If you’re an investor in growth stocks, you’ve probably been seeing a lot of red so far in 2022.
That’s because high-growth technology stocks have, on the whole, taken a beating. However, not all growth stocks are created equal.
That’s because some tech sectors, such as e-commerce companies, are seeing a natural slowdown given reopening and a potential recession on the horizon.
Meanwhile, other “mission-critical” services have been able to keep up their pandemic-era growth rates. One such sector (in the software space) is cybersecurity.
Just this week, one of the most exciting up-and-coming cloud cybersecurity firms – Zscaler Inc (NASDAQ: ZS) – reported its Q4 FY2022 earnings.
Given it was operating in what is perceived to be a slowing economy, it was an impressive set of numbers.
Structural tailwinds amid macro headwinds
If any company exemplifies how important cybersecurity is becoming, Zscaler is it. The company wrapped up its Fiscal Year (FY)2022 by reporting its Q4 FY2022 (for the three months ending 31 July 2022).
In its Q4 FY2022, Zscaler saw revenue of US$318 million – up a whopping 61% year-on-year. Incredibly, Zscaler’s year-on-year revenue growth has never dropped below 50% for the past eight consecutive quarters (see below).
Coming out of the pandemic, with a return to normalcy, Zscaler’s consistent growth is testament to the importance that’s attached to robust cybersecurity by enterprise clients.
While revenue growth for the full FY2022 came in at 62% year-on-year, management did guide for a slowdown in growth rates.
Guidance of between US$1.49-1.50 billion in FY2023 would imply a 38% year-on-year expansion from FY2022.
With an estimated total addressable market (TAM) of US$72 billion, Zscaler still has a long runway for growth.
And for a company that has gross margin of over 80%, while also being operating and free cash flow positive, long-term investors in best-of-breed cybersecurity firms should be a happy bunch.
Source: Zscaler September 2022 investor presentation
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.
