According to Yahoo News, shares of cloud security platform Zscaler (NASDAQ:ZS) experienced a 5.8% increase in the morning session after impressive earnings results from CrowdStrike and Okta. CrowdStrike's Q3 results exceeded analysts' annual recurring revenue (ARR) and revenue expectations, as well as non-GAAP operating income and non-GAAP EPS. Importantly, CrowdStrike surpassed the $3 billion ARR milestone. Meanwhile, Okta's Q3 earnings results outperformed Wall Street's sales estimates, driven by higher-than-anticipated subscription revenue. Adjusted operating income, free cash flow, EPS, and next quarter's revenue and EPS guidance also surpassed analysts' predictions. These results suggest that the demand for cybersecurity products remains strong, even in a challenging macroeconomic environment.
Additionally, the macro provided a tailwind, as many tech stocks flashed green. The yield on the 10-year Treasury fell below 4.3%, the first time it has dropped to these levels since September 2023. This drop indicates increased optimism in the market that, as inflation stabilizes, interest rates could stabilize or even move lower. Lower rates are beneficial for stock valuations, particularly for tech companies where the market needs to discount back cash flows further out in the future. After the initial pop, the shares cooled down to $201.93, up 4.1% from the previous close.
Zscaler's shares are known for their volatility, with 28 moves greater than 5% over the last year. Today's move suggests that the market considers this news significant but not something that would fundamentally change its perception of the business. Zscaler is up 83.3% since the beginning of the year, and investors who bought $1,000 worth of Zscaler's shares five years ago would now be looking at an investment worth $5,379.