To The Moon

$Zscaler Inc.(ZS)$ stock fell over 11% in premarket trading after the cybersecurity company joined the choir of cloud-software companies fretting about reluctant recession-leery customers, and praising upsells to loyal customers, while hiking their outlook and announcing layoffs."For Q3, we're assuming billings to decline by approximately 9% sequentially compared to the mid-single digit percentage declines we've seen over the last few years," Remo Canessa, Zscaler chief financial officer, told analysts on the call. For the second quarter, Zscaler reported billings, or revenue plus deferred revenue acquired over the quarter, of $493.8 million in the second quarter, while Wall Street expected billings of $491 million. A 9% decline would be about $449.4 million, whereas the Street is expecting $448.6 million. "In January, we saw higher scrutiny on budgets compared to December, resulting in additional delays in large deals," Jay Chaudhry, Zscaler chair and chief executive, told analysts. "These deals haven't gone away and customers are taking longer to make decisions and requiring additional approvals." As has been the case with many cloud-software vendors this earnings season, businesses are taking more time to scrutinize deal lengths or subscriptions, and cloud-software companies are streamlining their own operations. The company said in a filing with the Securities and Exchange Commission it was trimming its global workforce by 3%, or about 150 positions, by the end of fiscal 2023, which ends in July, and taking an $8 million to $10 million charge. Zscaler last reported a headcount of 4,975. Meanwhile, the company expects full-year earnings of $1.52 to $1.53 on about $1.56 billion revenue and billings of $1.94 billion to $1.95 billion. Zscaler had last forecast adjusted earnings of $1.23 to $1.25 a share on revenue of about $1.53 billion and billings of $1.93 billion to $1.94 billion for the year, and analysts were estimating $1.24 a share on revenue of $1.53 billion and billings of $1.93 billion for the year. Zscaler forecast adjusted earnings of about 39 cents a share on revenue of $396 million to $398 million for the fiscal third quarter. Analysts surveyed by FactSet had estimate 31 cents a share on revenue of $387.3 million and billings of $448.6 million for the quarter. The company reported a fiscal second-quarter loss of $57.5 million, or 40 cents a share, compared with a loss of $100.4 million, or 71 cents a share, in the year-ago period. Adjusted net income, which excludes stock-based compensation and other items, was 37 cents a share, compared with 13 cents a share in the year-ago period. Revenue rose to $387.6 million from $255.6 million in the year-ago quarter, the company said. Analysts surveyed by FactSet had forecast earnings of 29 cents a share on revenue of $340.7 million, based on Zscaler's forecast of 29 cents to 30 cents a share on revenue of $365.5 million to $366 million . Cloud-software vendors are still trying to snag deals in a cost-conscience environment as businesses slow spending a looming recession. By adding new services, or modules, to the platform, customers are then upsold, encouraged to add more modules, or functionality, to their customized platform. That's the model supporting identity-management software company $Okta Inc.(OKTA)$ (OKTA), which late Wednesday said the bulk of its businesses was in upsells and cross-sells to established customers, and Wall Street said the company was "partially out of the woods." Much of Zscaler's report mirrored that of Okta's: Reluctance of customers to close deals in the uncertain economic environment, longer times to close deals, and 90%-plus customer retention rates that are allowing the platforms to upsell to existing customers. Back in January, Morgan Stanley downgraded Zscaler and other cybersecurity names in the believe that "peak" cybersecurity has passed and that investors must get more selective in the sector. Meanwhile, human-resources cloud-software company $Workday(WDAY)$ Inc. (WDAY) said earlier in the week it was still on track for growth targets, despite a setback, and offer a conservative guidance. That dynamic was also evident in Salesforce Inc.'s $(CRM)$earnings report, another cloud-software company this week that promised profitability and trimmed jobs, giving the stock its biggest boost since 2020. $(ZS)$