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Zscaler Inc (Nasdaq: ZS) just reported better-than-expected financial results for its second quarter. Shares of the cloud security company are still losing in extended hours.

Why is Zscaler stock down in after-hours?

The price action is particularly interesting considering ZS issued good enough guidance for the future as well. Zscaler now forecasts its revenue to fall between $534 million and $536 million in Q3.

Analysts, in comparison, were at $531 million. Jay Chaudhry – the chief executive of Zscaler Inc said in a press release today:

An increasing number of customers are realizing the shortcomings of traditional firewall-based security and are engaging with us to transform their legacy security to Zero Trust architecture.

The Nasdaq-listed firm expects up to 65 cents a share of adjusted per-share earnings in the third quarter – also ahead of estimates. Zscaler stock is still up a little under 200% versus its 52-week low.

Zscaler Q2 earnings snapshot

• Lost $28.5 million versus the year-ago $57.5 million
• Per-share loss also narrowed from 40 cents to 19 cents
• Adjusted EPS printed at 76 cents as per the earnings report
• Revenue jumped 35% year-over-year to $525 million
• Consensus was 58 cents a share on $507.6 million in revenue

Zscaler saw its calculated billings and deferred revenue increase by 27% and 35%, respectively, in the second quarter. CEO Chaudhry also said on Thursday:

We delivered strong Q2 results, with billings, revenue and operating profit all coming in above our guidance as customer interest in the Zscaler Zero Trust Exchange platform remains high.

ZS was recently reported in talks to buy Avalor. Wall Street currently has a consensus “overweight” rating on Zscaler shares.

Even in cybersecurity (atleast temporarily), incumbents seem to be better positioned against startups in providing security for AI/LLMs.

I was surprised to see the role ZScaler $ZS is playing, but the more I look at it, the more it makes sense.

Interesting data. Other key… pic.twitter.com/fkb03dU7Kx

— Francis (@InvestiAnalyst) February 2, 2024

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