Zscaler Reports Strong Q2 Earnings but Lowers FY26 Sales Guidance
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 day ago
0mins
Should l Buy ZS?
Source: Benzinga
- Earnings Beat: Zscaler reported Q2 earnings of $1.01 per share, surpassing the analyst consensus of $0.90, indicating strong performance in the cybersecurity sector despite a challenging market environment.
- Revenue Growth: The quarterly revenue reached $815.75 million, exceeding the analyst estimate of $798.82 million, reflecting sustained demand for cybersecurity solutions in the AI era and enhancing its competitive position.
- Guidance Downgrade: Zscaler lowered its FY26 revenue outlook to a range of $3.31 billion to $3.32 billion, down from the previous estimate of $3.3 billion, indicating a cautious outlook that may impact investor confidence.
- Stock Volatility: Following the earnings announcement, Zscaler's shares fell 13.4% to $144.97 in pre-market trading, reflecting negative market sentiment towards the lowered guidance, with analysts adjusting their price targets potentially exacerbating market fluctuations.
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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: 167.360
Low
260.00
Averages
325.62
High
390.00
Current: 167.360
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 platform protects thousands of customers from cyberattacks and data loss by securely connecting users, devices, and applications in any location. Its solution is a purpose-built, multi-tenant, distributed cloud platform that incorporates the security functionality needed to enable users, applications, and devices to safely and efficiently utilize authorized applications and services based on an organization’s business policies. 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. It offers a security platform that combines its platform with automated security operations.
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 Reports Strong Q2 Earnings but Lowers FY26 Sales Guidance
- Earnings Beat: Zscaler reported Q2 earnings of $1.01 per share, surpassing the analyst consensus of $0.90, indicating strong performance in the cybersecurity sector despite a challenging market environment.
- Revenue Growth: The quarterly revenue reached $815.75 million, exceeding the analyst estimate of $798.82 million, reflecting sustained demand for cybersecurity solutions in the AI era and enhancing its competitive position.
- Guidance Downgrade: Zscaler lowered its FY26 revenue outlook to a range of $3.31 billion to $3.32 billion, down from the previous estimate of $3.3 billion, indicating a cautious outlook that may impact investor confidence.
- Stock Volatility: Following the earnings announcement, Zscaler's shares fell 13.4% to $144.97 in pre-market trading, reflecting negative market sentiment towards the lowered guidance, with analysts adjusting their price targets potentially exacerbating market fluctuations.
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- Financial Results: The decline in stock price was attributed to wider net losses reported in the quarter.
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- Price Target Adjustment: Oppenheimer has lowered Zscaler's price target from $345 to $280, reflecting a decline in peer multiples while maintaining an Outperform rating, indicating confidence in the company's future performance.
- Earnings Performance: Zscaler reported a solid Q2, exceeding revenue expectations and achieving sequential gross and operating margin expansion, demonstrating the company's competitive edge and improving profitability in the market.
- Increased Growth Expectations: Management raised FY26 organic net new annual recurring revenue (NNARR) growth expectations and issued Q3 guidance ahead of consensus, showcasing an optimistic outlook for future performance.
- Multiple Firms Lower Price Targets: Several firms, including Evercore ISI, RBC Capital, Mizuho, Baird, and UBS, have lowered their price targets for Zscaler, reflecting a cautious market sentiment regarding the company's future growth, which may impact investor confidence.
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- Industry Risk Assessment: Koenig expresses cautious optimism about the long-term outlook for the software sector, suggesting that while uncertainty looms, technological innovation will continue to drive industry growth, despite potential short-term volatility.
- Investor Sentiment Shift: The concept of 'SaaS-pocalypse' has shaken investor confidence in software companies, leading to increased stock price volatility, particularly for those operating under the SaaS model, which faces heightened scrutiny.
- Future Outlook: Despite the challenging market environment, Koenig believes that advancements in AI and other technologies could enable a recovery in the software industry, urging investors to focus on innovation and adaptability within the sector.
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- Earnings Miss: The company posted earnings per share of $1.74, missing the consensus estimate of $1.99, reflecting pressures from rising costs and intensified market competition, which may raise concerns about future profitability among investors.
- Significant Stock Decline: In pre-market trading, Flutter's shares plummeted by 14.8% to $104.84, indicating a strong market reaction to the disappointing earnings report, which could adversely affect the company's short-term market performance.
- Uncertain Future Guidance: Flutter issued weak FY26 revenue guidance in its report, potentially diminishing market confidence in the company's growth prospects and exacerbating stock volatility risks.
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Zscaler Reports Strong Q2 Earnings but Lowers FY26 Sales Guidance
- Earnings Beat: Zscaler reported Q2 earnings of $1.01 per share, surpassing the analyst consensus of $0.90, indicating strong performance in the cybersecurity sector despite a challenging market environment.
- Revenue Growth: The quarterly revenue reached $815.75 million, exceeding the analyst estimate of $798.82 million, reflecting sustained demand for cybersecurity solutions in the AI era and enhancing its competitive position.
- Guidance Downgrade: Zscaler lowered its FY26 revenue outlook to a range of $3.31 billion to $3.32 billion, down from the previous estimate of $3.3 billion, indicating a cautious outlook that may impact investor confidence.
- Stock Volatility: Following the earnings announcement, Zscaler's shares fell 13.4% to $144.97 in pre-market trading, reflecting negative market sentiment towards the lowered guidance, with analysts adjusting their price targets potentially exacerbating market fluctuations.
See More
Zscaler Stock Drops 10% Following Company’s Larger-than-Expected Q2 Net Loss
- Company Performance: Shares of ZScaler fell by 10% following the release of their Q2 financial results.
- Financial Results: The decline in stock price was attributed to wider net losses reported in the quarter.
See More
Zscaler Shares Decline Despite Strong Earnings: The Volatile Week for Software Stocks Explained.
- Stock Performance: Zscaler's shares experienced a 9% drop ahead of Friday's market opening.
- Earnings Report: The decline occurred despite the company beating earnings estimates announced the previous Thursday.
See More
Oppenheimer Lowers Zscaler Price Target to $280 Amid Peer Multiples Decline
- Price Target Adjustment: Oppenheimer has lowered Zscaler's price target from $345 to $280, reflecting a decline in peer multiples while maintaining an Outperform rating, indicating confidence in the company's future performance.
- Earnings Performance: Zscaler reported a solid Q2, exceeding revenue expectations and achieving sequential gross and operating margin expansion, demonstrating the company's competitive edge and improving profitability in the market.
- Increased Growth Expectations: Management raised FY26 organic net new annual recurring revenue (NNARR) growth expectations and issued Q3 guidance ahead of consensus, showcasing an optimistic outlook for future performance.
- Multiple Firms Lower Price Targets: Several firms, including Evercore ISI, RBC Capital, Mizuho, Baird, and UBS, have lowered their price targets for Zscaler, reflecting a cautious market sentiment regarding the company's future growth, which may impact investor confidence.
See More
Software Industry Faces 'SaaS-pocalypse' Risks
- Market Turmoil Analysis: Steve Koenig, head of software and services research at Macquarie, highlights that the software industry is undergoing unprecedented turmoil due to recent AI-driven sell-offs, with companies like Salesforce (CRM) facing existential threats, coining terms like 'SaaS-pocalypse'.
- Industry Risk Assessment: Koenig expresses cautious optimism about the long-term outlook for the software sector, suggesting that while uncertainty looms, technological innovation will continue to drive industry growth, despite potential short-term volatility.
- Investor Sentiment Shift: The concept of 'SaaS-pocalypse' has shaken investor confidence in software companies, leading to increased stock price volatility, particularly for those operating under the SaaS model, which faces heightened scrutiny.
- Future Outlook: Despite the challenging market environment, Koenig believes that advancements in AI and other technologies could enable a recovery in the software industry, urging investors to focus on innovation and adaptability within the sector.
See More
Flutter Entertainment Reports Disappointing Q4 Results, Shares Plunge
- Disappointing Financial Results: Flutter Entertainment reported Q4 revenue of $4.74 billion, a 25% year-over-year increase, yet it fell short of the market expectation of $4.97 billion, indicating challenges in revenue growth that could impact investor confidence moving forward.
- Earnings Miss: The company posted earnings per share of $1.74, missing the consensus estimate of $1.99, reflecting pressures from rising costs and intensified market competition, which may raise concerns about future profitability among investors.
- Significant Stock Decline: In pre-market trading, Flutter's shares plummeted by 14.8% to $104.84, indicating a strong market reaction to the disappointing earnings report, which could adversely affect the company's short-term market performance.
- Uncertain Future Guidance: Flutter issued weak FY26 revenue guidance in its report, potentially diminishing market confidence in the company's growth prospects and exacerbating stock volatility risks.
See More
