Lumentum and Texas Instruments Upgraded Amid AI Demand Surge
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 day ago
0mins
Source: seekingalpha
- Lumentum Upgrade: Lumentum Holdings (LITE) was upgraded to Buy by Hunting Alphas, citing a significant increase in purchase obligations and improved liquidity following a $2 billion investment from Nvidia, which signals strong revenue acceleration expected in the second half of 2026, indicating a genuine improvement in the company's fundamentals.
- Texas Instruments Recovery: Texas Instruments (TXN) was also upgraded to Buy, supported by a 90% year-over-year surge in data center revenue and improving operating leverage as manufacturing investments begin to pay off, suggesting early signs of demand revival from both traditional and AI data center sources, presenting new opportunities for investors.
- Nvidia Downgrade: Nvidia (NVDA) was downgraded to Hold by Oliver Rodzianko, who noted that while the company remains a strong compounder, rising valuation risks and increased market competition warrant a more cautious approach, reflecting concerns about future growth sustainability.
- Zscaler Challenges: Zscaler (ZS) was downgraded to Sell by Amrita Roy, who pointed out that despite beating revenue expectations, stagnating organic revenue growth and pressure from integrated platform competitors have created structural challenges that overshadow the stock's current valuation, leading to a bleak outlook.
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Analyst Views on ZS
Wall Street analysts forecast ZS stock price to rise
30 Analyst Rating
24 Buy
6 Hold
0 Sell
Strong Buy
Current: 130.040
Low
260.00
Averages
325.62
High
390.00
Current: 130.040
Low
260.00
Averages
325.62
High
390.00
About ZS
Zscaler, Inc. is a cloud security company. The Company has developed a platform incorporating core security functionalities needed to enable fast and secure access to cloud resources based on identity, context and an organization's policies. Its Zscaler Zero Trust Exchange is a cloud-native platform that securely connects users, devices, applications and workloads, including artificial intelligence (AI) agents, without relying on hub-and-spoke network architecture and firewall-centric security. It delivers its solutions using a software-as-a-service (SaaS) business model and sells subscriptions to customers to access its cloud platform, together with related support services. Its services include Zscaler Internet Access (ZIA), Zscaler Private Access (ZPA), and Zscaler Digital Experience (ZDX). ZIA provides secure access to externally managed applications, including SaaS applications and internet destinations, regardless of device, location or network.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Zscaler Shares Plunge 30% After Weak Fiscal Outlook
- Weak Guidance: Zscaler's fiscal Q3 results revealed a forecast for Q4 revenue growth of 22% year-over-year, estimating between $875 million and $878 million, which fell short of the $878.6 million consensus, indicating challenges in attracting new customers.
- Sales Executive Departures: The departure of two key sales executives has heightened investor concerns, as management indicated this change has impacted sales strategies, leading to a more cautious outlook on future growth and reflecting weaknesses in the core business.
- Struggling ARR Growth: Although Zscaler projects annual recurring revenue (ARR) growth of 16% to 17% for fiscal 2027, this is below expectations, and excluding Red Canary, new ARR growth is only 9.5%, highlighting difficulties in acquiring new customers.
- Strong Customer Retention: Zscaler achieved a 115% net dollar retention rate over the past 12 months, indicating high satisfaction among existing customers, particularly with its AI solutions, as AI Protect saw over $100 million in annual bookings, showcasing the company's ability to expand within its current customer base.
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Zscaler Shares Plunge 30% After Weak Q3 Outlook
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- Weak Outlook Guidance: Despite solid revenue results, the company forecasts only a 22% revenue growth for Q4, estimating between $875 million and $878 million, which falls short of the $878.6 million consensus, reflecting management's cautious stance on future growth.
- Executive Departures Impact: The departure of two sales executives has heightened investor concerns, particularly as the company struggles to attract new customers, which could hinder future sales growth and market share.
- Lackluster ARR Growth: While the acquisition of Red Canary is projected to contribute $136 million in ARR, the overall ARR growth is expected to be only 16%-17%, indicating weakness in the core business and an uncertain growth outlook ahead.
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- Tech Stock Surge: Snowflake's quarterly earnings exceeded expectations and included a $6 billion AI compute deal with Amazon, leading to a more than 36% single-day stock price increase, which reignited enthusiasm across the tech sector and boosted stocks like Dell and Broadcom significantly.
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- Tech Stocks Rally: Dell Technologies surged over 31% after reporting Q1 total revenue of $43.84 billion, significantly exceeding the consensus estimate of $35.52 billion, and raised its 2027 revenue forecast to $165 billion to $169 billion, indicating robust demand for AI infrastructure.
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- Weak Guidance: Zscaler's fiscal Q3 results revealed a forecast for Q4 revenue growth of 22% year-over-year, estimating between $875 million and $878 million, which fell short of the $878.6 million consensus, indicating challenges in attracting new customers.
- Sales Executive Departures: The departure of two key sales executives has heightened investor concerns, as management indicated this change has impacted sales strategies, leading to a more cautious outlook on future growth and reflecting weaknesses in the core business.
- Struggling ARR Growth: Although Zscaler projects annual recurring revenue (ARR) growth of 16% to 17% for fiscal 2027, this is below expectations, and excluding Red Canary, new ARR growth is only 9.5%, highlighting difficulties in acquiring new customers.
