Zscaler ZS reported better-than-expected fourth-quarter fiscal 2024 results. The company posted fourth-quarter fiscal 2024 non-GAAP earnings of 88 cents per share, which beat the Zacks Consensus Estimate of 69 cents. It reported non-GAAP earnings of 64 cents in the year-ago quarter.
Zscaler’s fourth-quarter fiscal 2024 revenues were $592.86 million, which surpassed the Zacks Consensus Estimate of $567.62 million and increased 30% year over year. This improvement in revenues was on the back of increased success in selling bigger bundles and multiple product pillars from the beginning of the quarter, achieving faster upsells within a year and strong customer demand for Zscaler’s Zero Trust Exchange platform.
Despite the strong fourth-quarter performance, Zscaler initiated a weak fiscal 2025 earnings guidance, which fell short of the Zacks Consensus Estimate. Given the company’s weak earnings guidance for fiscal 2025, we expect Zscaler's share price to be under pressure in the near term.
Zscaler, Inc. Price, Consensus and EPS Surprise
Zscaler, Inc. price-consensus-eps-surprise-chart | Zscaler, Inc. Quote
Zscaler’s Top-Line Details
During the fiscal fourth quarter, Zscaler’s calculated billings increased 26.6% year over year to $910.8 million.
Region-wise, the Americas accounted for 55% of revenues, while the EMEA contributed 30%. The Asia Pacific and Japan made up the remaining 15%.
In the fiscal fourth quarter, ZS added multiple large customers across all its offerings, including ZIA, ZPA and ZDX. Its net 12-month trailing dollar-based retention rate was 115%, driven by strong upsells.
Remaining Performance Obligations (RPO), representing Zscaler’s committed non-cancelable future revenues, were $4.42 billion as of July 31, which increased 26% year over year. The current RPO is approximately 48% of the total RPO.
At the end of the quarter, the company had 567 customers with $1 million or higher annualized recurring revenues (ARR). The company added 44 customers during the quarter with $1 million or more in ARR. The company’s customer count for ARR of more than $100,000 reached 3,100 at the end of the fiscal fourth quarter.
Operating Details of Zscaler
The non-GAAP gross profit increased 31% year over year to $462.7 million. The non-GAAP gross margin remained unchanged year over year at 81%.
Total non-GAAP operating expenses, accounting for 59.6% of revenues, increased 25.8% year over year to $353.5 million. Sales & marketing, research & development, and general & administrative expenses jumped 16.4%, 44.4% and 21.3%, respectively, on a year-over-year basis.
The non-GAAP operating income was $127.5 million compared with the year-ago quarter’s $86 million. The non-GAAP operating margin expanded 300 bps year over year to 22%.
Zscaler’s Balance Sheet & Cash Flow
As of July 31, 2024, Zscaler had $2.41 billion in cash, cash equivalents and short-term investments compared with $2.24 billion as of April 30, 2024.
The company generated operating and free cash flows of $203.6 million and $136.3 million, respectively, during the fiscal fourth quarter.
Guidance for Q1 and FY25
Zscaler initiated its outlook for the fiscal first quarter and fiscal year 2025. For fiscal 2025 the company forecasts revenues in the range of $2.60-$2.62 billion. The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $2.60 billion, suggesting growth of 21.5%.
Calculated billings are projected in the range of $3.11-$3.135 billion. The non-GAAP operating income is projected in the band of $530-$540 million.
Non-GAAP earnings per share for fiscal 2025 are expected in the band of $2.81-$2.87. The consensus mark for fiscal 2025 earnings is pegged at $3.27 per share, which has remained unchanged over the past 60 days.
For the first quarter of fiscal 2025, Zscaler projects revenues between $604 million and $606 million. The Zacks Consensus Estimate for first-quarter fiscal 2025 revenues is pegged at $598.89 million, suggesting growth of 20.6% year over year.
The gross margin is expected to be 80%. The non-GAAP income from operations is estimated in the band of $114-$116 million. Non-GAAP earnings per share are projected between 62 cents and 63 cents. The Zacks Consensus Estimate is pegged at 72 cents, which has remained unchanged over the past 30 days.
Zacks Rank & Stocks to Consider
Zscaler currently carries a Zacks Rank #3 (Hold). Shares of ZS have plunged 12.8% year to date (YTD).
Some better-ranked stocks in the broader technology sector are Aspen Technology AZPN, Celestica CLS and Arista Networks ANET. While AZPN and CLS sport a Zacks Rank #1 (Strong Buy) each, ANET carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus mark for Aspen’s 2025 earnings has been revised upward by 70 cents to $7.43 per share over the past 30 days, indicating a 12.8% year-over-year increase. It has a long-term earnings growth expectation of 13.1%. The stock has lost 2.2% YTD.
The Zacks Consensus Estimate for Celestica’s 2024 earnings has been revised upward by 33 cents to $3.65 per share in the past 30 days, suggesting year-over-year growth of 50.2%. Shares of Celestica have surged 58.6% YTD.
The Zacks Consensus Estimate for Arista’s 2024 earnings has been revised upward by 32 cents to $8.24 per share in the past 60 days, indicating an increase of 16% on a year-over-year basis. Shares of ANET have jumped 38.7% YTD. It has a long-term earnings growth expectation of 17.2%.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>Celestica, Inc. (CLS) : Free Stock Analysis Report
Aspen Technology, Inc. (AZPN) : Free Stock Analysis Report
Arista Networks, Inc. (ANET) : Free Stock Analysis Report
Zscaler, Inc. (ZS) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
