What happened
Shares of zero-trust cybersecurity specialist Zscaler (ZS 0.30%) suddenly soared on Monday after reporting upbeat preliminary financial results for its fiscal third quarter of 2023 and raising full-year financial guidance. The stock is downtrodden and still 45% below its 52-week high, even after today's gains. But as of 10:20 a.m., Zscaler stock is up about 20% for today's session.
So what
When Zscaler reported financial results for its fiscal second quarter back in March, the stock dropped because investors weren't satisfied with the company's bookings growth or with its guidance for Q3. That's noteworthy because Q3 is apparently shaping up better than anticipated.
For Q3, Zscaler's management expects to report revenue of $415 million to $419 million -- remember, these results are preliminary, so the numbers aren't final. That's 4% to 6% better than management's previously guided range.
At the high end of these preliminary results, Zscaler's revenue would be up about 46% from the prior-year period.
Zscaler's management expects to report 38% to 39% bookings growth for Q3, which is slower than its revenue growth. Typically, investors prefer to see bookings outpacing revenue because it can be an indication of an acceleration of the growth rate in the future. Therefore, today's update does continue to point to a trend management talked about in Q2: Companies appear to be cautious and are perhaps deferring some spend on cybersecurity.
Now what
Zscaler didn't just update projections for Q3 but also for its entire fiscal 2023. Management raised full-year revenue guidance by about 2% to $1.587 billion to $1.591 billion. And it raised full-year bookings guidance by about 1% to 2% to $1.970 billion to $1.974 billion.
It's good to see that Zscaler is outpacing expectations. That said, these are modest increases to guidance, in my opinion. Therefore, I'm a little surprised to see the market respond this positively today.
Zscaler is scheduled to report finalized Q3 financial results on June 1.
