Zscaler ZS is scheduled to report first-quarter fiscal 2023 results on Dec 1.
For the first quarter, Zscaler projects total revenues between $339 million and $341 million, suggesting year-over-year growth of 47% to 48%. The Zacks Consensus Estimate for the same is pegged at $341.1 million, suggesting growth of 48% from the year-ago quarter.
Zscaler anticipates non-GAAP earnings of approximately 26 cents per share, indicating a year-over-year increase of 85.7%. The company’s forecast for the bottom line is in line with the Zacks Consensus Estimate.
The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 28.6%.
Let’s see how things have shaped up for the upcoming announcement.
Zscaler, Inc. Price and EPS Surprise
Zscaler, Inc. price-eps-surprise | Zscaler, Inc. Quote
Factors to Consider
With hybrid work being the new normal, an increasing number of people have been logging into employers' networks through off-premises locations, which has triggered the need for greater security. This trend is anticipated to have spurred the demand for Zscaler’s products in the quarter under review.
Zscaler’s first-quarter results are likely to reflect the continued solid demand for its security and networking products, given the healthy environment of the global security market. The solid adoption of its in-cloud security platform, Zero Trust Exchange, due to the ongoing digital transformation across enterprises is likely to have acted as a key catalyst.
The increased adoption of Software-Defined Wide Area Network (“SD-WAN”) solutions might have acted as a key growth driver in the quarter to be reported. Per the latest Future Market Insights report, the market size for SD-WAN solutions is likely to reach $53.8 billion by 2032 from $3.4 billion in 2022, witnessing a CAGR of 31.6% during the forecast period of 2022 to 2032.
As there are only a few vendors that offer security and SD-WAN solutions, ZS has been capitalizing on the increasing opportunities in the market. The company’s collaboration with VMware and Silver Peak has been helping it secure SD-WAN deployments. This is likely to have positively impacted Zscaler’s fiscal first-quarter performance.
ZS’ existing core products, especially the ZIA (Zscaler Internet Access) and the ZPA (Zscaler Private Access), have been driving customer retention. The addition of new capabilities to its Zero Trust Exchange, such as Cloud Access Security Broker, Cloud Browser Isolation, Cloud Protection, Zscaler Digital Experience and Cloud Security Posture Management for Software-as-a-service applications, is likely to have driven its product portfolio expansion and aided customer acquisition.
However, increased investments to enhance sales and marketing (S&M) capabilities and higher research and development (R&D) expenses may have weighed on the company’s to-be-reported quarter’s bottom line.
The company witnessed a year-over-year increase of 67.7% in non-GAAP S&M and 45.4% in non-GAAP R&D expenses in the last reported quarter. Total non-GAAP operating expenses climbed 60.4% year over year in the last reported quarter.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for Zscaler this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here.
Though Zscaler currently carries a Zacks Rank #2, it has an Earnings ESP of -3.85%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With the Favorable Combination
Per our model, Coupa Software COUP, Splunk SPLK and AutoZone AZO have the right combination of elements to post an earnings beat in their upcoming releases.
Coupa Software is slated to report third-quarter fiscal 2023 results on Dec 12. The company carries a Zacks Rank #2 and an Earnings ESP of +71.17% at present. COUP's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 478.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Coupa Software’s quarterly earnings is pegged at 11 cents per share, suggesting a year-over-year decline of 64.5%. Its quarterly revenues are estimated to increase 14.3% year over year to $212.4 million.
Splunk carries a Zacks Rank #3 and has an Earnings ESP of +9.43. The company is slated to report its third-quarter fiscal 2023 results on Nov 30. Its earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 164.4%.
The Zacks Consensus Estimate for Splunk’s third-quarter bottom line stands at earnings of 23 cents per share, indicating a robust improvement from the year-ago quarter’s loss of 37 cents per share. Revenues are estimated to grow 27.3% year over year to $845.9 million.
AutoZone carries a Zacks Rank #3 and an Earnings ESP of +2.91%. The company is slated to report first-quarter fiscal 2023 results on Dec 6. AZO's earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 16.6%.
For the first quarter, the Zacks Consensus Estimate for AutoZone’s earnings is pegged at $24.82 per share, indicating a 3.4% year-over-year decrease. Revenues are expected to grow 4.2% to $3.82 billion.
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