Zscaler shares fall 10% on conservative outlook

02.12.2022

Shares of Zscaler Inc. fell in the extended session Thursday after the cybersecurity company said longer sales cycles and other unfavorable factors affected its conservative outlook, which was slightly above the Wall Street consensus.

Shares of Zscaler ZS, +8.28% fell 10% in after-hours trading after rising 8.3% in the regular session to close at $144.50.

Zscaler said it expects adjusted earnings of 29 cents to 30 cents per share on revenue of $364 million to $366 million in its fiscal second quarter. Analysts polled by FactSet expect 26 cents per share on revenue of $325.1 million and revenue of $355.3 million for the quarter.

The company also forecast adjusted earnings of $1.23 to $1.25 per share on revenue of about $1.53 billion for the year and bills of $1.93 billion to $1.94 billion. Analysts had projected earnings of $1.18 per share on revenue of $1.5 billion and bills of $1.93 billion for the year.

But last quarter, Zscaler beat Wall Street’s expectations across the board, and the stock posted its best one-day performance since the company went public in 2018.

Admittedly, it’s not easy for cloud software vendors to make deals in the midst of austerity and the looming recession. Over the past few years, native cloud companies and legacy companies moving to the cloud have offered their own version of a “platform” or, in essence, an ecosystem. By adding new services, or modules, to the platform, customers are then resold, encouraged to add additional modules, or functionality, to their individual platform.