Zscaler jumps 10% on strong results fueled by AI growth

Shares of Zscaler experienced a significant rise of approximately 10% on Friday following the company’s announcement of robust third-quarter results that surpassed expectations, largely propelled by the growing demand for artificial intelligence and the adoption of its zero-trust security framework. CEO Jay Chaudhry emphasized the increasing role of AI in business, stating, "The proliferation of AI in all aspects of business is increasing the need for our AI security." He highlighted the company's commitment to empowering clients in safely utilizing both public generative AI applications and their private AI solutions, alongside plans to enhance investments in this sector. Zscaler reported a 23% increase in revenue, reaching $678 million compared to $553 million from the same quarter last year, exceeding LSEG’s forecast of $666 million. The company’s adjusted earnings were 84 cents per share, surpassing the anticipated 75 cents. Additionally, billings rose by 25%, totaling around $785 million, which also exceeded the $760 million estimate from StreetAccount. This positive performance comes amidst mixed signals in the cybersecurity sector, with competitors like SentinelOne and Palo Alto Networks facing challenges. Morgan Stanley analyst Keith Weiss noted that Zscaler's report aligns with the anticipated recovery narrative the company has been promoting recently. Despite reporting a net loss of $4.1 million, or 3 cents per share, for the quarter—down from a profit of $19.1 million last year—Zscaler projected an optimistic adjusted EPS for the upcoming fiscal quarter, estimating earnings between 79 and 80 cents per share, higher than the 77 cents expected. Additionally, the company appointed Kevin Rubin as its new chief financial officer.