Despite reporting strong results and outlook in its latest earnings report today, shares in Zscaler Inc. fell slightly in late trading after executives warned that the macro environment and closing deals remain challenging.

For its fiscal fourth quarter ended July 31, Zscaler reported adjusted earnings per share of 64 cents, up from 25 cents in the same quarter of last year, on revenue of $455 million, up 43% year-over-year. Analysts had expected earnings per share of 49 cents on revenue of $430.38 million.

Zscaler reported a loss of $44.6 million in the quarter, or 10% of revenue, compared with a loss of $82.5 million, or 26% of revenue, in the fourth quarter of fiscal 2022. Cash flow in the quarter was $135.9 million, up from $103.1 million the year prior. Deferred revenue sat at $1.439 billion as of the end of July, up 41% year-over-year, while cash and equivalents on hand sat at $2.1 billion, up from $368.9 million the year prior.

Recent business highlights include Zscaler launching new cybersecurity services, including Zscaler Risk360 and Zero Trust Branch Connectivity, that extend the capabilities of the Zscaler Zero Trust Exchange cloud security platform to better identify, mitigate and manage large-scale attacks. The company also announced a partnership with the nonprofit Center for Internet Security Inc. in May to improve cybersecurity for state, local, tribal and territorial governments.

For its full fiscal year 2023, Zscaler reported adjusted earnings of $1.79 per share, up from 69 cents in fiscal year 2022, on revenue of $1.617 billion, up 48% year-over-year.

“We concluded our fiscal year with strong top-line growth and record operating profits,” Jay Chaudhry, chairman and chief executive of Zscaler, said in the company’s earnings release. “In less than two years, we doubled our annual recurring revenue, surpassing the $2 billion milestone. With cybersecurity as a high priority, IT executives are modernizing their legacy network security with our zero-trust architecture.”

For its first quarter of fiscal 2024, Zscaler said it expects adjusted earnings per share of 48 to 49 cents on revenue of $472 million to $474 million. Both were ahead of the analyst consensus of 45 cents and $464.75 million. For the full fiscal year, the company expects earnings per share of $2.20 to $2.25 on revenue of $2.05 to $2.07 billion — both beats as well versus an expected $2.10 and $2.04 billion.

Zscaler stock rose initially nearly 5% in late trading and then the investor call dropped and the stock was down nearly 1%.

According to MarketWatch, the drop started around 10 minutes into prepared remarks when Chaudry said the company was executing well “while the macro environment remains challenging.” Zscaler Chief Financial Officer Remo Canessa made similar remarks, saying that the “global macro environment remains uncertain” before adding that with growing economic uncertainty, they were “mindful” in this environment that closing deals within 90 days “remains challenging.”

Image: Zscaler