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For the second quarter, Zscaler projects total revenues between $505 million and $507 million. The Zacks Consensus Estimate is pegged at $507.6 million, indicating growth of 31% from the year-ago quarter's level.
Zscaler anticipates non-GAAP earnings per share between 57 cents and 58 cents. The Zacks Consensus Estimate for the bottom line is pegged at 58 cents per share, indicating a whopping 56.8% increase from the year-ago quarter’s level of 37 cents.
The cloud-based security solution provider projects non-GAAP income from operations between $84 million and $86 million. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 27.31%.
Let’s see how things might have shaped up prior to the announcement.
Zscaler’s second-quarter results are expected to reflect the sustained robust demand for its security and networking solutions, given the continuous growth in the global security space. The solid adoption of ZS’ in-cloud security platform, Zero Trust Exchange, due to the ongoing digital transformation across enterprises is likely to have acted as a key catalyst.
With the rising trend of hybrid work, an increasing workforce has been logging into their employers' in-premise networks from off-premises locations, which has triggered the need for greater security. This trend is likely to have spurred the demand for Zscaler’s solutions in the quarter under review.
The growing adoption of Software-Defined Wide Area Network (SD-WAN) solutions may have acted as a primary driver in the fiscal second quarter. Per the latest Global Market Insights report, the market size for SD-WAN solutions and products is expected to reach $69 billion by 2032 from $7.2 billion in 2023, witnessing a CAGR of 27%.
As there are only a handful of vendors that offer security and SD-WAN solutions, Zscaler has been benefiting from the increasing opportunities in this space. The company’s partnerships with VMware and Silver Peak have been helping the company in securing SD-WAN deliveries. This is expected to have aided Zscaler’s fiscal second-quarter performance.
ZS’ existing core products, mainly the Zscaler Internet Access and Zscaler Private Access, have been driving customer retention. The addition of new features to its Zero Trust Exchange, such as Cloud Access Security Broker, Cloud Browser Isolation, Cloud Protection, Zscaler Digital Experience and Cloud Security Posture Management for software-as-a-service applications, is expected to have driven its product portfolio expansion and customer acquisition.
Our estimate for second-quarter revenues from Channel Partners and Direct Customers is pegged at $463 million and $43 million, respectively. We expect the remaining performance obligation at the end of the second quarter to be approximately $3.69 billion.
Nevertheless, growing investments to improve sales and marketing (S&M) capabilities and higher research and development (R&D) costs may have weighed on the company’s fiscal second-quarter bottom line.
Zscaler witnessed a year-over-year increase of 16.7% in non-GAAP S&M and 48% in non-GAAP R&D expenses in the last reported quarter. Total non-GAAP operating expenses climbed 24% year over year in the last reported quarter.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for Zscaler this season. 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. However, that’s not the case here.
ZS currently has an Earnings ESP of 0.00% and carries a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With the Favorable Combination
Per our model, SEMrush (SEMR - Free Report) , SentinelOne (S - Free Report) and The Gap (GPS - Free Report) have the right combination of elements to post an earnings beat this reporting cycle.
SEMrush has an Earnings ESP of +23.08% and a Zacks Rank #2 at present. The company is scheduled to report fourth-quarter fiscal 2023 results on Mar 4. Its earnings surpassed the Zacks Consensus Estimate twice in the trailing four quarters while matching the same on the other two occasions, the average surprise being 112.50%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for SEMR’s fourth-quarter earnings has remained unchanged at 3 cents per share for the past 90 days. The consensus mark for revenues is pegged at $83.19 million, indicating a year-over-year increase of 20.93%.
SentinelOne has an Earnings ESP of +16.30% and a Zacks Rank #3 at present. The company is scheduled to report fourth-quarter fiscal 2024 results on Mar 13. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 33.54%.
The Zacks Consensus Estimate for earnings is pegged at a loss of 4 cents per share, indicating growth of 69.23% from the prior-year quarter's level. The consensus mark for revenues is pegged at $169.5 million, implying a year-over-year increase of 34.42%.
The Gap has an Earnings ESP of +24.44% and a Zacks Rank #1 at present. The company is scheduled to report fourth-quarter fiscal 2023 results on Mar 7. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, delivering an average surprise of 137.89%.
The Zacks Consensus Estimate for GPS’ fourth-quarter earnings is pegged at 19 cents per share, indicating a surge of 125.33% from the prior-year quarter's level. The consensus mark for revenues is pegged at $4.21 billion, implying a year-over-year decrease of 0.68%.
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Zscaler (ZS) to Report Q2 Earnings: What's in the Cards?
Zscaler (ZS - Free Report) is scheduled to report second-quarter fiscal 2024 results on Feb 29, after market close.
