Zscaler posted a Q3 beat on earnings and revenue but issued guidance for 2027 ARR growth of 16–17%, below Street expectations. The quarterly results included leadership turnover and higher capex, contributing to a >30% stock drop. Management remains confident in cybersecurity demand and AI-related opportunities, though investors will scrutinize ARR trajectory and cost structure over the next several quarters.
Zscaler forecast Q4 revenue below estimates, reflecting intensified competition in the cloud-security market as enterprises reassess spending. The weak guidance triggered a roughly 15% after-hours drop, underscoring near-term growth and margin concerns. Investors will closely watch pipeline visibility and margin resilience for near-term downside vs. longer-term recovery.
Zscaler topped Q3 expectations with revenue of $850.48M and adjusted EPS of $1.08, while ARR reached $3.53B. Cash flow remained robust, yet after-hours trading punished the stock as Q4 guidance was only modestly soft against consensus, even as full-year 2026 targets were raised. The AI-era Zero Trust SASE narrative remains the core growth thesis, suggesting upside if execution improves and sentiment stabilizes.
Zscaler is set to report after the close, showcasing 26% revenue growth and strong free cash flow margins near 27%. The company ends the period with roughly $1.7B in net cash and TTM revenue of about $3.32B, underpinning a resilient, cash-generating SaaS model. Management’s AI security narrative—via Zero Trust Exchange and AI Guardrails—offers a compelling long-term catalyst, though near-term profitability remains a concern.
Zscaler's wider net loss in Q2, driven by higher sales, marketing, and R&D expenses amid a competitive landscape, led to a 9% drop in shares during after-hours trading. Investors should closely monitor continued spending dynamics and their impact on profitability.
ZScaler (NASDAQ: ZS) reported weaker-than-expected earnings for Q2 and reduced its revenue forecast for fiscal 2026, leading to a drop in after-hours stock trading. This signals potential headwinds in meeting future revenue targets, which could further impact investor confidence.
