Despite solid financial results, Zscaler shares plunge after announcing layoffs

Shares in Zscaler Inc. plunged in late buying and selling after the cybersecurity firm introduced layoffs alongside strong monetary leads to its most up-to-date quarter.

For the quarter that ended Jan. 31, Zscaler reported non-generally accepted accounting rules web earnings per share of 37 cents, up from 13 cents in the identical quarter of final 12 months. Income got here in at $387.6 million, up 52% year-over-year. Each the figures had been sturdy beats as analysts had expected earnings of 27 cents per share on income of $364.7 million.

Deferred income as of the top of the quarter was $1.1 billion, up 46% year-over-year. Money stream within the quarter was $89.5 million, or 23% of income, up from $48.3 million or 19% within the second quarter of fiscal 2022. Zscaler had $1.9 billion in money and equivalents available, up from $174 million as of the top of July 2022.

Billings had been up 34% to $493.8 million, solely barely greater than an anticipated $491.5 million. The one small beat within the billings has been cited in some reports as driving Zscaler’s after-hours share worth fall – any beat is an efficient one, however likewise, traders might have been anticipating extra.

Highlights within the quarter included new integrations with Zoom Video Communications Inc., Zscaler Personal Entry achieved Federal Threat and Authorization Administration Program Reasonable authorization and the corporate launched  Zscaler Resilience, a cloud resilience service for Safety Service Edge to make sure nonstop cloud safety operations.

For its third quarter of fiscal 2023, Zscaler expects non-GAAP EPS of 39 cents on income of $396 million to $398 million. The analyst consensus was 31 cents and $387 million – one other beat. It was the identical with the corporate’s full fiscal 12 months outlook – EPS of $1.52 – $1.53 and income of $1.558 billion to $1.563 billion in comparison with an anticipated  $1.24 and $1.53 billion.

“Even on this troublesome macroeconomic surroundings, we proceed to see clients consolidate a number of level merchandise onto our built-in zero belief safety platform for higher safety and decrease price,” Jay Chaudhry, chairman and chief govt officer of Zscaler, mentioned in a press release. “We imagine that sturdy buyer curiosity in our platform, along with the expansion in our annual recurring income base, helps the rise to our fiscal 12 months steerage.”

Alongside the earnings, Zscaler additionally introduced that it was shedding 3% of its workforce, or round 177 staff. The corporate described the layoffs as a “focused optimization initiative to handle inefficiencies and sure job features and tasks.”

Regardless of the offered beats within the quarter and a revised outlook, the layoffs and the arguably not excessive sufficient improve in billings noticed Zscaler inventory fall over 10% after the bell. It’s an organization with fickle traders, as almost the very same outcomes resulted in an analogous fall in Zscaler’s inventory after its earnings in the previous quarter.

Picture: Zscaler