Zscaler Q2 Earnings Beat: Will Strong Guidance Lift the Stock?

Zscaler ZS reported second-quarter fiscal 2025 non-GAAP earnings of 78 cents per share, which beat the Zacks Consensus Estimate by 13%. Moreover, the bottom line increased 23.8% year over year, driven by higher revenues and efficient cost management.ZS’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 24.6%.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Zscaler’s second-quarter fiscal 2025 revenues of $647.9 million beat the Zacks Consensus Estimate by 2.2% and exceeded management’s guidance of $633-$635 million. The top line grew 23.4% year over year, demonstrating the company’s strong market position, fueled by heightened customer commitments to the Zero Trust Exchange platform and a growing demand for its artificial intelligence (AI)-based solutions.After the stronger-than-expected second-quarter results, Zscaler raised the guidance for the fiscal 2025. The stronger-than-expected results and raised guidance for fiscal 2025 are likely to help the ZS stock recover. ZS shares have lost 3% in the past year, underperforming the Zacks Security industry’s growth of 23.4%.Zscaler, Inc. Price, Consensus and EPS Surprise Zscaler, Inc. price-consensus-eps-surprise-chart | Zscaler, Inc. QuoteZscaler’s Q2 Top-Line DetailsDuring the second quarter, Zscaler’s calculated billings increased 18% year over year to $742.7 million.Region-wise, the Americas accounted for 54% of revenues, while the EMEA contributed 30%. The Asia Pacific and Japan made up the remaining 16%.In the fiscal second quarter, ZS added multiple large customers across all its offerings, including ZIA, ZPA and ZDX. Its net 12-month trailing dollar-based retention rate was 115%, driven by the sale of bigger bundles and strong upsells.Remaining Performance Obligations (“RPO”), representing Zscaler’s committed non-cancelable future revenues, were $4.615 billion as of Jan. 31, which increased 28% year over year. The current RPO is approximately 49% of the total RPO.At the end of the quarter, the company had 620 customers with $1 million or higher annualized recurring revenues (ARR). Zscaler’s customer count for ARR of more than $100,000 reached 3,291 at the end of the second quarter.Zscaler’s Operating DetailsThe non-GAAP gross profit increased 22.9% year over year to $520.8 million. The non-GAAP gross margin contracted 100 basis points (bps) on a year-over-year basis to 80%.Total non-GAAP operating expenses, accounting for 58.7% of revenues, increased 18.6% year over year to $380.4 million.The non-GAAP operating income was $140.5 million compared with the year-ago quarter’s $134.1 million. The non-GAAP operating margin expanded 200 bps year over year to 22%.Zscaler’s Balance Sheet & Cash FlowAs of Jan. 31, 2025, Zscaler had $2.88 billion in cash, cash equivalents and short-term investments compared with $2.71 billion as of Oct. 31, 2024.The company generated operating and free cash flows of $179.4 million and $143.4 million, respectively, during the second quarter. ZS generated operating and free cash flows of $142 million and $100.8 million, respectively, in the year-ago quarter.Zscaler Updates Guidance for FY25Zscaler revised its outlook for fiscal 2025. The company now forecasts revenues in the range of $2.64-$2.654 billion, up from the previous guidance of $2.623-$2.643 billion. The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $2.64 billion, suggesting growth of 21.6% from fiscal 2024.Calculated billings are now expected in the range of $3.153-$3.168 billion, up from the previous guidance of $3.124-$3.149 billion.Non-GAAP earnings per share for fiscal 2025 are expected in the band of $3.04-$3.09 compared with the previous guidance of $2.94-$2.99. The consensus mark for fiscal 2025 earnings is pegged at $2.99 per share, which has remained unchanged over the past 90 days.For the third quarter of fiscal 2025, Zscaler projects revenues between $665 million and $667 million. The Zacks Consensus Estimate for third-quarter fiscal 2025 revenues is pegged at $664.5 million, implying growth of 20.1% year over year.Non-GAAP earnings per share are projected between 75 cents and 76 cents. The Zacks Consensus Estimate is pegged at 73 cents, which has remained unchanged over the past 60 days.ZS Zacks Rank & Other Stocks to ConsiderCurrently, ZS carries a Zacks Rank #2 (Buy).Dropbox DBX, Garmin GRMN and Pitney Bowes PBI are some other top-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. DBX, GRMN and PBI presently sport a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.The consensus mark for DBX’s 2025 earnings has been revised eight cents downward to $2.54 per share over the past 30 days, indicating a 2% year-over-year increase. DBX shares have risen 10.6% in the past year.The consensus mark for GRMN’s 2025 earnings has been revised upward by 32 cent to $7.98 per share over the past 30 days, indicating a 8% year-over-year increase. GRMN shares have gained 57% in the past year.The consensus mark for PBI’s 2025 earnings has been revised nine cents downward to $1.21 per share over the past seven days, indicating a 47.6% year-over-year decline. PBI shares have gained 143.4% in the past year.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Garmin Ltd. (GRMN): Free Stock Analysis Report Pitney Bowes Inc. (PBI): Free Stock Analysis Report Dropbox, Inc. (DBX): Free Stock Analysis Report Zscaler, Inc. (ZS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks