Zscaler Q3 Earnings Preview: Strong Growth Expected
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 5 days ago
0mins
Source: seekingalpha
- Earnings Expectations: Zscaler is projected to report Q3 earnings of $1.01 per share, reflecting a 20.2% year-over-year increase, with revenues expected at $835.66 million, indicating a 23.2% growth, showcasing the company's robust growth potential in the cloud security sector.
- Strategic Expansion: The acquisition of SquareX extends Zscaler's Zero Trust security into standard browsers, while further expanding its Zero Trust Exchange platform, indicating a strategic focus on global sovereignty that enhances its competitive edge in the market.
- AI Security Partnership: Zscaler's collaboration with OpenAI strengthens its AI security positioning, and being recognized as the 2026 Google Cloud Partner of the Year in the security category highlights its leading role in the AI-driven cloud security market.
- Market Performance: Despite Zscaler beating EPS estimates 100% of the time over the past two years, its stock has fallen approximately 19.8% this year, reflecting the volatility and intensifying competition faced by the cybersecurity industry.
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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: 184.600
Low
260.00
Averages
325.62
High
390.00
Current: 184.600
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.
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- Stock Underperformance: Within the ETF, Zscaler shares fell about 31.2%, raising concerns about its future growth prospects, which could impact its financing capabilities and market position.
- Competitive Pressure: Netskope shares dropped approximately 8.9%, reflecting intensified competition in the cybersecurity industry that may lead to declining profit margins and further loss of market share.
- Market Sentiment Impact: The poor performance of the ETF may prompt investors to reassess the cybersecurity sector, potentially affecting stock prices and future investment decisions for related companies.
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- Decline in Mortgage Applications: US MBA mortgage applications fell by 8.5% for the week ending May 22, with the purchase mortgage sub-index down 0.4% and the refinancing sub-index plunging 18.1%, indicating the suppressive effect of high interest rates on the housing market.
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- Significant Revenue Growth: The company reported a 25.4% year-over-year revenue increase, with annual recurring revenue reaching $3.525 billion, also reflecting a 25% annual growth rate, showcasing Zscaler's competitive strength in the market.
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- Crude Oil Price Decline: Crude oil prices dropped over 4% to a five-week low amid optimism surrounding a US-Iran peace deal, which has lowered inflation expectations and pushed bond yields lower, with the 10-year T-note yield falling to a 1.5-week low of 4.45%.
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- Revenue Growth: The company achieved a year-over-year revenue increase of 25.4%, closing the quarter with annual recurring revenue of $3.525 billion, also up approximately 25%, demonstrating Zscaler's ongoing market share expansion and customer base enhancement.
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See More
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- ETF Decline: The Global X Cybersecurity ETF is down approximately 5% in Wednesday afternoon trading, indicating overall weakness in the sector that may affect investor confidence and lead to capital outflows.
- Stock Underperformance: Within the ETF, Zscaler shares fell about 31.2%, raising concerns about its future growth prospects, which could impact its financing capabilities and market position.
- Competitive Pressure: Netskope shares dropped approximately 8.9%, reflecting intensified competition in the cybersecurity industry that may lead to declining profit margins and further loss of market share.
- Market Sentiment Impact: The poor performance of the ETF may prompt investors to reassess the cybersecurity sector, potentially affecting stock prices and future investment decisions for related companies.
See More
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- Impact of Falling Oil Prices: Crude oil prices dropped over 3% amid optimism for a normalization of oil flows from the Middle East, which not only eased inflation expectations but also pushed the 10-year Treasury yield down to a 1.5-week low of 4.45%, positively affecting the bond market.
- Decline in Mortgage Applications: US MBA mortgage applications fell by 8.5% for the week ending May 22, with the purchase mortgage sub-index down 0.4% and the refinancing sub-index plunging 18.1%, indicating the suppressive effect of high interest rates on the housing market.
