Boersly Weekly: TACO Trades Trigger Market Fatigue
- May 31
- 18 min read
Updated: Jun 12
Friday, 30th of May
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What Moved The Market This Week
After a powerful 20% rally off the lows, the U.S. stock market showed signs of fatigue this week. Momentum stalled as investors were confronted with renewed uncertainty stemming from legal battles, political headlines, and uneven earnings reports.
One of the central themes driving volatility was the legal tug-of-war over President Donald Trump's trade tariffs. On May 28, a federal court ruled that Trump had overstepped his authority under the International Emergency Economic Powers Act (IEEPA) by imposing sweeping tariffs on countries with trade surpluses against the U.S. The court emphasized that the Constitution reserves the power to regulate commerce for Congress, and not even presidential emergency powers justify an exception. The ruling initially buoyed markets, with S&P 500 futures rising 1.4%, the Dow gaining 1.1%, and the Nasdaq-100 climbing 1.7%.
But that optimism quickly faded. The very next day, a federal appeals court temporarily stayed the ruling, allowing the contested tariffs to remain in effect while the case proceeds. The reversal reintroduced market uncertainty, and major indices turned mixed by week’s end. The SPDR S&P 500 ETF (SPY) closed down 0.08%, the Dow ETF (DIA) edged up 0.05%, and the Nasdaq-focused QQQ fell 0.11%.
This back-and-forth in trade policy exemplifies what the New York Times dubbed the “TACO trade” — short for “Trump Always Chickens Out.” The term reflects the pattern of tough rhetoric, followed by partial reversals or delays. While this approach injects risk and volatility into markets, it has historically been followed by sharp rebounds — at least so far. This week’s events showed both sides of that cycle in full swing.
Retailer earnings also contributed to the choppiness. Although some results were “better than feared,” others weighed on sentiment. Companies like Gap warned of significant profit pressure — up to $150 million in 2025 — due to the ongoing tariffs. Dell, Marvell Technology, NetApp, Elastic, and Costco all traded weaker following their reports, while only Zscaler and Ulta Beauty managed to impress investors.
Further dampening sentiment were comments from Donald Trump, who lashed out on Truth Social about trade talks with China. He claimed that China was failing to uphold its commitments from recent negotiations in Geneva, and that the U.S. had been “Mr. Nice Guy” — a stance he now regrets.
In short, the market is grappling with rising uncertainty just as momentum begins to stall. With legal risks escalating, trade policy unclear, and earnings offering a mixed picture, the mood has shifted. Investors are beginning to wonder if the rally has run its course — or if the TACO trade will deliver yet another rebound.
Bitcoin: Momentum Builds as Institutional and Government Support Grows
Bitcoin is experiencing a notable tailwind, with developments across the private and public sectors pointing to a more positive outlook for the world’s leading cryptocurrency.
On the corporate front, companies such as GameStop and Trump Media & Technology have announced substantial Bitcoin acquisitions. GameStop revealed it had purchased 4,710 Bitcoins at a value of over $500 million, while Trump Media plans to raise $2.5 billion through stock and convertible debt sales to build its own Bitcoin reserve. Other U.S. firms — including KULR Technology, Thumzup Media, and SharpLink Gaming — are also allocating significant portions of their liquid assets to Bitcoin or other crypto assets, underlining a trend of increasing corporate adoption.
In parallel, the U.S. government and several individual states are taking active steps toward integrating Bitcoin into their financial frameworks. The federal government recently established a Strategic Bitcoin Reserve and a Digital Asset Stockpile, using seized cryptocurrency assets to build long-term digital reserves. These moves position Bitcoin alongside gold as a strategic reserve asset.
Meanwhile, state-level initiatives are gaining traction. New Hampshire has passed legislation allowing public funds to be partially invested in digital assets like Bitcoin. Texas and Arizona are following suit with similar programs, and more than two dozen U.S. states have introduced legislation to establish crypto reserves. These policy changes suggest a growing acceptance of Bitcoin not only as an investment vehicle but also as a strategic asset for public finance.
The backdrop for Bitcoin is further strengthened by structural tailwinds: persistent inflation concerns, increased geopolitical risk, and growing interest in Bitcoin as a hedge and digital store of value. The approval of spot Bitcoin ETFs in the U.S. has opened new channels for traditional investors, while on-chain metrics indicate strong accumulation by long-term holders.
