Zscaler Shares Drop Despite Beating Q2 Estimates
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 11 hours ago
0mins
Should l Buy ZS?
Source: seekingalpha
- Earnings Beat but Shares Fall: Zscaler reported a net new ARR of $155.5 million for Q2, exceeding the market expectation of $142 million but falling short of the analyst target of $164 million, resulting in a premarket share drop of about 9%.
- Acquisition Impact Significant: Analysts noted that the contribution from the Red Canary acquisition was much higher than anticipated, accounting for nearly all of the quarter's upside, which, while boosting total revenue, raised concerns about organic growth.
- Organic Growth Slowing: Zscaler's organic net new ARR grew by 6.5% year-over-year to $139 million, slightly above BTIG's estimate, but the organic growth rate decelerated from 22% last quarter to 21%, indicating potential market concerns over increased competition.
- Cautiously Optimistic Outlook: Despite the slowdown in organic ARR growth, analysts remain optimistic about Zscaler's long-term growth potential, projecting over 20% organic ARR growth for FY26, and believe the company has strong expansion capabilities in the rapidly growing cybersecurity market.
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Analyst Views on ZS
Wall Street analysts forecast ZS stock price to rise
30 Analyst Rating
24 Buy
6 Hold
0 Sell
Strong Buy
Current: 167.360
Low
260.00
Averages
325.62
High
390.00
Current: 167.360
Low
260.00
Averages
325.62
High
390.00
About ZS
Zscaler, Inc. is a cloud security company. The Company has developed a platform incorporating core security functionalities needed to enable fast and secure access to cloud resources based on identity, context and an organization’s policies. Its Zscaler Zero Trust Exchange platform protects thousands of customers from cyberattacks and data loss by securely connecting users, devices, and applications in any location. Its solution is a purpose-built, multi-tenant, distributed cloud platform that incorporates the security functionality needed to enable users, applications, and devices to safely and efficiently utilize authorized applications and services based on an organization’s business policies. It delivers its solutions using a software-as-a-service (SaaS) business model and sells subscriptions to customers to access its cloud platform, together with related support services. It offers a security platform that combines its platform with automated security operations.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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See More
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- Investor Sentiment Shift: The concept of 'SaaS-pocalypse' has shaken investor confidence in software companies, leading to increased stock price volatility, particularly for those operating under the SaaS model, which faces heightened scrutiny.
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