Shares of cybersecurity firm Zscaler (ZS) jumped in after-hours trading after the company reported earnings for its second quarter of Fiscal Year 2025, which was followed by strong guidance. Earnings per share came in at $0.78, which beat analysts’ consensus estimate of $0.69 per share.
Sales increased by 23.4% year-over-year, with revenue hitting $647.9 million. This beat analysts’ expectations of $634.38 million. In addition, free cash flow increased to $143.4 million versus the $100.8 million seen in Q2 2024. The free cash flow margin also climbed from 19% to 22% during the same time period.
According to Zscaler’s CEO, Jay Chaudhry, these strong results were driven by growing demand for its platform. He explained that combining “Zero Trust” (a security model that assumes no user or device should be trusted by default) with AI is creating exciting new business opportunities. The company is confident that it can take advantage of these opportunities, which should lead to “new avenues of growth.”
2025 Outlook
Looking forward, management now expects revenue and adjusted earnings per share for Q3 2025 to be in the ranges of $665 million to $667 million (consensus: $667.2 million) and $0.75 to $0.76 (consensus: $0.74), respectively.
For FY 2025, these figures jump to a range of $2.640 billion to $2.654 (consensus: $2.638 billion) for revenue and $3.04 to $3.09 (consensus: $2.99) for EPS.
As we can see, the company’s outlook is better than expected, which likely led to the after-hours move in the stock price.
Is ZS Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on ZS stock based on 12 Buys, three Holds, and zero Sells assigned in the past three months. After a 9% year-to-date gain, the average ZS price target of $232.73 per share implies 18.5% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