For the second quarter, Zscaler projects total revenues between $505 million and $507 million. The Zacks Consensus Estimate is pegged at $507.6 million, indicating growth of 31% from the year-ago quarter's level.
Zscaler anticipates non-GAAP earnings per share between 57 cents and 58 cents. The Zacks Consensus Estimate for the bottom line is pegged at 58 cents per share, indicating a whopping 56.8% increase from the year-ago quarter’s level of 37 cents.
The cloud-based security solution provider projects non-GAAP income from operations between $84 million and $86 million. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 27.31%.
Let’s see how things might have shaped up prior to the announcement.
Zscaler, Inc. Price and EPS Surprise
Zscaler, Inc. price-eps-surprise | Zscaler, Inc. Quote
Factors to Consider
Zscaler’s second-quarter results are expected to reflect the sustained robust demand for its security and networking solutions, given the continuous growth in the global security space. The solid adoption of ZS’ in-cloud security platform, Zero Trust Exchange, due to the ongoing digital transformation across enterprises is likely to have acted as a key catalyst.
With the rising trend of hybrid work, an increasing workforce has been logging into their employers' in-premise networks from off-premises locations, which has triggered the need for greater security. This trend is likely to have spurred the demand for Zscaler’s solutions in the quarter under review.
The growing adoption of Software-Defined Wide Area Network (SD-WAN) solutions may have acted as a primary driver in the fiscal second quarter. Per the latest Global Market Insights report, the market size for SD-WAN solutions and products is expected to reach $69 billion by 2032 from $7.2 billion in 2023, witnessing a CAGR of 27%.
As there are only a handful of vendors that offer security and SD-WAN solutions, Zscaler has been benefiting from the increasing opportunities in this space. The company’s partnerships with VMware and Silver Peak have been helping the company in securing SD-WAN deliveries. This is expected to have aided Zscaler’s fiscal second-quarter performance.
ZS’ existing core products, mainly the Zscaler Internet Access and Zscaler Private Access, have been driving customer retention. The addition of new features to its Zero Trust Exchange, such as Cloud Access Security Broker, Cloud Browser Isolation, Cloud Protection, Zscaler Digital Experience and Cloud Security Posture Management for software-as-a-service applications, is expected to have driven its product portfolio expansion and customer acquisition.
Our estimate for second-quarter revenues from Channel Partners and Direct Customers is pegged at $463 million and $43 million, respectively. We expect the remaining performance obligation at the end of the second quarter to be approximately $3.69 billion.
Nevertheless, growing investments to improve sales and marketing (S&M) capabilities and higher research and development (R&D) costs may have weighed on the company’s fiscal second-quarter bottom line.
Zscaler witnessed a year-over-year increase of 16.7% in non-GAAP S&M and 48% in non-GAAP R&D expenses in the last reported quarter. Total non-GAAP operating expenses climbed 24% year over year in the last reported quarter.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for Zscaler this season. 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. However, that’s not the case here.
ZS currently has an Earnings ESP of 0.00% and carries a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With the Favorable Combination
Per our model, SEMrush (SEMR - Free Report) , SentinelOne (S - Free Report) and The Gap (GPS - Free Report) have the right combination of elements to post an earnings beat this reporting cycle.
SEMrush has an Earnings ESP of +23.08% and a Zacks Rank #2 at present. The company is scheduled to report fourth-quarter fiscal 2023 results on Mar 4. Its earnings surpassed the Zacks Consensus Estimate twice in the trailing four quarters while matching the same on the other two occasions, the average surprise being 112.50%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for SEMR’s fourth-quarter earnings has remained unchanged at 3 cents per share for the past 90 days. The consensus mark for revenues is pegged at $83.19 million, indicating a year-over-year increase of 20.93%.
SentinelOne has an Earnings ESP of +16.30% and a Zacks Rank #3 at present. The company is scheduled to report fourth-quarter fiscal 2024 results on Mar 13. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 33.54%.
The Zacks Consensus Estimate for earnings is pegged at a loss of 4 cents per share, indicating growth of 69.23% from the prior-year quarter's level. The consensus mark for revenues is pegged at $169.5 million, implying a year-over-year increase of 34.42%.
The Gap has an Earnings ESP of +24.44% and a Zacks Rank #1 at present. The company is scheduled to report fourth-quarter fiscal 2023 results on Mar 7. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, delivering an average surprise of 137.89%.
The Zacks Consensus Estimate for GPS’ fourth-quarter earnings is pegged at 19 cents per share, indicating a surge of 125.33% from the prior-year quarter's level. The consensus mark for revenues is pegged at $4.21 billion, implying a year-over-year decrease of 0.68%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.