Together, these developments point to a more mature, institutional, and resilient phase for Bitcoin — with increasing support from both Wall Street and Washington.
Reported Quarterly Earnings This Week
Costco Wholesale (COST)
Q3 FY2025 Financial Highlights:
Revenue: $63.21 billion, up 8% year-over-year, exceeding the consensus estimate of $62.93 billion.
Earnings Per Share (EPS): $4.28, beating analyst expectations of $4.24.
Comparable Store Sales: Increased by 5.7%, slightly below the anticipated 6% growth.
E-commerce Sales: Surged by 15%, reflecting strong online demand.
Net Income: $1.9 billion, a 13% increase from the previous year.
Strategic Developments:
Tariff Mitigation: Costco proactively managed tariff impacts by advancing product orders and shifting production to local markets for its private-label items, helping control costs and limit price increases for consumers.
Consumer Behavior Shift: The company observed a trend of consumers choosing to eat at home more frequently, leading to increased sales in meat and produce categories.
Membership Growth: Membership numbers increased by 7.2% compared to last year, with Costco ending the quarter with almost 139 million membership cardholders.
Market Reaction:
Following the earnings release, Costco's stock experienced a modest decline of 0.4% in after-hours trading, despite the strong financial performance.
Analysts:
Bernstein analyst Zhihan Ma has raised the price target for Costco Wholesale from $1,148 to $1,153 and maintains an "Outperform" rating on the stock. The analyst notes that Costco reported third-quarter results that exceeded consensus expectations. Bernstein continues to view Costco as the highest-quality company in its coverage portfolio, with global warehouse expansion opportunities for decades to come.
Laura Champine, an analyst at Loop Capital, has lowered her price target for Costco Wholesale from $1,115 to $1,110, while maintaining a "Buy" rating on the stock following better-than-expected third-quarter results. Core sales exceeded consensus in every period of the quarter, and Costco is passing on cost increases gradually, which is leading to market share growth. Champine adds that she remains positive on the stock, noting the company’s above-average value.
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Dell (DELL)
Q1 FY2026 Financial Highlights:
Revenue: $23.38 billion, up 5% year-over-year, surpassing the consensus estimate of $23.14 billion.
Adjusted EPS: $1.55, below analyst expectations of $1.69.
Infrastructure Solutions Group (ISG): Revenue of $10.3 billion, a 12% increase year-over-year, driven by strong demand for AI-optimized servers.
Client Solutions Group (CSG): Revenue of $12.5 billion, up 5% year-over-year, indicating resilience in the PC market.
AI Server Orders: $12.1 billion in the quarter, exceeding total shipments for all of fiscal 2025, with a backlog of $14.4 billion.
Forward Guidance:
Q2 FY2026 Revenue: Projected between $28.5 billion and $29.5 billion, above analyst expectations of $25.05 billion.
Full-Year FY2026 Revenue: Expected between $101 billion and $105 billion.
Full-Year Adjusted EPS: Forecasted at $9.40, up from the previous estimate of $9.30.
Market Reaction:
Despite strong revenue and optimistic guidance, Dell's stock experienced volatility. The shares initially rose 5.6% in after-hours trading but closed down approximately 2% the following day. Analysts attribute this to the EPS miss and concerns over margin pressures.
Analysts:
Wamsi Mohan, analyst at Bank of America, has raised the price target for Dell Technologies from $150 to $155 and maintains a "Buy" rating. Dell reported first-quarter revenue that exceeded expectations, but earnings per share came in at the low end of the guidance, attributed to minor tariff impacts on CSG margins and slightly weaker growth in the ISS segment. At a high level, the analyst sees potential for Dell to generate over $30 billion in AI server revenue within the next two years, with a significant boost to earnings per share if AI server momentum accelerates.
Barclays analyst Tim Long raised the price target for Dell from $116 to $123, maintaining an "Equal Weight" rating. Dell reported a mixed first quarter, but the highlight was $12.1 billion in AI-related orders, exceeding all AI revenue from the previous fiscal year. The analyst notes that full-year guidance remains unchanged, citing macroeconomic uncertainty and lower margins, although he believes this outlook is likely conservative.
