Spotting Winners: Zscaler (NASDAQ:ZS) And Cybersecurity Stocks In Q3

Radek Strnad /
2024/01/09 4:58 am EST

The end of an earnings season can be a great time to assess how companies are handling the current business environment and discover new stocks. Let’s take a look at how Zscaler (NASDAQ:ZS) and the rest of the cybersecurity stocks fared in Q3.

Cybersecurity continues to be one of the fastest-growing segments within software for good reason. Almost every company is slowly finding itself becoming a technology company and facing rising cybersecurity risks. Businesses are accelerating adoption of cloud-based software, moving data and applications into the cloud to save costs while improving performance. This migration has opened them to a multitude of new threats, like employees accessing data via their smartphone while on an open network, or logging into a web-based interface from a laptop in a new location.

The 9 cybersecurity stocks we track reported a mixed Q3; on average, revenues beat analyst consensus estimates by 2% while next quarter's revenue guidance was in line with consensus. Inflation (despite slowing) has investors prioritizing near-term cash flows, but cybersecurity stocks held their ground better than others, with the share prices up 17.6% on average since the previous earnings results.

Zscaler (NASDAQ:ZS)

After successfully selling all four of his previous cybersecurity companies, Jay Chaudhry's fifth venture, Zscaler (NASDAQ:ZS) offers software-as-a-service that helps companies securely connect to applications and networks in the cloud.

Zscaler reported revenues of $496.7 million, up 39.7% year on year, topping analyst expectations by 4.9%. It was a very good quarter for the company, with a decent beat of analysts' revenue estimates and strong sales guidance for the next quarter.

“We had a strong start to our fiscal year with all key metrics coming above our guidance. We are enabling enterprises to move forward with their key transformative initiatives - Zero Trust and AI - which is driving demand for our Zero Trust Exchange,” said Jay Chaudhry, Chairman and CEO of Zscaler.

Zscaler Total Revenue

The stock is up 13.6% since the results and currently trades at $218.1.

We think Zscaler is a good business, but is it a buy today? Read our full report here, it's free.

Best Q3: SentinelOne (NYSE:S)

With roots in the Israeli cyber intelligence community, SentinelOne (NYSE:S) provides software to help organizations efficiently detect, prevent, and investigate cyber attacks.

SentinelOne reported revenues of $164.2 million, up 42.4% year on year, outperforming analyst expectations by 5%. It was a strong quarter for the company, with a significant improvement in its gross margin and a solid beat of analysts' revenue estimates.

SentinelOne Total Revenue

SentinelOne pulled off the biggest analyst estimates beat, fastest revenue growth, and highest full-year guidance raise among its peers. The company added 66 enterprise customers paying more than $100,000 annually to reach a total of 1,060. The stock is up 17.3% since the results and currently trades at $23.49.

Is now the time to buy SentinelOne? Access our full analysis of the earnings results here, it's free.

Slowest Q3: Varonis (NASDAQ:VRNS)

Founded by a duo of former Israeli Defense Forces cyber warfare engineers, Varonis (NASDAQ:VRNS) offers software-as-service that helps customers protect data from cyber threats and gain visibility into how enterprise data is being used.

Varonis reported revenues of $122.3 million, down 0.8% year on year, falling short of analyst expectations by 2.5%. It was a weak quarter for the company, with a miss of analysts' revenue estimates and full-year revenue guidance missing analysts' expectations.

Varonis had the weakest performance against analyst estimates, slowest revenue growth, and weakest full-year guidance update in the group. The stock is up 38.1% since the results and currently trades at $43.47.

Read our full analysis of Varonis's results here.


Founded in 1999 as one of the first subscription security companies, Qualys (NASDAQ:QLYS) provides organizations with software to assess their exposure to cyber-attacks.

Qualys reported revenues of $142 million, up 13.1% year on year, in line with analyst expectations. It was a slower quarter for the company, with underwhelming revenue guidance for the next quarter.

The stock is up 20.8% since the results and currently trades at $184.73.

Read our full, actionable report on Qualys here, it's free.

CrowdStrike (NASDAQ:CRWD)

Founded by George Kurtz, the former CTO of the antivirus company McAfee, CrowdStrike (NASDAQ:CRWD) provides cybersecurity software that protects companies from breaches and helps them detect and respond to cyber attacks.

CrowdStrike reported revenues of $786 million, up 35.3% year on year, surpassing analyst expectations by 1.1%. It was a decent quarter for the company, with ARR (annual recurring revenue) and revenue narrowly topping analysts' expectations. CRWD beat on non-GAAP operating income and non-GAAP EPS by a more convincing amount. While next quarter's revenue guidance was only in-line, non-GAAP operating income was head. Full year guidance was also raised.

The stock is up 25.3% since the results and currently trades at $266.11.

Read our full, actionable report on CrowdStrike here, it's free.

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The author has no position in any of the stocks mentioned