Zscaler (ZS) reported second-quarter fiscal revenue and earnings that exceeded Wall Street’s targets. But billing growth was limited only by analyst estimates, and ZS shares plummeted on Friday’s news.
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The cybersecurity company released its earnings report after market close on Thursday. Zscaler announced a restructuring and headcount reduction to streamline operations.
For the quarter ended Jan. 31, Zscaler’s earnings were 37 cents per share on an adjusted basis, up 184% from a year earlier. Sales rose 52% to $387.6 million, the San Jose, California-based company said.
Analysts expected Zscaler earnings of 29 cents per share on revenue of $364.7 million. Bills also rose 34% to $493.8 million, compared to estimates for $491.5 million.
“On paper, Zscaler delivered a good quarter, but billing growth of 34% was below investor expectations as delayed and slower deals again impacted growth in the quarter,” said UBS analyst Roger Boyd in a note to customers.
ZS Stock: Palo Alto Competition Rises?
Shares of ZS fell 12.7% to nearly 117 today in early trading in the stock market.
For the full fiscal year 2023, Zscaler forecasts bills of $1.94 billion in the midpoint of its outlook, slightly above estimates of $1.93 billion.
“While customers continue to apply heightened levels of deal control, extending sales cycles, ZS notes that deals are not going away,” TD Cowen analyst Shaul Eyal said in a note.
Some analysts point to increased competition that Zscaler faces Palo Alto Networks (PANW).
Zscaler provides cloud-based cybersecurity services through 150 data centers worldwide.
Heading into Zscaler’s earnings report, ZS stock held a relative strength rating of 18 out of the best possible 99, according to IBD Stock Checkup.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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