement. “Our results demonstrate that our approach is resonating as we attract new customers and expand with our existing customers, and we see ample runway for long-term growth.”

The company’s earnings come just days after Zscaler announced its intent to acquire data security vendor Symmetry Systems for an undisclosed amount.

“We see Zscaler as a pioneer and leader in zero-trust security solutions, an area of cybersecurity primed for growth due to secular trends such as increased digitization of enterprises and a convergence of networking and security,” stated a Morningstar report.

ZS Q4 And Full-Year Outlook 

Zscaler expects revenue of $875 million to $878 million, up about 22% from the same quarter a year earlier, but slightly below analyst expectations of $878.6 million, according to Fiscal.ai data. 

The company expects net income of $1.08 to $1.09 per share, based on about 168 million fully diluted shares outstanding, which is above analyst expectations of $1.03 per share.

For the full year, it expects revenue of about $3.3 billion and earnings of $4.10 to $4.11 per share, both above expectations.

ZS Retail View 

Retail sentiment on Stocktwits was “extremely bullish” with “extremely high” message volumes. 

One user expressed bullishness by highlighting the need for cybersecurity as AI hackers rise. 

The ZS stock has lost 27.4% over the past 12 months.

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