What Happened?
Shares of cloud security platform Zscaler (NASDAQ:ZS) jumped 7.4% in the morning session after the company reported a "beat and raise" fiscal Q2 2025 financial result. Zscaler beat analysts' billings expectations and its revenue and operating profit outperformed Wall Street's estimates. That tells us demand is still strong for its cloud security solutions as more businesses adopt its Zero Trust approach. Looking ahead, the company raised full-year revenue and operating profit guidance, both of which are above Consensus expectations. Overall, this quarter was very solid with very little to pick on.
After the initial pop the shares cooled down to $203.43, up 3.5% from previous close.
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What The Market Is Telling Us
Zscaler’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock dropped 17.8% on the news that the company reported weak second-quarter earnings results. Its billings guidance for next year was slightly below expectations, and furthermore, suggested an acceleration in growth throughout the year. Management specifically detailed "year-over-year billings growth of approximately 13% in the first half, accelerating to 23% growth in the second half". This made the market quite uncomfortable.
On the other hand, Zscaler beat analysts' billings, revenue, and operating income expectations. Zooming out, we think this was a solid quarter featuring some areas of strength, but the outlook seems to be weighing on shares.
Zscaler is up 12% since the beginning of the year, and at $203.43 per share, it is trading close to its 52-week high of $216.87 from February 2025. Investors who bought $1,000 worth of Zscaler’s shares 5 years ago would now be looking at an investment worth $4,119.
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