Zscaler stock surges on upbeat earnings preview, full-year forecast

The Yahoo Finance Live team discusses a jump in stock for Zscaler on a positive full-year outlook.

Video Transcript

- All right. Let's talk about my pick here. We're talking about Zscaler. The cloud security company provided an earnings preview that pointed to better than expected results for Q1. And that led to a big lift in the stock there. The company now expects revenue of $415 million to $419 million in the April period. That is well above what the Street was expecting.

Now, the number investors are focused on is calculated billings. That is the amount charged to customers for subscribing to the company's cloud platform. Zscaler boosting that revenue outlook for the year significantly. The positive sentiment of Zscaler giving a lift to other cybersecurity names, including Crowdstrike.

But, Josh, what's also interesting to me is so much of this is about managing expectations. And the company did say, look, we're not likely to see significant demand from a lot of these companies who are pulling back on spending. They also announced cuts. And here we are talking about better than expected demand. We'll see if it is really the strength in the company or it is about lowering the expectations in [INTERPOSING VOICES]

- Akiko, we're in the middle of an earnings season where earnings are declining on a quarterly basis again, yet over 70% of the S&P 500 have beat Street expectations. So I think that sort of gives you an overall look into how this sort of works and the way to manage that. And stocks haven't moved that much on some of those movements either. But yeah. You're right. It is sort of a base case in how to manage things properly.

But I do think it is a little bit something about the cybersecurity space too, Seana, and the overall macro environment and where companies are going to be willing to spend. I don't think cybersecurity is a place that you're going to cut down spending. So I do think at least in the customers they do have, and maybe some new customers, they'll be able to keep growing that revenue line because that's something that companies do need.

- Yes. Certainly, it is something that companies do need when they are adjusting their spending plans. If they do already have a presence, a large presence, in that space, you're right. The likelihood of them cutting back on that versus something else that's maybe more discretionary, you're right. They aren't going to pull back at least to the same degree. But on the flip side, though, I think the narrative and, really, what has been surrounding so many of these cloud players has been the lengthening sales cycle.

So, yes, they will be able, hopefully, to retain some of the clients that they already have. But they won't really be able to expand their business maybe as rapidly as we initially saw. And, of course, we've also seen that reflected in some of those larger tech giants.

- Well, that's why you've seen the stock is still down 10% over the last six months. So we're really seeing a recovery today more so than a surge in the intraday.

- And we'll see whether or not it actually holds when we get the full results in just about a month.