What happened

Shares of Zscaler (NASDAQ:ZS) declined 10.8% in December, according to data from S&P Global Market Intelligence, after the company followed stronger-than-expected fiscal first-quarter 2020 results with an underwhelming forward outlook.

To be sure, the bulk of the cybersecurity stock's decline came on the heels of its Dec. 3, 2019, quarterly update. Zscaler's revenue soared 48% year over year to $93.6 million, translating to adjusted (non-GAAP) net income of $0.03 per share. Both figures easily exceeded consensus estimates at the time for earnings of a penny per share on revenue of $89.8 million.

Metal padlock on a circuit board, cybersecurity concept.

Image source: Getty Images.

So what

Zscaler Chairman and CEO Jay Chaudhry lauded the company's strong top-line growth and (adjusted) profitability even "while significantly investing in our business to pursue our large market opportunity."

"We are committed to scaling all elements of our go-to-market strategy, as we see enterprises increasingly transforming their network and security to realize the benefits of the cloud," he was quoted as saying in a company press release. "I am confident that our new sales leadership, coupled with our cloud-native security platform, is strengthening our foundation for the long-term growth of our business."

For the current quarter, however, Zscaler told investors to expect revenue of $97 million to $100 million -- up just 33% at the midpoint and marking a significant sequential deceleration -- with adjusted earnings of $0.03 per share.

For the full year, the company is targeting revenue of $405 million to $413 million -- up 35% year over year -- and adjusted net income per share of $0.13 to $0.15.

Now what

Of course, it certainly didn't help that shares had rallied nearly 30% from their October lows heading into last month's report, leaving the market unwilling to forgive Zscaler's light guidance at the time.

That said, Zscaler also has a tendency to underpromise and overdeliver. So perhaps unsurprisingly, shares have also rallied hard along with the broader market so far in 2020, indicating opportunistic investors might be taking advantage of the beaten-down stock with the hope its fiscal second quarter report -- which should be released in late February or early March -- could bring good news. If Zscaler can show notable progress in its efforts to capture more of the "large market opportunity" Chaudhry described, the stock could have plenty of room to run from here.