Zscaler (ZS) Tops Q3 Earnings and Revenue Estimates

Zscaler (ZS) reported Q3 earnings of $0.84 per share, surpassing estimates of $0.75, and revenues of $678.03 million, also exceeding expectations by 1.75%. While the company has outperformed the S&P 500 year-to-date, the stock holds a Zacks Rank #3 (Hold), suggesting near-term performance in line with the market, pending revisions to earnings estimates. CrowdStrike Holdings (CRWD), another security company, is expected to report earnings on June 3.

Analysis

Zscaler (ZS) delivered a strong fiscal third-quarter performance for the period ending April 2025, reporting adjusted earnings of $0.84 per share, which surpassed the Zacks Consensus Estimate of $0.75 by 12%; however, this figure was slightly below the $0.88 per share recorded in the comparable year-ago quarter. The company also exceeded revenue expectations, posting $678.03 million, a 1.75% beat against the Zacks Consensus Estimate and representing a notable 22.6% increase from the $553.2 million reported in the prior-year quarter. This marks the fourth consecutive quarter Zscaler has surpassed both EPS and revenue consensus estimates, contributing to a significant year-to-date stock appreciation of approximately 40.6%, substantially outperforming the S&P 500's 0.1% gain. Despite these positive results, the estimate revisions trend for Zscaler was characterized as mixed leading into this earnings release, and the stock currently holds a Zacks Rank #3 (Hold), suggesting its near-term performance may align with the broader market. The sustainability of the stock's immediate price movement and future earnings expectations will heavily depend on management's commentary during the earnings call. Current consensus estimates for the upcoming quarter stand at $0.75 EPS on $707.18 million in revenue, and for the current fiscal year, $3.06 EPS on $2.65 billion in revenue. Zscaler operates within the favorably ranked Security industry, which is positioned in the top 13% of over 250 Zacks industries, a factor indicating strong sector tailwinds.

Key Decisions for Investors

• Investors should acknowledge Zscaler's consistent operational strength, evidenced by its Q3 earnings surprise of 12% and robust year-over-year revenue growth of 22.6%, while also noting the slight decline in quarterly earnings per share compared to the prior year.
• Given the substantial 40.6% year-to-date stock appreciation juxtaposed with a Zacks Rank #3 (Hold) and previously mixed estimate revision trends, it is crucial to closely scrutinize management's forward-looking guidance from the earnings call and any subsequent revisions to consensus earnings estimates.
• Consider the positive industry backdrop, with the Security sector ranking in the top 13% of Zacks industries, but remain vigilant for shifts in future earnings expectations, particularly how estimates for the coming quarters and current fiscal year evolve post-release.