What Happened:
Shares of cloud security platform Zscaler (NASDAQ:ZS) jumped 16.5% in the pre-market session after the company pre-announced an impressive "beat and raise" quarter. Preliminary third-quarter results exceeded analysts' revenue, and operating income estimates. In addition, management raised full-year guidance for revenue, calculated billings, and operating income. Founder and CEO, Jay Chaudhry, added to the optimism, stating that "the high ROI of adopting the Zscaler Zero Trust Exchange platform continues to resonate with customers and prospects in this challenging macro environment." It's been a mixed start to the earnings season for cybersecurity stocks, with Tenable, Cloudflare, and Check Point Software all reporting disappointing results thus far. However, the company's impressive announcement means that either the subsector may not be as challenged as feared, that there is company-specific outperformance from Zscaler, or some combination of both.
What is the market telling us:
Zscaler's shares are very volatile and over the last year have had 48 moves greater than 5%. But moves this big are very rare even for Zscaler and that is indicating to us that this news had a significant impact on the market's perception of the business.
Zscaler is down 3.1% since the beginning of the year, and at $106.88 per share it is trading 44.8% below its 52-week high of $193.60 from September 2022. Investors who bought $1,000 worth of Zscaler's shares 5 years ago would now be looking at an investment worth $3,880.
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