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Zscaler (ZS) to Report Q4 Earnings: What's in The Cards?

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Zscaler (ZS - Free Report) is slated to release fourth-quarter fiscal 2021 results on Sep 9.

The company projects total revenues between $185 million and $187 million for the quarter. The Zacks Consensus Estimate for fiscal fourth-quarter revenues is pegged at $187.8 million, suggesting growth of 49.2% from the year-ago quarter.

Zscaler anticipates non-GAAP earnings to be 8-9 cents per share. The Zacks Consensus Estimate for non-GAAP earnings stands at 9 cents per share, indicating year-over-year improvement of 80%.

The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 84.8%.


Zscaler, Inc. Price and EPS Surprise Zscaler, Inc. Price and EPS Surprise

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

Factors to Note

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

With work from anywhere being the new normal amid the ongoing pandemic, an increasing number of people have been logging into employers' networks, which has prompted the need for greater security. This trend is anticipated to have spurred demand for Zscaler’s products in the fiscal fourth quarter.

Solid adoption of the company’s Zero Trust Exchange platform owing to the on-going digital transformation across enterprises is likely to have acted as a key catalyst.

The company’s existing core products, especially the ZIA (Zscaler Internet Access) and the ZPA (Zscaler Private Access), have been driving strong customer retention. Its net dollar retention rate soared to 126% in third-quarter fiscal 2021 compared with 127% in the previous quarter and 119% in the year-ago period. This trend is expected to have sustained in the fourth quarter as digital transformation continues across industries.

The addition of new capabilities to Zscaler’s Zero Trust Exchange, such as Cloud Access Security Broker, Cloud Browser Isolation, Cloud Protection, ZDX and CSPM for SaaS applications, might have driven the company’s product portfolio expansion and aided customer acquisition.

Apart from this, the company’s partnerships with VMware (VMW - Free Report) , Microsoft (MSFT - Free Report) , CrowdStrike (CRWD - Free Report) and Silver Peak are likely to have facilitated deployment of its Software-Defined Wide Area Network (SD-WAN) solutions. This, in turn, may have boosted revenues in the quarter under review.

Increased investments to enhance sales and marketing capabilities, and higher research and development expenses  may have weighed on the company’s to-be-reported quarter’s bottom line. The company witnessed a year-over-year increase of 56% in S&M expenses in the third quarter.

It expects some of its emerging products, including Zscaler Digital Experience (ZDX), Workload Segmentation and Cloud Security Posture Management (CSPM) to report lower gross margins than its core products in the fourth quarter.

The company does not expect any material impacts on its quarterly top-line performance from its Trustdome and Smokescreen start-up buyouts.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Zscaler this time around. The combination of a positive Earnings ESP and a 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 has a Zacks Rank #2 and an Earnings ESP of 0.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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