Zscaler Stock Down 34% Amid Revenue Growth Deceleration
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 42 minutes ago
0mins
Source: Fool
- Revenue Growth Slowdown: Zscaler's stock has declined approximately 34% year-to-date, primarily due to a deceleration in revenue growth, with only 25% year-over-year growth reported in Q3 FY26, indicating significant pressure on profitability.
- Customer Acquisition and Expansion: Despite challenges, Zscaler's Q3 FY26 report highlights efforts to attract new customers and expand relationships with existing ones, suggesting a focus on driving profitable growth across multiple avenues.
- Bleak Future Outlook: Zscaler anticipates only 16% to 17% year-over-year revenue growth for FY27, a stark contrast to the 44% annualized growth rate over the past five years, reflecting a concerning long-term financial outlook.
- Skepticism on AI Opportunities: While Zscaler positions artificial intelligence as a significant opportunity, current financial metrics suggest that such transformation is not occurring as rapidly as the company claims, potentially undermining investor confidence.
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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: 146.450
Low
260.00
Averages
325.62
High
390.00
Current: 146.450
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 Stock Down 34% Amid Revenue Growth Deceleration
- Revenue Growth Slowdown: Zscaler's stock has declined approximately 34% year-to-date, primarily due to a deceleration in revenue growth, with only 25% year-over-year growth reported in Q3 FY26, indicating significant pressure on profitability.
- Customer Acquisition and Expansion: Despite challenges, Zscaler's Q3 FY26 report highlights efforts to attract new customers and expand relationships with existing ones, suggesting a focus on driving profitable growth across multiple avenues.
- Bleak Future Outlook: Zscaler anticipates only 16% to 17% year-over-year revenue growth for FY27, a stark contrast to the 44% annualized growth rate over the past five years, reflecting a concerning long-term financial outlook.
- Skepticism on AI Opportunities: While Zscaler positions artificial intelligence as a significant opportunity, current financial metrics suggest that such transformation is not occurring as rapidly as the company claims, potentially undermining investor confidence.
See More
Porch Group and Zscaler Options Trading Activity
- Porch Group Options Volume: Today, Porch Group Inc (PRCH) options have reached a trading volume of 10,284 contracts, equivalent to approximately 1 million shares, representing 50.9% of its average daily trading volume of 2 million shares over the past month, indicating a significant increase in market interest.
- High Call Option Activity: Within PRCH, the $17.50 strike call option has been particularly active, with 5,005 contracts traded today, representing about 500,500 underlying shares, suggesting that investors are increasingly optimistic about future price increases.
- Zscaler Options Dynamics: Concurrently, Zscaler Inc (ZS) options are also showing strong performance, with a trading volume of 23,193 contracts, equivalent to approximately 2.3 million shares, accounting for 49.9% of its average daily trading volume of 4.7 million shares, reflecting robust market interest.
- Concentrated Call Option Trading: For ZS, the $162.50 strike call option has seen a trading volume of 1,502 contracts, representing about 150,200 underlying shares, indicating a bullish sentiment among investors regarding the stock's future performance.
See More
U.S. Stocks Close Higher, Led by Technology Gains
- Tech Stock Surge: On Monday, the S&P 500 rose by 1.18%, the Dow Jones increased by 0.59%, and the Nasdaq 100 jumped by 2.25%, indicating a strong rebound in technology stocks that boosted overall market performance and reflected growing investor confidence in the tech sector.
- Geopolitical Easing: The U.S. and Iran agreed to halt hostilities in the Strait of Hormuz ahead of peace talks, providing market support and alleviating investor concerns over geopolitical risks, which contributed to the stock market's upward movement.
- Oil Price Volatility: Although WTI crude oil prices surged over 2% due to escalating tensions, they retreated after the U.S. and Iran reached a temporary ceasefire, highlighting the market's sensitivity to oil price fluctuations and expectations for future economic growth.
- Economic Confidence Indicator Rise: The Eurozone's June economic confidence indicator rose to 95.0, surpassing expectations of 94.3, suggesting signs of economic recovery that may further enhance investor optimism and promote capital inflows into the market.
