What Analyst Projections for Key Metrics Reveal About Zscaler (ZS) Q4 Earnings

Wall Street analysts anticipate Zscaler (ZS) will report Q4 earnings of $0.80 per share, a 9.1% year-over-year decline, with revenues projected at $706.23 million, marking a 19.1% increase. The consensus EPS estimate has seen no revisions in the past 30 days, suggesting stable analyst expectations. Beyond top-line figures, key forecasts include billings of $1.14 billion, remaining performance obligations of $5.52 billion, and a Dollar-Based Net Retention Rate of 114.3%, a slight decrease from 115.0% year-over-year. ZS shares have recently underperformed, falling 7.7% over the last month compared to the S&P 500's 1.3% gain.

Analysis

Zscaler's upcoming Q4 earnings report presents a mixed outlook according to Wall Street consensus, characterized by strong top-line growth but declining profitability. Analysts forecast a significant 19.1% year-over-year revenue increase to $706.23 million, yet project a 9.1% decrease in earnings per share to $0.80. Forward-looking indicators, however, point to sustained business momentum. Projected billings of $1.14 billion and Remaining Performance Obligations of $5.52 billion represent year-over-year growth of approximately 25%, signaling a robust future revenue pipeline. This growth is supported by a 30.8% increase in revenues from direct customers, though a slight deceleration in the Dollar-Based Net Retention Rate to 114.3% from 115.0% warrants attention. The stock's recent performance, a 7.7% decline in the past month against the S&P 500's 1.3% gain, suggests investor caution is already being priced in ahead of the report, especially given the stable, unrevised EPS consensus over the last 30 days.

Key Decisions for Investors

• Investors should weigh the projected 9.1% YoY decline in EPS against the strong forward-looking growth indicators, such as the ~25% expected increase in both billings and remaining performance obligations.
• Monitor the official earnings release for commentary on the drivers behind the margin compression and the slight dip in the dollar-based net retention rate, as these could be early signs of increasing competition or operational costs.
• Given the stock's recent -7.7% underperformance, consider whether the market has already priced in the negative earnings forecast, which could present an opportunity if the company meets or beats the strong revenue and billings estimates.
• Pay close attention to any management guidance for the upcoming fiscal year, as the robust growth in billings and RPO suggests the outlook could be more positive than the Q4 EPS figure implies.