The Rollercoaster Ride of Zscaler’s Stock
Zscaler, Inc. (Nasdaq: ZS), a leading name in cloud security, has recently experienced significant volatility in its stock price. On Tuesday, Zscaler’s stock closed at $193.19, reflecting a decline of -3.40% from the previous day. The situation worsened in after-hours trading, where the stock fell an additional -15.06% to $164.10. This sharp drop follows the company’s fiscal fourth-quarter and full-year earnings report, which revealed both encouraging and concerning elements for investors.
Financial Results: A Mixed Bag
Fourth Quarter Highlights
Zscaler’s financial results for the fourth quarter of fiscal 2024 show strong revenue growth but mixed operational performance. The company reported revenue of $592.9 million, a notable increase of 30% year-over-year. Despite this robust growth, Zscaler faced a GAAP loss from operations of $27.0 million, which, although improved from the $44.6 million loss in Q4 fiscal 2023, still signifies ongoing challenges.
Sponsored
On a positive note, the company saw significant improvements in non-GAAP metrics. Non-GAAP income from operations rose to $127.5 million, up from $86.0 million in the previous year. Similarly, non-GAAP net income reached $140.6 million, compared to $100.9 million in Q4 fiscal 2023. This translates into a non-GAAP net income per share of $0.88, an increase from $0.64 a year earlier.
Cash flow was another bright spot, with cash provided by operations climbing to $203.6 million, or 34% of revenue. This represents an improvement over the $135.9 million (30% of revenue) reported in the same quarter last year. Free cash flow also saw an increase, reaching $136.3 million, up from $101.3 million in Q4 fiscal 2023.
Full Year Overview
For the fiscal year ending July 31, 2024, Zscaler reported revenue of $2.167.8 billion, a 34% increase from the previous year. The company managed to reduce its GAAP loss from operations to $121.5 million, down from $234.6 million in fiscal 2023. Non-GAAP income from operations was substantially higher at $442.2 million, up from $240.8 million in the previous year.
Net income figures also improved. Zscaler’s GAAP net loss decreased to $57.7 million, a significant improvement from $202.3 million in fiscal 2023. Non-GAAP net income surged to $508.1 million from $277.0 million the previous year. This resulted in a non-GAAP net income per share of $3.19, compared to $1.79 in fiscal 2023.
Financial Outlook and Market Reactions
Guidance for Fiscal 2025
Looking ahead, Zscaler has provided optimistic guidance for the first quarter and full year of fiscal 2025. The company expects revenue to range between $604 million and $606 million for Q1, with non-GAAP income from operations anticipated to be between $114 million and $116 million. For the full year, projected revenue is between $2.60 billion and $2.62 billion, with non-GAAP net income per share expected to be between $2.81 and $2.87.
Market Performance Comparison
As of now, Zscaler’s year-to-date (YTD) performance paints a different picture compared to broader market indices. The stock is down -12.80% YTD, starkly contrasting with the S&P 500’s impressive +15.91% YTD performance. This divergence underscores the challenges Zscaler faces despite its strong operational metrics and growth prospects.
The Road Ahead
Zscaler’s recent earnings report presents a mixed bag of results. While the company shows impressive revenue growth and improved cash flow, it also faces ongoing challenges reflected in its stock performance and GAAP losses. Investors will be closely watching how the company’s optimistic guidance and strong market position will play out in the coming quarters.
