Zscaler (NASDAQ:ZS) reported better-than-expected fourth-quarter results but saw its stock plummet more than 15% in premarket US trading on Wednesday due to disappointing profit guidance for the upcoming fiscal year.
The cloud security company posted adjusted earnings per share (EPS) of $0.88, surpassing analyst estimates of $0.70. Revenue for the quarter reached $592.9 million, a 30% year-on-year increase and above the consensus estimate of $567.46 million.
But Zscaler's outlook for fiscal 2025 fell short of forecasts. The company said it expects to deliver full-year adjusted earnings of $2.81 to $2.87 per share, below analysts' estimates of $3.01. Revenue guidance of $2.60 billion to $2.62 billion was in line with expectations.
For the first quarter of fiscal 2025, Zscaler expects revenue between $604 million and $606 million, slightly above consensus. However, its adjusted EPS forecast of $0.62 to $0.63 was below the mark of $0.73 analysts were expecting.
Speaking to investors in a post-earnings call, Chief Executive Jay Chaudhry said the macroeconomic environment remains "challenging," adding that buyers want to see that the company's products can "save money" for them. The comments echoed recent signs that cybersecurity customers, wary of broader market headwinds and elevated interest rates, have been reining in some expenditures on technology.
However, he called the firm's 2024 performance "successful," saying that customer adoption of its Zero Trust Exchange platform, which aims to securely connect devices across networks, is "stronger than ever."
In a note to clients, analysts at Bernstein said the 2025 guidance "appeared disappointing," but argued that "[s]ales effectiveness is already increasing, and new customer demand won’t remain muted by poor macro forever."
