Cloud Stocks: Zscaler Focuses on Federal Agencies

Enterprise cloud security company Zscaler (NASDAQ: ZS) recently announced its quarterly results that were labeled as “jaw-dropper” results. The company has had a strong run this year with the stock more than doubling within the last twelve months.

Zscaler’s Financials

Revenues for the fourth quarter grew 57% to $197.1 million, ahead of the market’s forecast of $187.8. GAAP net loss was $81 million, compared with net loss of $49.5 million a year ago. Non-GAAP EPS was $0.14 compared with the Street’s forecast of an EPS of $0.09.

Among key metrics, calculated billings for the quarter grew 70% to $332.2 million. Deferred revenues grew 71% to $630.6 million.

For the fiscal year, Zscaler reported revenues of $637.1, up 56%, and an EPS of $0.52.

For the first quarter, Zscaler expects revenue of $210-$212 million and an EPS of $0.12. The market was looking for revenues of $199.69 million with an EPS of $0.12. Zscaler expects to end the current year with revenues of $940-$950 million and an EPS of $0.52-$0.56. The Street had forecast revenues of $908.2 million with an EPS of $0.56.

Zscaler’s Growth Areas

Zscaler announced integrations with ServiceNow that will allow customers to benefit from their zero trust architecture by gaining full control of sensitive cloud-based data, fast threat detection, and response, thus helping them accelerate their digital transformation journey. The integration facilitates security teams with the ability to view actionable data in one console, reducing the need to pivot across disjointed management tools for point products.

Zscaler has also been expanding its federal footprint. During the last quarter, it added 20 new US government customers, ending the year with over 100 government agencies and federal integrators as its customers. Four of these new customers signed contracts worth over $1 million ACV. The company believes it still has a long way to go and is buoyed by the fact that the new Biden government supports the implementation of zero trust architectures instead of relying on legacy technology like firewalls and VPNs. Zscaler is also among a select group of companies chosen by National Institute of Standards and Technology (NIST) to run a pilot program in support of the Executive Order to drive security solutions within federal agencies.

Meanwhile, the company continues to improve its product offering. Over the past year, Zscaler had started with a scalable, multi-tenant globally distributed cloud, capable of providing inline inspection of Internet and SaaS traffic with ZIA. After adding the ability to secure access to private applications with ZPA last year, it has extended its platform to protect cloud workloads and to manage digital user experience with Zscaler Digital Experience (ZDX). ZDX is among its fastest-growing solution and a natural complement to both ZIA and ZPA. The solution provides end-to-end visibility to help resolve performance issues for every Zscaler user and continues to attract Fortune 500 players as its customers.

Zscaler is currently trading at $267.84 with a market capitalization of $36.7 billion. It hit a 52-week low of $120.34 in September last year and a 52-week high of $293.44 in August.