Zscaler Reports Strong Q3 Growth with Record Margins
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 days ago
0mins
Source: Yahoo Finance
- Significant Revenue Growth: Zscaler reported Q3 revenue of $850 million, a 25% year-over-year increase, with annual recurring revenue (ARR) reaching $3.5 billion, indicating strong demand and sustained growth potential in the cloud security market.
- Record Operating Profit: The company achieved a non-GAAP operating margin of 23%, marking an all-time high that reflects successful cost control and efficiency improvements, thereby enhancing investor confidence.
- Expanding Customer Base: Zscaler's number of customers with over $1 million in ARR increased to 748, up 18% year-over-year, indicating improved penetration in the enterprise market and the potential for higher revenue growth in the future.
- Optimistic Outlook: The company guided for full-year fiscal 2026 revenue between $3.3295 billion and $3.3325 billion, expecting approximately 24.6% to 24.7% year-over-year growth, demonstrating management's confidence in future performance despite challenges from sales leadership turnover.
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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.
- Performance Update Disappointment: The cybersecurity company failed to meet market expectations in its latest performance update, leading to a decline in investor confidence and a significant drop in stock prices during afternoon trading on May 26, 2026.
- Stock Price Volatility: Following the earnings release, the stock experienced extreme volatility, reflecting market concerns about the company's future growth potential, which could impact its financing capabilities and competitive position in the industry.
- Investor Reaction: The disappointment among investors regarding the company's future outlook may lead to increased selling pressure, further depressing stock prices and affecting the company's market capitalization.
- Need for Strategic Adjustment: In light of the poor performance, the company may need to reassess its strategic direction and market positioning to restore investor confidence and improve future performance outcomes.
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- Earnings Disappointment: Zscaler's latest earnings report failed to meet investor expectations, resulting in a stock price decline that reflects market concerns over its future growth, potentially impacting its financing capabilities and market confidence.
- Investor Focus Shift: Although Zscaler did not make it onto The Motley Fool's list of the top 10 stocks, the stocks that did have shown impressive past performance, indicating a market appetite for high-return investments that may increase competitive pressure on Zscaler.
- Intensifying Industry Competition: With major companies like Nvidia and Intel requiring critical technology, Zscaler is labeled as an
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- Earnings Performance: Zscaler reported a 25% year-over-year revenue increase to $850.5 million for its third quarter ending April 30, exceeding expectations; however, investor disappointment over future guidance led to a 32% stock plunge.
- Sales Personnel Loss: The company noted the loss of several key salespeople, resulting in a cautious forecast for annual recurring revenue growth of only 16% to 17%, which heightened market concerns and contributed to the stock's decline.
- Price Correction: Zscaler's stock has fallen over 40% since the beginning of the year and is down 61% from its 52-week high of $336.99, with a current forward P/E ratio of 27, higher than the S&P 500's average of 22, indicating valuation concerns.
- Investment Opportunity: Despite the short-term volatility, Zscaler may represent a long-term investment opportunity given the increasing demand for cybersecurity, especially as artificial intelligence introduces new threats, making it a stock to watch for potential recovery.
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