Zscaler's Q3 Earnings: Mixed Results Prompt Future Guidance

Zscaler, Inc. reported a mixed Q3 earnings performance with an adjusted EPS of $0.84, overshadowed by a net loss and guidance that shows revenue growth potential. Investors should assess the implications of guidance on stock movement.

Date: 29-05-2025

AI Rating: 6

Zscaler, Inc. recently announced its Q3 earnings, revealing a complex picture for investors. The company has indicated that it generated $678.0 million in revenue for the quarter, which signifies strong growth compared to $553.2 million from the same period last year. This represents a revenue growth of approximately 22.6%, a positive indicator for investors, suggesting strong demand for Zscaler's cloud-based security solutions.

However, despite this revenue growth, the company did not escape the negative impacts affecting earnings, reporting a net loss of $4.13 million compared to a profit of $19.12 million in the previous year. Consequently, the EPS was reported at -$0.03, a considerable drop from $0.12 year-over-year. This aspect of the earnings report reflects concerns about operational efficiency and cost management amidst growth, leading to slightly negative sentiment.

On the positive side, Zscaler provided guidance that suggests increasing profitability potential. For the next quarter, the company anticipates an EPS within the range of $0.79 to $0.80 and expects revenue to be between $705-$707 million. For the full fiscal year, Zscaler projects an EPS of $3.18 to $3.19 and total revenue around $2.659 - $2.661 billion. The guidance indicates confidence in sustaining revenue momentum while addressing underlying profitability challenges.

From a professional investor's viewpoint, while the revenue growth is strong, the net loss and diminishing profitability raise concerns. Investing based on the mix of growth potential with expressed guidance will be paramount. Investors should keep a close eye on how the company manages its costs to return to profitability.

Stocks: ZS