Citigroup analyst Asiya Merchant raised the price target for Dell from $128 to $135, maintaining a "Buy" rating. Dell delivered a mixed quarter, with revenue beating and earnings missing estimates. The analyst says management reaffirmed full-year revenue guidance despite macro headwinds, and believes Dell’s “strong” AI momentum offsets weakness in its enterprise segment.
J.P. Morgan analyst Samik Chatterjee raised the price target from $111 to $125 and maintains an "Overweight" rating. He notes that demand and orders for AI servers in Q1, along with above-average expectations for Q2, were a bright spot in an otherwise muted outlook. However, traditional enterprise demand drivers are weakening, leading to more cautious sentiment for the second half of the year.
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Elastic (ESTC)
Q4 FY2025 Financial Highlights:
Revenue: $388.4 million, a 15.9% increase year-over-year, exceeding the consensus estimate of $380.6 million.
Earnings Per Share (EPS): $0.47 (non-GAAP), beating analyst expectations of $0.37.
Elastic Cloud Revenue: Grew by 23% year-over-year, highlighting strong demand for the company's cloud-based solutions.
Non-GAAP Operating Margin: 15%, demonstrating improved operational efficiency.
Strategic Highlights:
Enterprise Customer Growth: The number of customers spending over $100,000 annually increased to over 1,510, indicating strong enterprise adoption.
Generative AI Momentum: Elastic experienced significant growth in generative AI applications, with over 1,750 Elastic Cloud customers utilizing these solutions.
Notable Deals: Secured an eight-figure expansion deal with a global financial institution for Elastic Observability, showcasing the company's competitive edge.
Guidance for Q1 FY2026:
Revenue: Projected between $396 million and $398 million, slightly above the consensus estimate of $395.1 million.
Non-GAAP EPS: Expected to be between $0.41 and $0.43, aligning with analyst expectations.
Market Reaction:
Despite the strong quarterly performance, Elastic's stock declined approximately 14% to $79.61 following the earnings release. Analysts attribute this to the company's conservative fiscal year 2026 outlook.
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Gap (GPS)
Q1 FY2025 Financial Highlights:
Revenue: $3.5 billion, a 2% increase year-over-year, surpassing the consensus estimate of $3.41 billion.
Earnings Per Share (EPS): $0.51, beating analyst expectations of $0.44.
Comparable Sales: Increased by 2%, with Old Navy and Gap brands showing strong performance, while Banana Republic and Athleta experienced declines.
Online Sales: Grew by 6%, representing nearly 40% of total net sales.
Strategic Developments:
Tariff Impact: Gap warned that proposed tariffs could result in additional costs of $250 million to $300 million. After mitigation strategies, the net impact to operating income is estimated between $100 million and $150 million, primarily in the second half of the year.
Supply Chain Diversification: The company has reduced its reliance on China to below 10% and aims to lower it further to below 3% by the end of 2025.
Domestic Investment: Gap plans to double its use of U.S.-grown cotton by 2026, emphasizing its commitment to investing in its domestic market.
Market Reaction:
Despite the strong earnings report, Gap's stock declined by approximately 20% to $22.31 following the announcement. The decline is attributed to investor concerns over potential profit impacts from proposed tariffs.
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Marvell Technology (MRVL)
Q1 FY2026 Financial Highlights:
Revenue: $1.90 billion, up 63% year-over-year, surpassing the consensus estimate of $1.88 billion.
Adjusted EPS: $0.62, slightly above the expected $0.61.
Data Center Revenue: $1.44 billion, accounting for 76% of total revenue, driven by strong demand for custom AI chips.
Net Income: $177.9 million, compared to a net loss of $215.6 million in the same quarter the previous year.
Forward Guidance:
For Q2 FY2026, Marvell anticipates revenue of approximately $2.0 billion, exceeding Wall Street's estimates, fueled by robust demand for custom chips supporting AI workloads in data centers.
Strategic Developments:
Amazon Relationship: Marvell continues to work with Amazon Web Services (AWS) on future iterations of the Trainium AI chip, despite concerns over a potential dual-sourcing strategy by AWS.
Microsoft Partnership: The company is reportedly collaborating with Microsoft on custom AI chip development, which could serve as an alternative growth driver.
Upcoming Events: Marvell plans to host a webinar on June 17 focusing on the future of custom silicon technology for AI infrastructure, which may serve as a potential catalyst for positive sentiment.
