What happened

Shares of Zscaler (NASDAQ:ZS) were down on Friday after the software-as-a-service (SaaS) provider reported disappointing fiscal second-quarter results. While the company beat analyst estimates for revenue and earnings, sluggish billings growth and a weak earnings forecast overshadowed the headline numbers. Zscaler stock was down 14.4% at 11:40 a.m. EST today.

So what

Second-quarter revenue was $101.3 million, up 36% year over year and $2.25 million above the average analyst estimate. Adjusted earnings per share came in at $0.09, flat from the prior-year period and $0.06 higher than analysts expected.

A declining chart.

Image source: Getty Images.

Calculated billings, which represents amounts invoiced for subscriptions and related support services, grew just 18% in the second quarter. A one-time private cloud sale last year made the comparison difficult, with the company saying that billings would have grown by 30% excluding that sale.

While billings growth was weak, CEO Jay Chaudhry doesn't blame increased competition: "I haven't really seen much impact on the competition side. In fact, our churn is down year over year."

Now what

For the third quarter, Zscaler expects to produce revenue between $105 million and $107 million, along with adjusted EPS between $0.01 and $0.03. That revenue range was slightly above analyst expectations, but the EPS guidance fell short of the $0.04 analysts were expecting.

For the full year, Zscaler sees revenue between $414 million and $417 million, calculated billings between $512 million and $517 million, and adjusted EPS between $0.14 and $0.16. At the midpoints of those ranges, revenue will be up 37.2%, billings will be up 31.9%, and EPS will be down 31.8% from fiscal 2019.

Including Friday's decline, Zscaler stock is now down nearly 38% from its 52-week high.

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