Zscaler stock surges on deal to buy active defense startup Smokescreen, upbeat quarterly results

Cyber-security firm Zscaler this afternoon reported fiscal Q3 revenue and profit that both topped Wall Street analysts' expectations, and an outlook that was higher as well, and said it will acquire Mumbai, India-based Smokescreen Technologies, a six-year-old startup specializing in what's known as "active defense" technology. 

Terms of the deal were not disclosed.

The Smokescreen technology can help block attacks such as the Colonial Pipeline ransomeware attack that took place earlier this month, Zscaler said.

The report sent Zscaler shares surging by 7% in late trading. 

CEO and founder Jay Chaudhry, remarked, "With the addition of Smokescreen to our Zero Trust Exchange, our customers will be able to change the economics of cyberattacks by making them far more costly, complex and difficult for the adversary both before and during their attempted intrusions"

For those unfamiliar with active defense, Zscaler remarks that, 

In contrast to traditional reactive security measures, active defense uses proactive tactics to thwart the most advanced attackers with high-confidence detections across the lifecycle of an attack. It allows businesses to rebalance the defensive equation in their favor; identifying intrusions before attackers compromise vital company data and resources. Smokescreen is fully aligned with MITRE Shield, a framework for organizations to apply active defense effectively in their security operations workflows.

Revenue in the three months ended in April rose 60%, year over year, to $176.4 million, yielding a profit of 15 cents a share, excluding some costs.

Analysts had been modeling $163.7 million and 7 cents per share.

For the current quarter, the company sees revenue of $185 million to $187 million, and EPS in a range of 8 cents to 9 cents, again, in a non-GAAP basis. That compares to consensus for $174 million and a 9-cent profit per share.

For the full year, the company sees revenue in a range of $660 million to $664 million, and EPS of 47 cents per share. That compares to consensus of $638 million and a 40-cent profit per share.