Market Reaction:
Despite the positive earnings report, Marvell's stock declined by approximately 6.6% to $59.50 following the announcement. The decline is attributed to investor concerns over potential loss of business from Amazon's Trainium AI chip program and the company's reliance on a few large customers.
Analysts:
Analysts at Deutsche Bank have lowered the price target for Marvell Technology from $100 to $85, while maintaining a "Buy" rating. The company reported "solid, not spectacular" Q1 results. The analysts noted that Marvell addressed some hot-button issues, reaffirming its confidence in multi-generation XPU production ramp-ups with its two main customers, and expressing expectations for growth with its first customer in fiscal years 2026 and 2027. The company also once again sought to ease ongoing concerns about socket losses to a Taiwanese competitor.
Joseph Moore, analyst at Morgan Stanley, raised the price target for Marvell from $70 to $73, maintaining an "Equal Weight" rating. While Marvell again delivered a quarter in line with expectations and issued unsurprising guidance, Trainium 2 fell short of original expectations. The analyst added that it is "clear we overestimated either pricing, volume, or both for the Trainium opportunity." However, he noted this has already been reflected in earlier-year figures and is no longer a surprise from this point onward.
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NetApp (NTAP)
Q4 FY2025 Financial Highlights:
Revenue: $1.73 billion, up 4% year-over-year, surpassing the consensus estimate of $1.72 billion.
Adjusted Earnings Per Share (EPS): $1.93, beating analyst expectations of $1.90.
Hybrid Cloud Segment Revenue: $1.57 billion, compared to $1.52 billion in the same quarter the previous year.
Public Cloud Segment Revenue: $164 million, up from $152 million year-over-year.
Operating Cash Flow: $675 million, an increase from $613 million in the prior-year quarter.
Shareholder Returns: Returned $355 million through share repurchases and cash dividends during the quarter.
Q1 FY2026 Guidance:
Revenue: Expected to be between $1.455 billion and $1.605 billion, below the analyst consensus of $1.61 billion.
Adjusted EPS: Projected between $1.48 and $1.58, compared to the consensus estimate of $1.65.
Market Reaction:
Following the earnings release, NetApp's stock declined by approximately 5% in after-hours trading. Analysts attribute the drop to the company's cautious guidance for the upcoming quarter, reflecting broader economic concerns and intensified competition in the data storage industry.
Analysts:
Wamsi Mohan, analyst at Bank of America, has raised the price target for NetApp from $120 to $121 while maintaining a "Neutral" rating. After NetApp reported fourth-quarter results and issued guidance for fiscal year 2025/26 that was mostly in line with expectations, the analyst adjusted his forecasts. He lowered the revenue estimate for fiscal year 2025/26 from $6.91 billion to $6.76 billion, but raised the earnings per share estimate from $7.59 to $7.77.
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Nvidia (NVDA)
Financial Highlights:
Revenue: $30.0 billion, up 15% quarter-over-quarter and 122% year-over-year, surpassing the $28.7 billion consensus estimate.
Data Center Revenue: $26.3 billion, a 16% sequential increase and 154% year-over-year growth, fueled by strong demand for Hopper GPUs and networking platforms.
Non-GAAP EPS: $0.68, exceeding the consensus of $0.65.
Gross Margin: 75.1%, down from 78.4% in the previous quarter, attributed to inventory provisions and product mix shifts.
Strategic Developments:
Blackwell AI Chips: Sample shipments began during the quarter, with production ramp-up expected in Q4 FY2025. The company anticipates several billion dollars in revenue from Blackwell chips in that quarter.
Share Buyback Program: NVIDIA's board approved an additional $50 billion in share repurchase authorization, reflecting confidence in the company's future prospects.
Outlook:
Q3 FY2025 Guidance: Revenue projected at approximately $32.5 billion, with GAAP and non-GAAP gross margins expected to be around 74.4% and 75.0%, respectively.
AI Demand: CEO Jensen Huang emphasized the exponential growth in AI workloads, noting that inference tasks now contribute over 40% of data center revenue.
Market Reaction:
Following NVIDIA's Q2 FY2025 earnings release, the market reacted positively, with the stock rising over 5% in after-hours trading. This surge was driven by strong revenue and earnings that surpassed analyst expectations, particularly in the data center segment, which saw a 154% year-over-year increase to $26.3 billion. Despite concerns about U.S. export restrictions to China potentially impacting future sales, investors remained optimistic due to NVIDIA's robust AI demand and strategic initiatives like the rollout of Blackwell AI chips and a $50 billion share buyback program.
