Zscaler Shares Plunge 30% on Weak Guidance Despite Earnings Beat
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 35 minutes ago
0mins
Source: CNBC
- Earnings Beat: Zscaler reported adjusted earnings of $1.08 per share and revenue of $850 million for the fiscal third quarter, surpassing analyst expectations of $835 million, indicating resilience in a challenging market environment.
- Weak Guidance: Despite projecting annual recurring revenue of $3.74 billion to $3.75 billion for FY2026, the guidance for FY2027 indicates only 16% to 17% growth, falling short of market expectations and leading to a significant drop in investor confidence.
- Leadership Changes: The company lost two sales leaders during the quarter, and CFO Kevin Rubin noted a
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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.
Palo Alto Networks Shares Drop 3.2% Amid Cybersecurity Sector Concerns
- Stock Fluctuation: Palo Alto Networks' shares fell 3.2% on Wednesday, with an intraday drop of 5.3%, as market sentiment was influenced by earnings reports from peers in the cybersecurity sector despite no specific news affecting the company.
- Zscaler Earnings Impact: Zscaler's quarterly results led to a 31.5% drop in its stock price, and while its adjusted earnings of $1.08 per share and revenue of $850.48 million exceeded Wall Street expectations, the weaker growth outlook raised concerns about overall cybersecurity valuations.
- Market Reaction: With a market cap of $210 billion, Palo Alto Networks' current share price stands at $248.51, and investor expectations remain high for its upcoming earnings report, projecting sales between $2.941 billion and $2.945 billion, indicating approximately 28.5% year-over-year growth.
- Future Outlook: Despite the sell-off triggered by Zscaler's report, Palo Alto Networks may still achieve significant sales and earnings growth in its upcoming report, yet investors are understandably cautious about potential stock price pullbacks following strong performance.
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- Zscaler Earnings Reaction: Zscaler reported non-GAAP earnings of $1.08 per share and revenue of $850.48 million, both exceeding Wall Street expectations; however, its stock plummeted by 31.5%, reflecting disappointment in future growth projections, which subsequently affected Palo Alto's market performance.
- Market Expectation Pressure: Palo Alto is set to release its Q3 2026 fiscal results on June 2, with high expectations for revenue growth of 28.5% to approximately $2.945 billion, yet investors are concerned about potential valuation pullbacks even if results exceed expectations, given the current market sentiment.
- Investor Confidence Shaken: Although Palo Alto remains up about 35% in 2026 trading, the fallout from Zscaler's report has led to increased skepticism regarding Palo Alto's future performance, especially after it failed to make the Motley Fool's list of top recommended stocks, further exacerbating market unease.
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- Earnings Beat: Zscaler reported adjusted earnings of $1.08 per share and revenue of $850 million for the fiscal third quarter, surpassing analyst expectations of $835 million, indicating resilience in a challenging market environment.
- Weak Guidance: Despite projecting annual recurring revenue of $3.74 billion to $3.75 billion for FY2026, the guidance for FY2027 indicates only 16% to 17% growth, falling short of market expectations and leading to a significant drop in investor confidence.
- Leadership Changes: The company lost two sales leaders during the quarter, and CFO Kevin Rubin noted a
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- Earnings Performance: Zscaler reported a 25% year-over-year revenue increase in Q3, reaching $850.5 million, surpassing the $835.7 million consensus estimate, with adjusted EPS of $1.08 exceeding the $1.01 forecast, yet the Q4 revenue guidance fell short of expectations, projected between $875 million and $878 million.
- Market Reaction: Zscaler's shares plummeted over 31% on Wednesday morning, marking the largest single-day decline, reflecting investor anxiety regarding the company's financial outlook, particularly amid signs of slowing growth.
- Retail Sentiment Shift: Despite the price target cuts, retail sentiment on Stocktwits shifted from ‘Bullish’ to ‘Extremely Bullish’ in the past 24 hours, indicating that retail investors still hold confidence in the company's future prospects.
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Global X Cybersecurity ETF Underperforms
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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.
See More
Palo Alto Networks Shares Drop 3.2% Amid Cybersecurity Sector Concerns
- Stock Fluctuation: Palo Alto Networks' shares fell 3.2% on Wednesday, with an intraday drop of 5.3%, as market sentiment was influenced by earnings reports from peers in the cybersecurity sector despite no specific news affecting the company.
