Zscaler (NASDAQ:ZS) will announce its Q4FY22 earnings after the market closes on Thursday, September 8, 2022. The company is benefitting from strong demand for its offerings despite macro challenges and economic uncertainties. Given the strong momentum in its business, Zscaler is well-positioned to exceed the Street’s projections in the quarter.
Zscaler: Recent Past and the Near Future
The graph below shows that Zscaler has consistently surpassed analysts’ earnings estimates over the past several quarters.
During the last reported quarter, Zscaler delivered adjusted earnings of $0.17 a share, compared to Wall Street’s expectations of $0.11. Its revenue surged 63% year-over-year, while billings increased 54%. Further, Zscaler generated a free cash flow margin of 15%.
Commenting on its Q3 performance, Zscaler CEO Jay Chaudhry stated that the macro headwinds and uncertainty are driving “large, multi-year commitments for multiple product pillars of Zscaler platform as periods of uncertainty can act as a catalyst for change.”
Further, increasing cyber security threats due to the ongoing digitization and cloud adoption drive demand for Zscaler’s products and services.
Thanks to strong demand and secular tailwinds, Zscaler expects total revenue in the range of $304 million to $306 million in Q4, implying year-over-year growth of 54% to 55%. Meanwhile, it expects to deliver earnings per share of $0.20 to $0.21. Analysts expect Zscaler to post earnings of $0.20 a share.
Is Zscaler Stock a Buy, Sell, or Hold?
Given the strength in its business and consistent earnings beat, Wall Street analysts maintain a bullish outlook on Zscaler stock ahead of its earnings.
On TipRanks, ZS stock commands a Strong Buy rating based on 13 Buys and one Hold. Meanwhile, ZS’ average price forecast of $212.15 implies upside potential of 46.2%.
Bottom Line: Strong Fundamentals to Support Growth
Zscaler’s revenues have grown at a CAGR of 52% between 2017 and 2021. Meanwhile, its customer base, with $100K in ARR (annual recurring revenue), has grown at a CAGR of 45% during the same period. This year is no different, with its revenues and high-value customer base increasing rapidly.
Zscaler is poised to benefit from long-term secular tailwinds, including the increased spending on digital transformation and the rise in cyber threats. The company is witnessing an increase in new $1M+ ACV (annual contract value) deals across major geographies and verticals, which is positive news. Further, solid billings and a high retention rate augur well for growth.
Read full Disclosure
