Posted on Friday, Mar 26th 2021
Last year’s SolarWinds cyber-attack has been described as the
largest and most sophisticated attack ever witnessed by the world. The supply chain attack infiltrated over 18,000 of SolarWinds customers including several US government agencies. The attack has resulted in an increased focus on deploying security capabilities, and enterprise cloud security provider Zscaler (NASDAQ: ZS) is benefiting from this trend. Zscaler’s Financials
Revenues for the second quarter grew 55% to $157 million, ahead of the market’s forecast of $147.38 million. Net loss was $67.5 million, compared with a net loss of $29.2 million a year ago. Adjusted EPS was $0.10 compared with the Street’s forecast of an EPS of $0.08.
Among key metrics, calculated billings grew 71% to $232 million. Deferred revenues grew 60% to $446.8 million.
For the third quarter, Zscaler expects revenue of $162-$164 million, with an EPS of $0.07. The market was looking for revenues of $153.12 million with an EPS of $0.08. Zscaler expects to end the current year with revenues of $634-$638 million and an EPS of $0.39-$0.40. The Street had forecast revenues of $611.95 million with an EPS of $0.38.
Zscaler’s Product Upgrades
During the quarter, Zscaler made several product upgrades to deliver improved security capabilities. It announced the launch of Zscaler Cloud Platform (ZCP), a cloud-based solution that removes operational complexities from cloud workload security. ZCP extends its Zero Trust Exchange from users to workloads and provides an expanding portfolio of products including: CSPM to ensure proper configuration and compliance; Workload Communication to secure app-to-app and cloud-to-cloud secure communication; and Workload Segmentation to achieve app segmentation without legacy network segmentation. It reduces attack services and automates world-wide enforced security policies throughout the organization’s multi-cloud footprint, therefore delivering the same high performance and reliability to protect business applications and internet access.
The recent SolarWinds attack has highlighted the importance of deploying a true zero trust platform. During sophisticated attacks, Zscaler’s proxy-based architecture helps prevent loss of sensitive data and its application-level segmentation eliminates lateral threat movement. To help organizations deal with such attacks, Zscaler announced the release of a security assessment program that can help assess the impact of the attack and conform adherence to the practices recommended to safeguard the organization’s resources.
Zscaler’s products continue to receive rave reviews among peers. According to a recent Gartner Magic Quadrant report on Secure Web Getaways, Zscaler was the only leader among the pack. Gartner recognized Zscaler for its ability to execute and the completeness of vision. The report acknowledges that whereas offerings from competitors are disjointed, Zscaler’s proxy-based architecture has been built on an industry-leading SASE framework to deliver an improved user experience, superior security, and data protection with full SSL inspection. This was the 10th consecutive year that Zscaler was named a Leader in the quadrant.
Its stock is currently trading at $171.45 with a market capitalization of $23.5 billion. It had fallen to a year low of $57.77 in March last year. It has recovered since and it climbed to a year high of $230.88 earlier last month.
Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company. This segment is a part in the series : Cloud Stocks . Smartsheet Acquiring Bootstrapped Startups to Drive Growth . Bootstrapped Unicorn Atlassian is Acquiring Capital Efficient Startups . Netflix Price Hike Ruffles Competition . How Will Carbon Black Differentiate? . 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