- Corporate Earnings Overview: As of now, 83% of the 475 S&P 500 companies that reported Q1 earnings have exceeded expectations, with overall earnings projected to rise by 12% year-on-year, but excluding the tech sector, the growth is only 3%, highlighting disparities across industries.
See More
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- Telecom Infrastructure Surge: Dycom Industries saw a stock increase of about 30% after raising its full-year outlook, projecting contract revenue between $7.38 billion and $7.65 billion, and enhancing its data center capabilities through the acquisition of National Technology Integrators.
- Cloud Security Decline: Zscaler's shares tumbled over 30% after guiding for current-quarter revenue below analyst expectations, despite beating third-quarter adjusted earnings forecasts, reflecting market concerns about its future growth trajectory.
- Retail Stock Gains: Bath & Body Works shares rose 12% after forecasting second-quarter earnings per share between 20 to 25 cents, exceeding analyst expectations, which indicates strong consumer demand and improved profitability for the company.
See More
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- Earnings Beat: Zscaler's fiscal Q3 results revealed adjusted earnings per share of $1.08 and sales of $850.48 million, surpassing Wall Street's expectations of $1.01 and $835.66 million, indicating strong performance in the cybersecurity sector.
- Significant Revenue Growth: The company reported a 25.4% year-over-year revenue increase, with annual recurring revenue reaching $3.525 billion, also reflecting a 25% annual growth rate, showcasing Zscaler's competitive strength in the market.
- Robust Cash Flow: Zscaler's free cash flow grew by 14% year-over-year to $136 million, demonstrating ongoing improvements in operational efficiency and profitability, despite the sharp decline in stock price.
- Market Overreaction: Although Zscaler's guidance for current quarter sales between $875 million and $878 million fell short of the analyst estimate of $878.66 million, the slight upward revision of its full-year sales target to between $3.3295 billion and $3.3225 billion suggests that the market may be overreacting to the quarterly report.
See More
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- Market Divergence: The S&P 500 index fell by 0.05%, while the Dow Jones Industrial Average rose by 0.23%, and the Nasdaq 100 index decreased by 0.15%, indicating a divergence in market performance, particularly under the pressure of weak energy and cybersecurity stocks.
- Crude Oil Price Decline: Crude oil prices dropped over 4% to a five-week low amid optimism surrounding a US-Iran peace deal, which has lowered inflation expectations and pushed bond yields lower, with the 10-year T-note yield falling to a 1.5-week low of 4.45%.
- Mortgage Application Decrease: For the week ending May 22, US MBA mortgage applications fell by 8.5%, with the purchase mortgage sub-index down 0.4% and the refinancing mortgage sub-index down 18.1%, indicating the suppressive effect of high rates on the housing market.
- Earnings Performance: As of now, 83% of the 475 S&P 500 companies that reported Q1 earnings have exceeded expectations, with Q1 earnings projected to rise by 12% year-over-year, but excluding the technology sector, earnings growth is only about 3%, marking the lowest in two years, reflecting disparities across industries.
See More
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- Earnings Beat: Zscaler reported adjusted earnings per share of $1.08 and sales of $850.48 million for fiscal Q3 2026, surpassing Wall Street's expectations of $1.01 and $835.66 million, indicating robust performance in the cybersecurity sector.
- Revenue Growth: The company achieved a year-over-year revenue increase of 25.4%, closing the quarter with annual recurring revenue of $3.525 billion, also up approximately 25%, demonstrating Zscaler's ongoing market share expansion and customer base enhancement.
- Cash Flow Improvement: Zscaler's free cash flow grew by 14% year-over-year to reach $136 million, reflecting improvements in operational efficiency and profitability, although the market remains cautious about its future growth prospects.
- Guidance Update: While Zscaler raised its Q4 sales guidance to between $875 million and $878 million, suggesting a 22% year-over-year growth, this still fell short of the analyst estimate of $878.66 million, leading to a 30.7% drop in stock price post-report, indicating potential market overreaction.
See More
