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Zscaler shares slip following conservative annual billings guidance

Published 11/27/2023, 04:27 PM
Updated 11/28/2023, 07:33 AM
© Reuters.

Investing.com -- Shares in Zscaler (NASDAQ:ZS) fell in premarket U.S. trading on Tuesday after the cloud security company backed a conservative full-year billings outlook that overshadowed better-than-expected fiscal first-quarter results.

Calculated billings for the California-based firm's 2024 financial year were reaffirmed at a range of $2.52 billion to $2.56 billion, disappointing Bloomberg consensus projections of $2.55B at the midpoint.

Observers had hoped that Zscaler's decision to raise its annual adjusted earnings per share forecast to a range of $2.45 to $2.48 from a prior outlook of $2.20 to $2.25 would also translate to an improved billings guidance, analysts at JPMorgan said in a note to clients.

Speaking to analysts in a call, Zscaler Chief Financial Officer Remo Canessa flagged that the global operating environment remains "challenging," adding that customers are "continu[ing] to scrutinize large deals." However, consumer sentiment "seems to be stabilizing," according to Canessa.

"In our outlook for fiscal [year 2024], we are balancing our business optimism and continued sales execution with ongoing macroeconomic uncertainties," he said.

Executives at Zscaler noted that the fresh appointment of a go-to-market leadership team that aims to "scale and accelerate" the company's next phase of expansion was also cited as a motive for the muted billings estimate.

In Zscaler's first quarter, calculated billings grew 34% year-over-year to $456.6M, although that was slower than a 37% increase seen in the prior three-month period. 

Meanwhile, for the quarter ended on Oct. 31, Zscaler reported adjusted per-share income of $0.67 on revenue of $496.7M. The figures topped estimates despite an almost 24% jump in quarterly operating expenses to $431.4M, which reflected a push to roll out new services to satisfy surging demand for cyber security and artificial intelligence offerings.

“In order to meet this growing need, we are scaling our go-to-market and [research and development] organizations, strengthening our foundation for the long-term growth of our business,” said Chief Executive Officer Jay Chaudhry in a statement.

Yasin Ebrahim contributed to this report.

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