However, some analysts cautioned that the company's growth pace has moderated compared to previous quarters, and the projected revenue for the next quarter, while strong, may not fully meet the heightened market expectations. Overall, the market's response underscores confidence in NVIDIA's leadership in AI and data center technologies, despite geopolitical challenges.
Analysts:
Barclays analyst Tom O'Malley raised the price target for NVIDIA from $155 to $170 and maintains an "Overweight" rating following the release of the company’s Q1 results. From his perspective, NVIDIA continues to deliver sequential growth, even while facing more than $10 billion in headwinds from China in the April and July quarters alone.
Vivek Arya, analyst at Bank of America, increased his price target for NVIDIA from $160 to $180 and reiterated his "Buy" rating. With China no longer posing a risk and Blackwell racks now in full production, Arya reaffirmed his buy recommendation for his "top pick" NVIDIA. He also raised his pro-forma EPS estimates for fiscal years 2025/26, 2026/27, and 2027/28 by 6%, 2%, and 12%, respectively, to $4.21, $5.87, and $7.23.
Citigroup analyst Atif Malik also raised his price target for NVIDIA from $150 to $180, maintaining a "Buy" rating. The company reported April-quarter results in line with his expectations, and issued a revenue forecast for the July quarter that was $1 billion above his estimates. Malik added that this marked the end of the transition quarter related to the H20 ban in China. Furthermore, revenue from Blackwell reached $24 billion, exceeding Citi’s projection of $20 billion, while management maintained its gross margin target in the mid-70% range, indicating improved profitability from Blackwell despite minimal tariff impact. Citi believes NVIDIA’s stock is likely to break out of its trend since mid-last year and reach a new 52-week high, driven by expanding margins.
Morgan Stanley analyst Joseph Moore raised his NVIDIA price target from $160 to $170 and kept an "Overweight" rating. He stated that without the H20 ban, NVIDIA would have exceeded its April-quarter forecast by more than $3 billion. Moore claims the company has "completely dispelled digestion fears" and is showing business acceleration aside from the China-related headwinds. He believes the bear case has faded and sees the company as being in a durable turnaround. According to Moore, “everything should get better from here” for his top semiconductor pick.
Piper Sandler analyst Harsh Kumar lifted the price target for NVIDIA from $150 to $180 while maintaining an "Overweight" rating. He called NVIDIA’s April-quarter performance strong and noted that, despite the China ban, the company still beat estimates. For the July quarter, NVIDIA guided revenue to $45 billion, slightly below the consensus of $45.8 billion, but management indicated that around $8 billion of that would be a drag from the China business. Overall, Piper Sandler sees continued strong execution and remains optimistic.
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Salesforce (CRM)
Q1 FY2026 Financial Highlights:
Revenue: $9.83 billion, up 8% year-over-year, surpassing the consensus estimate of $9.75 billion.
Adjusted EPS: $2.58, exceeding the expected $2.55.
Operating Cash Flow: $6.5 billion, a 4% increase year-over-year.
Current Remaining Performance Obligation (CRPO): $29.6 billion, up 12% year-over-year.
Non-GAAP Operating Margin: 32.3%.
Outlook:
Q2 FY2026 Guidance: Revenue projected between $10.11 billion and $10.16 billion; adjusted EPS between $1.80 and $1.82.
Full-Year FY2026 Guidance: Revenue expected between $41.0 billion and $41.3 billion, up from the previous forecast of $40.5 billion to $40.9 billion. Adjusted EPS projected between $7.15 and $7.21.
Strategic Developments:
AI Initiatives: Salesforce's AI-driven Agentforce platform reached $100 million in annual recurring revenue. CEO Marc Benioff emphasized the company's unified enterprise AI platform, integrating agents, data, apps, and metadata.
Informatica Acquisition: Salesforce announced plans to acquire data-management firm Informatica for $8 billion, aiming to enhance its AI capabilities. The deal is expected to close in early fiscal 2027.
Market Reaction:
Despite the strong earnings report, Salesforce's stock fell approximately 6.4% following the announcement. Analysts attribute this decline to concerns over slowing growth in core cloud segments and the implications of the Informatica acquisition.
