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Zscaler reported its second-quarter earnings on March 5, showcasing a significant improvement in its financial health with sales of $648 million, up from $525 million year-over-year, and a reduced net loss of $8 million from $28 million. This financial progress coincides with the company's updated guidance for the third quarter and fiscal year 2025, projecting continued revenue growth. Despite these positive developments, the company’s stock moved up slightly by 0.32% over the past week. This muted reaction occurred amid unfavorable broader market conditions; tech stocks faced pressure, with the Nasdaq Composite down by 1.1% due to tariff uncertainties and a general tech sector sell-off. Amid the market’s 1.9% decline, Zscaler's relative stability might reflect investor confidence in its improved financial performance and promising guidance, despite external market challenges.
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The last five years have seen Zscaler's shareholders enjoy substantial total returns, with the company's stock delivering a very large 358.14% increase. This return reflects several influential factors that have played out over this period. Notably, Zscaler's alignment with leading tech firms like SAP and Cognizant through partnerships bolstered its presence in delivering zero trust security solutions, which likely attracted investor interest. Additionally, despite being currently unprofitable, the company's ambitious revenue growth targets continue to signal potential future profitability.
During this timeframe, Zscaler's valuation has often been perceived as expensive relative to industry peers, as evident in its Price-To-Sales Ratio, yet this hasn't deterred strong investor enthusiasm. Furthermore, executive changes, including the appointment of a new Chief Product Officer, underscore the company's commitment to innovation and growth. It is notable that over the past year, while Zscaler outpaced long-term growth expectations, it underperformed the broader US market and Software industry returns.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.