Okay, so Zscaler "beat" expectations. Big deal. Another quarter, another round of analysts tripping over themselves to declare victory while the stock drops 10.9%. Anyone else smell the BS? Let's be real, this is how the game is played.
The Illusion of Growth
25.5% year-on-year revenue growth to $788.1 million? Sounds impressive, right? Except analysts expected $773.6 million. A 1.9% "beat." Give me a break. It's like celebrating a participation trophy. And management's patting themselves on the back about "strong demand" for their Zero Trust and AI Security platform... Yeah, because fear sells.
And the billings? Up 15.5% to $597 million. Not bad, I guess. But is that really impressive when you consider the hype around cybersecurity these days? I mean, every company is terrified of getting hacked, so they're throwing money at anything that promises to keep them safe.
The "AI" Hype Train
Oh, and let's not forget the AI angle. Zscaler is now an "early adoption partner" with Microsoft Entra Agent ID. Translation: they're riding the AI hype train for all it's worth. Securing AI-driven enterprise operations? Sounds fancy, but what does it actually mean? Are they stopping rogue AI from ordering pizza at 3 AM? I'm not convinced.
Here's the thing that really gets me: they're partnering with HCLTech on "AI-powered network transformation." Network transformation? Last time I heard that phrase, it involved a lot of consultants charging exorbitant fees for something that could be done with a decent firewall and a competent IT guy. Maybe I'm just getting old and cranky...
The Hyperscaler Threat
But here's the real elephant in the room: the hyperscalers. You know, Amazon, Microsoft, Google... the guys who really control the cloud. Zscaler's narrative requires $4.7 billion revenue by 2028. That's some serious growth. What happens when those hyperscalers decide to bundle security features into their existing services? Suddenly, Zscaler's "edge" doesn't look so sharp.
Champlain Investment Partners LLC reduced its position in shares of Zscaler, Inc. by 51.7% in the 2nd quarter. That's a HUGE selloff. See Zscaler, Inc. $ZS Shares Sold by Champlain Investment Partners LLC.
And get this: CEO Jagtar Singh Chaudhry sold 2,865 shares. Insiders are selling. Should we be worried?
So, What's the Scam?
This whole thing reeks of manufactured optimism. They beat expectations by a hair, hype up the AI angle, and hope nobody notices the underlying risks.
I'm calling it: Zscaler's Q3 "surprise" is just another rigged game.