Zscaler Q1 2022 Earnings - Quick Update and Analysis
December 01, 2021
I/O Fund
Team
I/O Fund is keeping tabs on cloud security company Zscaler because of its surging sales and strong growth over multiple quarters. Zscaler's success is evident in the most recent earnings results.
Sales History
Zscaler's growth is impressive, because sales have grown over 50%+ for five consecutive quarters.
In fact, as you can see in the chart below, Zscaler has grown 40%+ or more in every quarter, except one, as a public company.
Growth Factors
Zscaler's notably high growth is due to a few secular tailwinds propelling the company forward:
- Rise of the cloud environment
- Obsolescence of firewalls used to secure networks in the cloud
- Network effects, as Zscaler collects massive amounts of data, over 300 trillion signals everyday
Upward Trending Sales and Persistent Demand
Market demand for Zscaler's products and solutions is demonstrated in customers' willingness to pay for multi-year contracts upfront, allowing for a constant stream of revenue and capital to go back into Zscaler's operations.
Current cashflow trends are indicative of Zscaler's ability to deliver high quality results.
We can see upfront cash payments by looking at deferred revenue, which increased 74% YoY. It is also worth pointing out that long-term deferred revenue (DR) increased 99% YoY to $63 million. Deferred revenue turns into sales in the future and an outsized growth in DR highlights that there is ample balance sheet support for future sales.
Deferred revenue actually represented 281% of Q1 sales, the highest seasonal value in the firm's history.
Thoughts from Zscaler's Management
Management has raised its sales guide, and expects FY2022 sales to grow 50% YoY to $1 billion. Management also expects billings to increase 40% YoY to $1.3 billion, which further underscores recent topline growth.
I/O Fund's Potential Position on Zscaler
I/O Fund is watching Zscaler closely but we do have reservations about the company’s elevated valuation. Zscaler trades at over 50x fwd sales which is a premium multiple in the cloud category.
We will be tracking cloud earnings to better understand whether Zscaler is positioned to continue to grow strongly going forward.
But there's more to Zscaler and this analysis -
Sign up for I/O Fund's free newsletter with gains of up to 1100% here.
Look over our Premium Services, offered through our Premium Membership program, here.
More To Explore
Newsletter
AI Stocks & Nvidia: I/O Fund’s 2025 Tech Media Highlights
As we close out a defining year for tech, we’re proud to share a few media moments where our theses met the mainstream. We are grateful that our readers trust us to cut through the noise - and we want
The AI Revenue Leader Nobody Is Talking About—Second Only to Nvidia Stock
Meta’s stock sits at the center of the AI spending debate, as Big Tech continues to shock markets with outsized AI-driven capital expenditures. What is being overlooked is that Meta’s stock is already
Broadcom Stock: The Silent Winner in the AI Monetization Supercycle
The AI accelerator market will inevitably widen beyond Nvidia’s GPUs - the keyword is widen. More players will sell more AI systems as the market expands, and that growth supports both the clear leade
Nvidia Stock and the AI Monetization Supercycle No One Is Pricing In
Two weeks ago, Nvidia blew the doors off with an earnings report that defies the company’s mega-cap scale. The long-awaited Blackwell and Blackwell Ultra architectures are shipping in volume, leading
I/O Fund Called the Bitcoin Selloff: What Liquidity & DXY Data Predict Next
In August, the I/O Fund warned that Bitcoin was entering a high-risk phase as global liquidity stalled, and sentiment patterns flashed caution. Since then, Bitcoin has fallen more than -35%. In this a
Why Nvidia Stock Could Reach a $20 Trillion Market Cap by 2030
The headline that Nvidia could reach a $20 trillion market cap by 2030 will trigger plenty of emotion — it sounds fantastical, full of hype, or like a prediction made far too early in the AI cycle. Ye
Big Tech’s $405B Bet: Why AI Stocks Are Set Up for a Strong 2026
AI accelerators such as GPUs and custom silicon need no introduction. Compute has led the AI boom; a trend so powerful, it is displacing the FAANGs of the last decade with Nvidia firmly the world’s mo
Market Cycles, Not Headlines: What History Says About the 2025 Rally and What Comes Next
Despite how it may seem, modern-day narratives rarely drive market swings. Tariffs, political headlines, niche trends like rare earth materials, or speculation about which company OpenAI partners with
Decoding the S&P 500: When Human Sentiment Meets Artificial Intelligence
Less than one-fifth of the U.S. economy is expanding, yet this small segment is growing at such a blistering pace—driven by AI-related spending—that it continues to hold up the rest of the economy. We
TSM Stock and the AI Bubble: 40%+ AI Accelerator Growth Fuels the Valuation Debate
Taiwan Semiconductor (NYSE: TSM) recently announced fiscal Q3 earnings, stating its longer-term AI revenue outlook is stronger than anticipated. The company reported record Q3 revenue of $33.1 billion
