Zscaler Gains Analyst Upgrade As Strong Billing Growth And Zero Trust Adoption Fuel Confidence

Zscaler Inc ZS stock gained after the company reported better-than-expected second-quarter financial results and issued third-quarter adjusted EPS guidance above estimates.

Zscaler reported quarterly earnings of 78 cents per share, which beat the analyst consensus estimate of 69 cents. Quarterly revenue was $647.9 million (up from $525 million a year ago), which beat the analyst consensus estimate of $635.56 million.

Also Read: ChatGPT Parent OpenAI’s Specialized AI Agents Could Cost Up To $20 Thousand Per Month: report

Zscaler expects third-quarter revenue of $665 million to $667 million, versus the $667.37 million estimate, and EPS of 75 cents to 76 cents per share, versus the 74 cent estimate.

Rosenblatt analyst Catharine Trebnick upgraded Zscaler from Neutral to Buy and raised the price target from $190 to $235.

This upgrade is driven by Trebnick’s increased confidence in Zscaler’s ability to sustain strong growth based on key factors. The analyst marginally increased her revenue forecasts for fiscal 2025 and 2026, reflecting a belief in the company’s improved sales capacity, broader platform adoption and potential to capture legacy firewall refresh initiatives. Trebnick also observed improvements in Zscaler’s GTM motions and sales execution, which are contributing to stronger
performance.

The rerating reflects demonstrable performance improvements. Zscaler’s latest results exceeded expectations, driven by improved billing growth and margin expansion.

Improved marketing (Zero Trust Everywhere) and sales productivity drive more significant deals and upsells.

Calculated billings of $743 million rose 18%, beating Street estimates by $23 million, fueled by 25% growth in unscheduled billings.

This performance prompted management to raise the fiscal 2025 billings outlook, a clear signal of the company’s continued confidence in the future.

Furthermore, new products, including ZDX, Zero Trust Cloud Workload and Zero Trust Branch, are gaining traction and expected to generate 25% of total revenue at year-end.

The combined improvements in GTM motion, sales productivity, and broader platform momentum led the analyst to note the company can sustain durable growth.

Trebnick projected third-quarter revenue of $666.6 million and EPS of $0.75.

Price Action: ZS stock is up 6.95% at $210.33 at last check Thursday.

Also Read:

• China’s JD.com Q4 Retail Revenue And Margin Growth Impress, Hikes Annual Dividend