What happened
Shares of Zscaler (ZS -1.49%) spiked this morning after the company reported better-than-expected results for its third quarter. The company easily beat Wall Street's average estimate for both its top and bottom lines.
The tech stock gained 10.5% as of 10:27 a.m. ET.
So what
The company reported non-GAAP (adjusted) earnings per share of $0.17 in the quarter, which was up from $0.15 in the year-ago quarter and far above analysts' consensus estimate of $0.11 per share.
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Zscaler's revenue increased 63% from the year-ago quarter to $286.8 million, which impressed investors and blew past Wall Street's average estimate of $271.3 million for the quarter.
"We delivered 63% revenue growth and 54% billings growth, while also generating a strong free cash flow margin of 15% for the third quarter," CEO Jay Chaudhry said in a press release.
Chaudhry added that, because of the company's strong financial results in the quarter, management is raising its full-year guidance.
The company now expects non-GAAP earnings per share to be in the range of $0.64 to $0.65, up from the previous guidance range of $0.50 to $0.52.
Management also slightly increased its full-year revenue guidance from the previous $1.01 billion at the high end of guidance to the current estimate of $1.08 billion.
Now what
Zscaler investors clearly have a lot to be happy with today, and it's not a surprise that the company's share price is rising this morning.
But investors should also keep in mind that the stock market, and the tech sector in particular, is very volatile right now. Which means that any recent share price gains made by Zscaler could quickly be erased.
That doesn't mean that stock isn't a good long-term investment, it just means that shareholders should remember that holding onto their investments for years, not a few good quarters, is what allows investors to experience significant gains.
