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Zscaler (ZS) to Report Q2 Earnings: What's in the Cards?

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Zscaler (ZS - Free Report) is set to report second-quarter fiscal 2021 results on Feb 25.

For the quarter, the company projects total revenues between $146 million and $148 million. Non-GAAP earnings are projected between 7 cents and 8 cents per share.

The Zacks Consensus Estimate for revenues is pegged at $147.34 million, indicating an increase of 45.49% from the year-ago quarter’s reported figure. The consensus mark for earnings has remained unchanged at 8 cents per share over the past 30 days, indicating an 11.11% year-over-year decline.

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 162.5%.

Zscaler, Inc. Price and EPS Surprise

Zscaler, Inc. Price and EPS Surprise

Zscaler, Inc. price-eps-surprise | Zscaler, Inc. Quote

Factors at Play

Zscaler’s quarterly results are expected to reflect continued solid demand for its security and networking products, given the healthy environment of the global security market.

Also, a big chunk of the global workforce is still working remotely in an effort to contain the spread of coronavirus. Therefore, an increasing number of people logging into employers' networks has been triggering a greater need for security. This trend might have spurred demand for Zscaler’s products in the fiscal second quarter.

Additionally, strong adoption of the company’s Zero Trust Exchange platform owing to the ongoing digital transformation across enterprises is expected to have been a key catalyst.

Moreover, the addition of new capabilities to Zscaler’s Zero Trust Exchange, such as Cloud Access Security Broker (CASB), Cloud Browser Isolation and Zscaler Cloud Security Posture Management (CSPM) for SaaS applications, is likely to have driven the expansion of the company’s product portfolio and aided customer acquisition.

Further, Zscalar’s existing products, especially the ZPA (Zscaler Private Access), are driving strong customer retention. Notably, the company’s net dollar retention rate rose to 122% compared with 120% recorded in the previous quarter. This trend is expected to continue as digital transformation continues across industries.

Further, the company’s partnerships with VMware (VMW - Free Report) , Microsoft (MSFT - Free Report) , CrowdStrike (CRWD - Free Report) and Silver Peak are expected to have facilitated accelerated deployment of its Software-Defined Wide Area Network (SD-WAN) solutions, thereby driving revenues in the quarter under review.

Nonetheless, increased investments to enhance sales and marketing capabilities and higher research and development expenses are likely to have weighed on the company’s bottom-line results.

What Our Model Says

Our proven model does not predict an earnings beat for Zscaler this season. The combination of a positive Earnings ESP, and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Zscaler currently carries a Zacks Rank of 3 and has an Earnings ESP of 0.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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