Posted on Friday, Jun 18th 2021
According to a recent research report, the global cyber security services market is expected to grow at 10% CAGR to reach $192.7 billion by 2028. Enterprise cloud security company Zscaler (NASDAQ: ZS) recently announced its plans to acquire two small cloud startups TrustDome and Smokescreen Technologies. Its recent quarterly results surpassed market expectations.
Revenues for the third quarter grew 60% to $176.4 million, ahead of the market’s forecast by 7%. Net loss was $58.5 million, compared with a net loss of $19.3 million a year ago. Non GAAP EPS was $0.15 compared with the Street’s forecast of an EPS of $0.07.
Among key metrics, calculated billings for the quarter grew 71% to $225 million. Deferred revenues grew 65% to $495.4 million.
For the fourth quarter, Zscaler expects revenue of $185-$187 million with an EPS of $0.08-$0.09. The market was looking for revenues of $174.02 million with an EPS of $0.09. Zscaler expects to end the current fiscal year with revenues of $660-$664 million and an EPS of $0.47. The Street had forecast revenues of $638.05 million with an EPS of $0.40.
Zscaler’s Recent Acquisitions
Recently, Zscaler announced its acquisition of India-based Smokescreen Technologies. Founded in 2015 by Raviraj Doshi and Sahir Hidayatullah, Smokescreen is a cyber-deception platform that provides threat prediction, breach response, and other related services. The acquisition will integrate Smokescreen’s capabilities into Zscaler Zero Trust Exchange, building on Zscaler’s ability to detect sophisticated, highly targeted attacks, ransomware, and lateral movement attempts. The acquisition will also enable threat intelligence and telemetry for the Zscaler team, allowing them to proactively hunt for emerging adversary tactics and techniques. Terms of the acquisition were not disclosed. Prior to the acquisition, Smokescreen was privately held. Its funding details are not known. It is estimated to have generated $7.3 million in revenues last year.
Earlier last quarter, it also announced the acquisition of Tel Aviv-based Trustdome, a leading innovator in Cloud Infrastructure Entitlement Management (CIEM). Trustdome is known for the development of an innovative platform that helps solve the challenges of entitlements and permissions while allowing development and DevOps teams to maintain speed and agility. Trustdome’s development team and CIEM technology will be integrated with Zscaler’s Cloud Security Posture Management (CSPM) platform to offer a comprehensive cloud security solution that is focused on reducing public cloud attack surfaces and improving security posture. With this acquisition, Zscaler will also be able to expand its presence in Israel. Prior to the acquisition, Trustdome had raised $2.5 million in seed funding from Cyberstarts.
Zscaler is currently trading at $215.14 with a market capitalization of $29.4 billion. It hit 52-week low of $103.01 in June last year and a 52-week high of $230.88 in February.
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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