- Strong Customer Retention: Zscaler achieved a 115% net dollar retention rate over the past 12 months, indicating high satisfaction among existing customers, particularly with its AI solutions, as AI Protect saw over $100 million in annual bookings, showcasing the company's ability to expand within its current customer base.
See More
Zscaler Shares Plunge 30% After Weak Q3 Outlook
- Strong Revenue Performance: Zscaler reported a 25% year-over-year revenue increase in Q3, reaching $850.5 million, which surpassed management's previous guidance of $834-$836 million, indicating robust performance among existing customers.
- Weak Outlook Guidance: Despite solid revenue results, the company forecasts only a 22% revenue growth for Q4, estimating between $875 million and $878 million, which falls short of the $878.6 million consensus, reflecting management's cautious stance on future growth.
- Executive Departures Impact: The departure of two sales executives has heightened investor concerns, particularly as the company struggles to attract new customers, which could hinder future sales growth and market share.
- Lackluster ARR Growth: While the acquisition of Red Canary is projected to contribute $136 million in ARR, the overall ARR growth is expected to be only 16%-17%, indicating weakness in the core business and an uncertain growth outlook ahead.
See More
Stocks Hit Record Highs Again, Driven by Tech Gains
- Market Performance: Last week, the S&P 500 and Nasdaq Composite rose over 1% and 2%, respectively, marking the S&P 500's ninth consecutive week of gains and the Nasdaq's eighth out of the last nine weeks, reflecting strong investor confidence in the market.
- Tech Stock Surge: Snowflake's quarterly earnings exceeded expectations and included a $6 billion AI compute deal with Amazon, leading to a more than 36% single-day stock price increase, which reignited enthusiasm across the tech sector and boosted stocks like Dell and Broadcom significantly.
- Cybersecurity Stock Volatility: Zscaler's disappointing earnings report resulted in its worst single-day performance, negatively impacting peers CrowdStrike and Palo Alto Networks; however, Okta's strong earnings report led to a 30% stock price jump, indicating ongoing demand in the cybersecurity sector.
- Middle East Situation's Market Impact: Despite mixed signals from the Middle East, rumors of peace progress between Iran and the U.S. spurred market gains, although the White House dismissed the reports, investor optimism still supported the stock market's upward trajectory.
See More
US Stock Indices Reach All-Time Highs Amid Positive Economic Signals
- Strong Market Performance: The S&P 500 rose by 0.22%, the Dow Jones Industrial Average increased by 0.72%, and the Nasdaq 100 climbed by 0.36%, with all three indices reaching new all-time highs, reflecting market confidence in economic recovery.
- Tech Stocks Lead Gains: Dell Technologies surged 32% after reporting Q1 total revenue of $43.84 billion, significantly exceeding the consensus estimate of $35.52 billion, and raised its 2027 revenue forecast to between $165 billion and $169 billion, indicating strong market demand and growth potential.
- Positive Economic Data: The May Chicago PMI rose by 13.5 to 62.7, far surpassing expectations of 50.3, marking the fastest expansion pace in 4.25 years, which further bolstered market confidence in stocks.
- Oil Price Decline Benefits Stocks: Crude oil prices fell over 1% to a five-week low due to a preliminary agreement between the US and Iran, easing inflation concerns and supporting the upward trend in the stock market.
See More
Nasdaq Index Rises on Friday, Dell Technologies Shares Surge
- Dell Technologies Surge: Following its blockbuster first-quarter results, Dell Technologies saw its shares skyrocket over 33%, marking its largest single-day gain since 2024, indicating strong market confidence in its growth potential and attracting investor interest.
- Tech Sector Boosts Nasdaq: The Nasdaq Composite Index closed up 0.28% on Friday, driven by robust performance in the tech sector, suggesting increased investor confidence in technology stocks, which may lead to further price appreciation for related companies.
- Weekly Performance Highlights: Micron and AppLovin led the weekly gains with increases of 26% and 26.36%, respectively, reflecting a positive market outlook for these companies and potentially drawing more capital into the tech sector.
- Weekly Losers: Despite the strong performance of tech stocks, Zscaler and PDD Holdings experienced declines of 18.43% and 13.70% following their quarterly results, indicating market concerns regarding their profitability and future outlook.
See More
US Stock Indices Reach All-Time Highs Amid Positive Economic Signals
- Market Surge: The S&P 500 rose by 0.21%, the Dow Jones Industrial Average increased by 0.65%, and the Nasdaq 100 climbed by 0.25%, with all three indices reaching new all-time highs, reflecting strong market confidence in economic recovery.
- Tech Stocks Rally: Dell Technologies surged over 31% after reporting Q1 total revenue of $43.84 billion, significantly exceeding the consensus estimate of $35.52 billion, and raised its 2027 revenue forecast to $165 billion to $169 billion, indicating robust demand for AI infrastructure.
- Positive Economic Indicators: The May MNI Chicago PMI jumped 13.5 to 62.7, well above the expected 50.3, marking the strongest expansion pace in 4.25 years, which supports the bullish sentiment in the stock market.
- Oil Price Decline: Crude oil prices fell more than 1% to a five-week low as the US and Iran tentatively agreed to extend a ceasefire, easing inflation concerns and fostering optimism about the economic outlook.
See More