See More
Valuation Analysis of Zscaler Stock
- Stock Performance: Zscaler's recent closing price is $132.26, with a weekly return of 5.9%, yet it has seen a 40.0% decline year-to-date and a 58.1% drop over the past year, indicating market concerns about its future growth prospects.
- Cash Flow Analysis: The latest twelve-month free cash flow for Zscaler is reported at $852.30 million, with projections suggesting it could reach $1,755.13 million by 2030; the discounted cash flow model estimates an intrinsic value of approximately $205.95 per share, indicating a 35.8% undervaluation.
- Price-to-Sales Ratio Comparison: Zscaler currently trades at a P/S ratio of 6.74x, which is above the software industry average of 3.25x but below the peer average of 9.28x, highlighting its relative value in the market.
- Investor Sentiment: The focus on cybersecurity demand has influenced Zscaler's stock performance; despite a valuation score of 5 out of 6, investor expectations for future growth remain cautious, reflecting broader market sentiment.
See More
U.S. Stocks Close Lower on Friday, Chipmakers Weigh on Market
- Market Decline: The S&P 500 and Nasdaq 100 fell by 0.05% and 1.09% respectively on Friday, reaching two-week lows, indicating market sensitivity to the weak performance of chipmakers, which could undermine investor confidence.
- Chipmaker Sell-off: The significant drop in Samsung Electronics and SK Hynix shares led to a more than 5% decline in South Korea's Kospi Index, triggering a global downturn in semiconductor stocks and exacerbating market uncertainty.
- Oil Price Impact: WTI crude oil prices fell over 3% to a four-month low on Friday, which helps lower inflation expectations and supports the stock market, but also reflects potential slowdowns in global economic growth.
- Consumer Sentiment Revision: The University of Michigan's consumer sentiment index was revised upward by 0.6 to 49.5, although still below the expected 50.0, indicating a cautious consumer outlook that may affect future spending.
See More
Zscaler Under Investigation for Securities Fraud
- Strong Financial Performance: Zscaler's Q3 2026 fiscal results exceeded expectations in revenue and earnings; however, the company guided for current-quarter revenue between $875 million and $878 million, falling short of the $879 million consensus, indicating potential growth slowdown.
- Significant Stock Decline: Following the earnings report, Zscaler's stock plummeted by $58.19, or 31.52%, closing at $126.41 per share on May 27, 2026, reflecting investor concerns about future performance.
- Legal Investigation Launched: Pomerantz LLP is investigating Zscaler and its executives for potential securities fraud or other unlawful business practices, which could further damage the company's reputation and shareholder confidence.
- Investor Action Call: Pomerantz LLP is urging Zscaler investors to contact their attorneys to join the class action, highlighting investor concerns over corporate governance and transparency, which may lead to broader legal and financial repercussions.
See More
Zscaler Stock Down 34% Amid Revenue Growth Deceleration
- Revenue Growth Slowdown: Zscaler's stock has declined approximately 34% year-to-date, primarily due to a deceleration in revenue growth, with only 25% year-over-year growth reported in Q3 FY26, indicating significant pressure on profitability.
- Customer Acquisition and Expansion: Despite challenges, Zscaler's Q3 FY26 report highlights efforts to attract new customers and expand relationships with existing ones, suggesting a focus on driving profitable growth across multiple avenues.
- Bleak Future Outlook: Zscaler anticipates only 16% to 17% year-over-year revenue growth for FY27, a stark contrast to the 44% annualized growth rate over the past five years, reflecting a concerning long-term financial outlook.
- Skepticism on AI Opportunities: While Zscaler positions artificial intelligence as a significant opportunity, current financial metrics suggest that such transformation is not occurring as rapidly as the company claims, potentially undermining investor confidence.
See More
Porch Group and Zscaler Options Trading Activity
- Porch Group Options Volume: Today, Porch Group Inc (PRCH) options have reached a trading volume of 10,284 contracts, equivalent to approximately 1 million shares, representing 50.9% of its average daily trading volume of 2 million shares over the past month, indicating a significant increase in market interest.
- High Call Option Activity: Within PRCH, the $17.50 strike call option has been particularly active, with 5,005 contracts traded today, representing about 500,500 underlying shares, suggesting that investors are increasingly optimistic about future price increases.