Analysts:
Barclays analyst Raimo Lenschow has lowered the price target for Salesforce from $425 to $347 but maintains an "Overweight" rating on the cloud software company. He believes that the company’s Q1 report was solid enough to drive the stock from here. Increased sales capacity and growing adoption of Agentforce should support revenue going forward, especially considering that guidance remains conservative.
Goldman Sachs analyst Kash Rangan raised his price target for Salesforce from $340 to $385, keeping a "Buy" rating. The company delivered solid Q1 results and raised its revenue forecast. According to Rangan, investors are weighing the quarterly performance against a shift in the company’s sales approach, which could signal margin pressure. While he acknowledges concerns about this change in tone after two years of carefully managed margin expansion and cost control, he views the scaling of Salesforce’s sales capacity as "strategically sensible."
Morgan Stanley analyst Keith Weiss increased his price target for Salesforce from $393 to $404 and reiterated his "Overweight" rating. The company’s Q1 current remaining performance obligation (cRPO) growth of 11.4% in constant currency beat forecasts by about 100 basis points. Confirming full-year guidance for FY 2025/26 was seen by the analyst as “better than feared” in light of macro volatility and concerns following M&A activity. He added that growing momentum in Data Cloud and Agentforce strengthens confidence in Salesforce’s positioning in the AI space.
Oppenheimer analyst Brian Schwartz cut his price target for Salesforce from $380 to $370 due to compressed valuation multiples but maintained an "Outperform" rating. He noted that Salesforce’s Q1 results mostly exceeded consensus estimates, and the cRPO growth forecast came in 200 basis points above expectations. Management was positive on the rollout of Agentforce and Data Cloud, as well as strength in specific industries. On the downside, growth guidance remains “tepid” due to the challenging macroeconomic environment.
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Ulta Beauty (ULTA)
Q1 Financial Highlights:
Revenue: $2.85 billion, a 4.5% year-over-year increase, surpassing analyst expectations of $2.79 billion.
Earnings Per Share (EPS): $6.70, exceeding the consensus estimate of $5.73.
Comparable Store Sales: Increased by 2.9%, significantly above the anticipated 0.37%.
Strategic Insights:
CEO Kecia Steelman attributed the strong performance to robust sales in fragrances and the successful launch of new and exclusive brands. She noted that consumers are turning to beauty products as a source of comfort amid economic uncertainties.
Updated Guidance:
Ulta Beauty raised its full-year EPS forecast to between $22.65 and $23.20 and increased its sales guidance ceiling to $11.7 billion, signaling optimism about continued growth despite a "fluid" operating environment.
Market Reaction:
Following the earnings release, Ulta Beauty's stock surged over 14%, reflecting investor confidence in the company's performance and outlook.
Analysts:
Susan Anderson, an analyst at Citigroup, has raised the price target for Ulta Beauty from $425 to $450 while maintaining a "Neutral" rating on the cosmetics company. She noted that Ulta experienced a rebound in Q1 due to strong execution. The company has shown it can differentiate itself from competitors through an improved brand assortment and stronger marketing strategy. As a result, Citi holds a more positive view of the business, but continues to see a balanced risk-reward profile at the current share price.
J.P. Morgan analyst Chris Horvers raised the price target for Ulta Beauty from $477 to $525 and maintains an "Overweight" rating. The company’s results significantly exceeded expectations on both revenue and margins. Horvers said Ulta gained share in both the mass and prestige beauty segments, despite Amazon increasing its presence and expanding its retail reach over the past four years. J.P. Morgan believes the quarter supports multiple expansion for Ulta’s stock, as the company’s market share gains ease structural concerns and its margin performance sets the stage for upward earnings revisions.
Piper Sandler analyst Korinne Wolfmeyer lifted the price target for Ulta Beauty from $386 to $437 and maintained a "Neutral" rating. She observed that the company delivered solid results and raised guidance, though the updated outlook still reflects expectations for a softer second half of the year amid ongoing macroeconomic uncertainty.
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Zscaler (ZS)
Q3 FY2025 Financial Highlights:
Revenue: $678 million, up 23% year-over-year, exceeding the consensus estimate of $666.86 million.
Adjusted EPS: $0.84, beating analyst expectations of $0.75.
Calculated Billings: $784.5 million, a 25% increase year-over-year.