- Zscaler Earnings Impact: Zscaler's quarterly results led to a 31.5% drop in its stock price, and while its adjusted earnings of $1.08 per share and revenue of $850.48 million exceeded Wall Street expectations, the weaker growth outlook raised concerns about overall cybersecurity valuations.
- Market Reaction: With a market cap of $210 billion, Palo Alto Networks' current share price stands at $248.51, and investor expectations remain high for its upcoming earnings report, projecting sales between $2.941 billion and $2.945 billion, indicating approximately 28.5% year-over-year growth.
- Future Outlook: Despite the sell-off triggered by Zscaler's report, Palo Alto Networks may still achieve significant sales and earnings growth in its upcoming report, yet investors are understandably cautious about potential stock price pullbacks following strong performance.
See More
Zscaler Earnings Report Triggers Palo Alto Networks Stock Decline
- Stock Price Impact: Palo Alto Networks saw its stock decline by 3.2% on Wednesday, with an intraday drop of 5.3%, as the market reacted negatively to Zscaler's earnings report, indicating investor concerns about the overall outlook for the cybersecurity sector despite no specific negative news for Palo Alto.
- Zscaler Earnings Reaction: Zscaler reported non-GAAP earnings of $1.08 per share and revenue of $850.48 million, both exceeding Wall Street expectations; however, its stock plummeted by 31.5%, reflecting disappointment in future growth projections, which subsequently affected Palo Alto's market performance.
- Market Expectation Pressure: Palo Alto is set to release its Q3 2026 fiscal results on June 2, with high expectations for revenue growth of 28.5% to approximately $2.945 billion, yet investors are concerned about potential valuation pullbacks even if results exceed expectations, given the current market sentiment.
- Investor Confidence Shaken: Although Palo Alto remains up about 35% in 2026 trading, the fallout from Zscaler's report has led to increased skepticism regarding Palo Alto's future performance, especially after it failed to make the Motley Fool's list of top recommended stocks, further exacerbating market unease.
See More
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- Earnings Beat: Zscaler reported adjusted earnings of $1.08 per share and revenue of $850 million for the fiscal third quarter, surpassing analyst expectations of $835 million, indicating resilience in a challenging market environment.
- Weak Guidance: Despite projecting annual recurring revenue of $3.74 billion to $3.75 billion for FY2026, the guidance for FY2027 indicates only 16% to 17% growth, falling short of market expectations and leading to a significant drop in investor confidence.
- Leadership Changes: The company lost two sales leaders during the quarter, and CFO Kevin Rubin noted a
See More
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- Diversification Strategy: Jim Cramer emphasized the need for diversification even as artificial intelligence dominates the market, ensuring long-term stability in investment portfolios to mitigate risks associated with single-theme investments.
- Stock Recommendations: Cramer recommended four stocks for new members to buy, including Alphabet, Amazon, Apple, and Nvidia, all of which demonstrate strong growth potential, particularly in their AI-related businesses.
- Market Outlook: Despite challenges faced by Meta and Microsoft, Cramer remains cautiously optimistic about their future performance, suggesting that these companies could achieve breakthroughs in the evolving AI landscape.
- Emerging Investment Opportunities: Stocks like Arm Holdings and Broadcom are showing strong performance, particularly in the data center and AI chip sectors, reflecting robust market demand for related technologies, making them worth watching for long-term growth potential.
See More
Zscaler Shares Plunge 31% Amid Cautious Outlook
- Analyst Rating Changes: Among the 47 analysts covering Zscaler, 38 rated it ‘Buy’ or higher; however, Evercore ISI downgraded its rating to ‘In Line’ and slashed its price target by $70 to $155, indicating market concerns about the company's future growth.
- Earnings Performance: Zscaler reported a 25% year-over-year revenue increase in Q3, reaching $850.5 million, surpassing the $835.7 million consensus estimate, with adjusted EPS of $1.08 exceeding the $1.01 forecast, yet the Q4 revenue guidance fell short of expectations, projected between $875 million and $878 million.
- Market Reaction: Zscaler's shares plummeted over 31% on Wednesday morning, marking the largest single-day decline, reflecting investor anxiety regarding the company's financial outlook, particularly amid signs of slowing growth.
- Retail Sentiment Shift: Despite the price target cuts, retail sentiment on Stocktwits shifted from ‘Bullish’ to ‘Extremely Bullish’ in the past 24 hours, indicating that retail investors still hold confidence in the company's future prospects.
See More
Global X Cybersecurity ETF Underperforms
- 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