- Zscaler Options Dynamics: Concurrently, Zscaler Inc (ZS) options are also showing strong performance, with a trading volume of 23,193 contracts, equivalent to approximately 2.3 million shares, accounting for 49.9% of its average daily trading volume of 4.7 million shares, reflecting robust market interest.
- Concentrated Call Option Trading: For ZS, the $162.50 strike call option has seen a trading volume of 1,502 contracts, representing about 150,200 underlying shares, indicating a bullish sentiment among investors regarding the stock's future performance.
See More
U.S. Stocks Close Higher, Led by Technology Gains
- Tech Stock Surge: On Monday, the S&P 500 rose by 1.18%, the Dow Jones increased by 0.59%, and the Nasdaq 100 jumped by 2.25%, indicating a strong rebound in technology stocks that boosted overall market performance and reflected growing investor confidence in the tech sector.
- Geopolitical Easing: The U.S. and Iran agreed to halt hostilities in the Strait of Hormuz ahead of peace talks, providing market support and alleviating investor concerns over geopolitical risks, which contributed to the stock market's upward movement.
- Oil Price Volatility: Although WTI crude oil prices surged over 2% due to escalating tensions, they retreated after the U.S. and Iran reached a temporary ceasefire, highlighting the market's sensitivity to oil price fluctuations and expectations for future economic growth.
- Economic Confidence Indicator Rise: The Eurozone's June economic confidence indicator rose to 95.0, surpassing expectations of 94.3, suggesting signs of economic recovery that may further enhance investor optimism and promote capital inflows into the market.
See More
Valuation Analysis of Zscaler Stock
- Stock Performance: Zscaler's recent closing price is $132.26, with a weekly return of 5.9%, yet it has seen a 40.0% decline year-to-date and a 58.1% drop over the past year, indicating market concerns about its future growth prospects.
- Cash Flow Analysis: The latest twelve-month free cash flow for Zscaler is reported at $852.30 million, with projections suggesting it could reach $1,755.13 million by 2030; the discounted cash flow model estimates an intrinsic value of approximately $205.95 per share, indicating a 35.8% undervaluation.
- Price-to-Sales Ratio Comparison: Zscaler currently trades at a P/S ratio of 6.74x, which is above the software industry average of 3.25x but below the peer average of 9.28x, highlighting its relative value in the market.
- Investor Sentiment: The focus on cybersecurity demand has influenced Zscaler's stock performance; despite a valuation score of 5 out of 6, investor expectations for future growth remain cautious, reflecting broader market sentiment.
See More
U.S. Stocks Close Lower on Friday, Chipmakers Weigh on Market
- Market Decline: The S&P 500 and Nasdaq 100 fell by 0.05% and 1.09% respectively on Friday, reaching two-week lows, indicating market sensitivity to the weak performance of chipmakers, which could undermine investor confidence.
- Chipmaker Sell-off: The significant drop in Samsung Electronics and SK Hynix shares led to a more than 5% decline in South Korea's Kospi Index, triggering a global downturn in semiconductor stocks and exacerbating market uncertainty.
- Oil Price Impact: WTI crude oil prices fell over 3% to a four-month low on Friday, which helps lower inflation expectations and supports the stock market, but also reflects potential slowdowns in global economic growth.
- Consumer Sentiment Revision: The University of Michigan's consumer sentiment index was revised upward by 0.6 to 49.5, although still below the expected 50.0, indicating a cautious consumer outlook that may affect future spending.
See More
Zscaler Under Investigation for Securities Fraud
- Strong Financial Performance: Zscaler's Q3 2026 fiscal results exceeded expectations in revenue and earnings; however, the company guided for current-quarter revenue between $875 million and $878 million, falling short of the $879 million consensus, indicating potential growth slowdown.
- Significant Stock Decline: Following the earnings report, Zscaler's stock plummeted by $58.19, or 31.52%, closing at $126.41 per share on May 27, 2026, reflecting investor concerns about future performance.
- Legal Investigation Launched: Pomerantz LLP is investigating Zscaler and its executives for potential securities fraud or other unlawful business practices, which could further damage the company's reputation and shareholder confidence.
- Investor Action Call: Pomerantz LLP is urging Zscaler investors to contact their attorneys to join the class action, highlighting investor concerns over corporate governance and transparency, which may lead to broader legal and financial repercussions.
See More
