Shares of Zscaler are down more than 10% after an outlook raise and job cuts

The share of Zscaler Inc. fell in the extended session Thursday after the cybersecurity firm raised its revenue forecast for the year and announced layoffs.

Zscaler ZS,
shares were down 12% after hours, after gaining 4.4% in the regular session to close at $134.13.

The company said in a filing with the Securities and Exchange Commission that it will cut its global workforce by 3%, or about 150 positions, by the end of its fiscal year 2023, which ends in July, and an expense of $8 million to $ charges 10 million. Zscaler last reported a headcount of 4,975.

The company also expects full-year earnings of $1.52 to $1.53 on sales of approximately $1.56 billion and bills of $1.94 billion to $1.95 billion.

Zscaler last forecast adjusted earnings of $1.23 to $1.25 per share on sales of approximately $1.53 billion and bills of $1.93 billion to $1.94 billion for the year, and Analysts estimate $1.24 per share on revenues of $1.53 billion and bills of $1.93 billion for the year.

“Even in this challenging macroeconomic environment, we are still seeing customers consolidate multi-point products on our integrated Zero Trust security platform for better security and lower costs,” said Jay Chaudhry, chairman and CEO of Zscaler, in a statement. “We believe that strong customer interest in our platform, along with growth in our annual recurring revenue base, supports the increase in our fiscal year guidance.”

Zscaler forecast adjusted earnings of about 39 cents per share on revenue of $396 million to $398 million for the fiscal third quarter. Analysts polled by FactSet had an estimate of 31 cents per share on revenues of $387.3 million and bills of $448.6 million for the quarter.

The company reported a second-quarter tax loss of $57.5 million, or 40 cents per share, compared to a loss of $100.4 million, or 71 cents per share, in the same period last year. Adjusted net income, excluding share-based compensation and other items, was 37 cents per share, compared to 13 cents per share in the same period a year ago.

Revenue increased from $255.6 million in the same quarter last year to $387.6 million, the company said. Calculated bills, or revenue plus deferred revenue accrued during the quarter, increased to $493.8 million from $367.7 million in the year-ago period.

Analysts surveyed by FactSet had forecast earnings of 29 cents per share on revenue of $340.7 million and bill of $491 million, based on Zscaler’s forecast of 29 cents to 30 cents per share on revenue of $365.5 million to $366 million.

Read: These “Three Horsemen” of cybersecurity are the most likely to weather declining demand, says Morgan Stanley

Cloud software vendors are still trying to win deals in a cost-conscious environment as companies slowly spend a looming recession. Adding new services or modules to the platform then sells and encourages customers to add more modules or functionality to their custom platform.

That’s the model identity management software company Okta Inc. OKTA supports,
which said late Wednesday that most of its business was upsells and cross-sells to established clients, and Wall Street said the company was “partly out of the woods.”

In January, Morgan Stanley downgraded Zscaler and other cybersecurity names on the belief that the “surge” in cybersecurity is over and that investors need to become more selective in the sector.

Read: Cloud software is a ‘fight for a knife in the mud’ and Wall Street sours the only sector that was winning

Meanwhile, human-resources cloud software company Workday Inc. WDAY,
said earlier this week that despite a setback it was still on track for growth targets and offering conservative guidance.

As of Thursday’s close, Zscaler’s stock is down 47% over the past 12 months, compared to a 9% loss from the S&P 500 Index SPX,
down 17% from the tech-heavy Nasdaq Composite Index COMP,
and a 20% drop on the ETFMG Prime Cyber ​​Security ETF HACK,

Leave a Reply

Your email address will not be published. Required fields are marked *