Deferred Revenue: $1.99 billion, up 26% year-over-year.
Annual Recurring Revenue (ARR): $2.9 billion, reflecting 23% growth year-over-year.
Free Cash Flow: $119.5 million, representing an 18% margin.
GAAP Net Loss: $4.1 million, compared to a net income of $19.1 million in the same quarter last year.
Forward Guidance:
Q4 FY2025 Revenue: Projected between $705 million and $707 million.
Full-Year FY2025 Revenue: Expected to be between $2.659 billion and $2.661 billion.
Full-Year EPS: Anticipated to range from $3.18 to $3.19.
Strategic Developments:
Acquisition: Zscaler announced the acquisition of Red Canary, a managed threat detection and response services provider, for $675 million, aiming to enhance its AI-driven security offerings.
Product Expansion: The company introduced Zscaler Asset Exposure Management, a foundational component of its Continuous Threat Exposure Management (CTEM) suite, providing organizations with comprehensive visibility into asset inventories and associated risks.
Market Reaction:
Following the earnings release, Zscaler's stock price increased by approximately 4.5% in after-hours trading, reflecting investor confidence in the company's strong performance and optimistic outlook.
Analysts:
Bernstein analyst Peter Weed has raised the price target for Zscaler from $244 to $251 and maintains an "Outperform" rating on the stock. He noted that Zscaler’s Q3 results demonstrated strong resilience despite macroeconomic pressure, with revenue coming in $12 million above expectations and an even larger upward revision to the full-year outlook.
KeyBanc analyst Eric Heath increased the price target for Zscaler from $290 to $310 and also maintains an "Overweight" rating, after the company exceeded expectations in the third quarter. Guidance for the fourth quarter was in line with expectations regarding revenue, billings, and margins.
What's Coming Up Next Week
On Tuesday after the market close, Crowdstrike and Hewlett Packard Enterprise will report earnings. On Wednesday, Dollar Tree and MongoDB follow, with Broadcom, Ciena, DocuSign, and Lululemon reporting on Thursday.
In terms of economic data, the May ISM Manufacturing PMI will be released on Monday, followed by May consumer price data for the Eurozone and April JOLTs job openings on Tuesday. On Wednesday, the ISM Services PMI will be published, with the key U.S. labour market report scheduled for Friday.
Regarding central banks, the ECB, the Bank of Canada, and the Reserve Bank of Australia are all expected to cut interest rates next week.
Overview:
Monday, 3 June
Economic Events:
May ISM Manufacturing Index (U.S.) – A key gauge of industrial activity.
Eurozone May CPI (Consumer Price Index) – Important inflation data from Europe.
Tuesday, 4 June
Economic Events:
U.S. April JOLTs Job Openings – Insight into labour market demand.
Earnings Reports:
CrowdStrike (CRWD) – Expected strong YoY growth in revenue and earnings.
Hewlett Packard Enterprise (HPE) – Forecasted decline in both revenue and EPS.
Dollar General (DG) – Slight revenue decline, but strong earnings rebound anticipated.
Wednesday, 5 June
Economic Events:
ISM Services Index (U.S.) – Key services sector activity reading.
Earnings Reports:
Dollar Tree (DLTR) – Solid revenue growth and return to profitability expected.
Thursday, 6 June
Earnings Reports:
Broadcom (AVGO) – Strong revenue and EPS growth, AI-driven.
Lululemon (LULU) – Modest revenue growth, stable earnings.
DocuSign (DOCU) – Positive earnings surprise expected.
Ciena (CIEN) – Boost from telecom infrastructure investments.
Friday, 7 June
Economic Events:
U.S. May Jobs Report (NFP) – The most important macroeconomic data of the week.
Expected job creation: ~130,000
Key input for Fed interest rate decisions.
Saturday, 8 June
Global Events:
OPEC+ Meeting – Expected to discuss production hikes of ~411,000 barrels/day. Could impact energy markets.
Disclaimer: This content is for informational and educational purposes only and does not constitute financial advice. It does not consider your personal objectives, financial situation, or needs. You should consider whether the information is appropriate for your circumstances and seek professional advice before making any investment decisions. Investing in stocks carries inherent risks, and the application of any strategy may not eliminate the risk of loss. Market conditions, volatility, and unforeseen events can impact outcomes, and past performance is not indicative of future results.
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