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Zscaler (ZS) to Report Q3 Earnings: What's in the Cards?

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Zscaler (ZS - Free Report) is set to report third-quarter fiscal 2020 results on May 28.

For the quarter, the company projects total revenues between $105 million and $107 million. Moreover, non-GAAP earnings are expected between 1 cent and 3 cents per share.

The Zacks Consensus Estimate for revenues is pegged at $106.4 million, indicating an increase of 34.5% from the year-ago quarter’s reported figure.

Moreover, the consensus mark for earnings has remained unchanged at 2 cents per share over the past 30 days.

Notably, the company’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average being 350%.
 

Zscaler, Inc. Price and EPS Surprise

Zscaler, Inc. Price and EPS Surprise

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

 

Let’s see how things have shaped up for this announcement.

Factors to Watch

Zscaler’s portfolio strength provides a boost to its competitive edge and helps adding users, a trend that most likely continued in the third quarter of fiscal 2020. Demand for the company’s cloud-native security solutions is expected to have increased amid coronavirus-induced remote working wave.

Notably, the company became the first cloud security provider to emerge as a certified partner in the Microsoft’s (MSFT - Free Report) Networking Partner Program (NPP) for Office 365. Zscaler cloud’s capability to effectively handle web traffic and block any unnecessary interference on Office 365 is noteworthy.

Moreover, integration of Zscaler platform with CrowdStrike (CRWD - Free Report) is expected to have helped the former tap the Global 2000 customers. The company’s collaboration with both VMware (VMW - Free Report) and Silver Peak is helping it secure SD WAN deployments.

Notably, its unique offerings include four architectural advantages that firewalls cannot add. These include Edge cloud for policy enforcement, multi-tenancy, proxy for SSL or TLS inspection and zero trust network access.

Zscaler’s ability to provide cloud-based security solutions irrespective of the users’ “device or location” is a key catalyst. This, in turn, is likely to have aided the Zacks Rank #3 (Hold) company to win customers in the to-be-reported quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Additionally, strength in channel partnerships with large system integrators and global service providers, which contributes to more than 50% of revenues, is expected to have been a major driver.

However, hefty investments in sales, cloud infrastructure and new product innovation are expected to have strained margins in the period under consideration.


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