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Q3 Earnings Roundup: Zscaler (NASDAQ:ZS) And The Rest Of The Cybersecurity Segment

By: StockStory

January 06, 2025 at 04:01 AM EST

ZS Cover Image

Earnings results often indicate what direction a company will take in the months ahead. With Q3 behind us, let’s have a look at Zscaler (NASDAQ: ZS) and its peers.

Cybersecurity continues to be one of the fastest-growing segments within software for good reason. Almost every company is slowly finding itself becoming a technology company and facing rising cybersecurity risks. Businesses are accelerating adoption of cloud-based software, moving data and applications into the cloud to save costs while improving performance. This migration has opened them to a multitude of new threats, like employees accessing data via their smartphone while on an open network, or logging into a web-based interface from a laptop in a new location.

The 9 cybersecurity stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 2.3% while next quarter’s revenue guidance was 0.5% above.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 6.8% since the latest earnings results.

Zscaler (NASDAQ: ZS)

After successfully selling all four of his previous cybersecurity companies, Jay Chaudhry's fifth venture, Zscaler (NASDAQ: ZS) offers software-as-a-service that helps companies securely connect to applications and networks in the cloud.

Zscaler reported revenues of $628 million, up 26.4% year on year. This print exceeded analysts’ expectations by 3.7%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ EBITDA estimates and full-year EPS guidance exceeding analysts’ expectations.

“Growing customer engagements and strong sales execution drove a solid Q1 with all metrics exceeding our guidance. The combination of Zero Trust and AI is creating exciting new opportunities, which we are well positioned to capture with our large and expanding platform,” said Jay Chaudhry, Chairman and CEO of Zscaler.

The stock is down 11% since reporting and currently trades at $185.71.

We think Zscaler is a good business, but is it a buy today? Read our full report here, it’s free.

Best Q3: Okta (NASDAQ: OKTA)

Founded during the aftermath of the financial crisis in 2009, Okta (NASDAQ: OKTA) is a cloud-based software-as-a-service platform that helps companies manage identity for their employees and customers.

Okta reported revenues of $665 million, up 13.9% year on year, outperforming analysts’ expectations by 2.4%. The business had a very strong quarter with EPS guidance for next quarter exceeding analysts’ expectations and an impressive beat of analysts’ EBITDA estimates.

However, the results were likely priced into the stock as it’s traded sideways since reporting. Shares currently sit at $81.80.

Is now the time to buy Okta? Access our full analysis of the earnings results here, it’s free.

Weakest Q3: SentinelOne (NYSE: S)

With roots in the Israeli cyber intelligence community, SentinelOne (NYSE: S) provides software to help organizations efficiently detect, prevent, and investigate cyber attacks.

SentinelOne reported revenues of $210.6 million, up 28.3% year on year, in line with analysts’ expectations. It was a mixed quarter as it posted an impressive beat of analysts’ EBITDA estimates but a significant miss of analysts’ billings estimates.

SentinelOne delivered the weakest performance against analyst estimates in the group. The company added 77 enterprise customers paying more than $100,000 annually to reach a total of 1,310. As expected, the stock is down 19.8% since the results and currently trades at $23.01.

Read our full analysis of SentinelOne’s results here.

Rapid7 (NASDAQ: RPD)

Founded in 2000 with the idea that network security comes before endpoint security, Rapid7 (NASDAQ: RPD) provides software as a service that helps companies understand where they are exposed to cyber security risks, quickly detect breaches and respond to them.

Rapid7 reported revenues of $214.7 million, up 8% year on year. This result beat analysts’ expectations by 2.2%. Zooming out, it was a satisfactory quarter as it also logged accelerating customer growth but EPS guidance for next quarter missing analysts’ expectations significantly.

Rapid7 had the slowest revenue growth among its peers. The company added 135 customers to reach a total of 11,619. The stock is down 5% since reporting and currently trades at $39.53.

Read our full, actionable report on Rapid7 here, it’s free.

Palo Alto Networks (NASDAQ: PANW)

Founded in 2005 by cybersecurity engineer Nir Zuk, Palo Alto Networks (NASDAQ: PANW) makes hardware and software cybersecurity products that protect companies from cyberattacks, breaches, and malware threats.

Palo Alto Networks reported revenues of $2.14 billion, up 13.9% year on year. This print topped analysts’ expectations by 0.8%. Overall, it was a strong quarter as it also put up EPS guidance for next quarter exceeding analysts’ expectations and a solid beat of analysts’ EBITDA estimates.

Palo Alto Networks had the weakest full-year guidance update among its peers. The stock is down 6% since reporting and currently trades at $184.54.

Read our full, actionable report on Palo Alto Networks here, it’s free.

Market Update

Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market has thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.

Want to invest in winners with rock-solid fundamentals? Check out our Hidden Gem Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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