Zscaler (NASDAQ:ZS) Shares Gap Down - What's Next?

Key Points

• Zscaler’s fiscal fourth-quarter results beat expectations: Revenue rose 24.9% year over year to $898.2 million, while non-GAAP earnings reached $1.19 per share. Profitability and enterprise demand improved, with a record 24% non-GAAP operating margin and 25% ARR growth.
• Shares fell after the company projected slower fiscal 2027 growth. Revenue and ARR growth are expected to decelerate to roughly 17%, while a planned 3% workforce reduction and weaker free-cash-flow margin added pressure.
• Analysts remain broadly bullish despite the selloff. Zscaler has a “Moderate Buy” consensus rating, with 34 Buy ratings and a consensus price target of $217.33; analysts cited AI-focused security products as a potential future growth driver.

Zscaler, Inc. (NASDAQ:ZS - Get Free Report) gapped down prior to trading on Friday . The stock had previously closed at $177.80, but opened at $166.15. Zscaler shares last traded at $170.8370, with a volume of 1,960,706 shares changing hands.

Zscaler News Roundup

Here are the key news stories impacting Zscaler this week:

• Positive Sentiment: Results exceeded expectations. Zscaler reported fiscal Q4 revenue of $898.2 million, up 24.9% year over year and above the $877.0 million consensus estimate. Non-GAAP earnings of $1.19 per share also topped expectations of $1.09. Zscaler Q4 Earnings and Revenues Top Estimates
• Positive Sentiment: Profitability and enterprise demand improved. Q4 non-GAAP operating margin reached a record 24%, while annual recurring revenue rose 25% to $3.77 billion. Large-deal activity increased, Fortune 500 penetration reached 50%, and net retention was 115%, supporting continued customer expansion. Zscaler Announces Strong Fourth Quarter and Fiscal 2026 Financial Results
• Positive Sentiment: Analysts raised targets. Stephens increased its target to $225 and Needham raised its target to $215; Cantor Fitzgerald maintained an overweight rating and a $225 target, while Rosenblatt reiterated buy with a $200 target.
• Neutral Sentiment: AI remains a growth opportunity. Management highlighted momentum for Agentic SecOps and security products designed for AI workloads, but investors are awaiting evidence that these offerings can reaccelerate growth.
• Negative Sentiment: Fiscal 2027 growth is expected to slow. Zscaler forecast revenue growth of 16.6%-17.5% and ARR growth of 16.6%-17.4%, down from 25% in fiscal 2026. This deceleration overshadowed the better-than-expected quarterly results, particularly because full-year revenue guidance was broadly in line with consensus. Zscaler Forecasts Fiscal 2027 Growth
• Negative Sentiment: Restructuring and cash-flow concerns add pressure. The company plans to eliminate about 3% of its workforce as it reallocates resources toward AI and growth initiatives. Q4 free-cash-flow margin fell to 7% from 24% a year earlier because of significantly higher capital spending, while Zscaler remains GAAP unprofitable.
• Negative Sentiment: Some investors question the valuation case. Although ZS trades at a historically lower forward multiple, analysts note that its projected growth lacks the acceleration seen at some AI-focused cybersecurity peers.

Analyst Upgrades and Downgrades

ZS has been the subject of several recent research reports. Cantor Fitzgerald restated an "overweight" rating and set a $225.00 target price on shares of Zscaler in a report on Friday. HC Wainwright upgraded shares of Zscaler from a "buy" rating to a "buy" rating in a research note on Monday, May 18th. Sanford C. Bernstein cut their price target on shares of Zscaler from $228.00 to $224.00 and set an "outperform" rating on the stock in a research report on Wednesday, May 27th. Rosenblatt Securities restated a "buy" rating and set a $200.00 price objective on shares of Zscaler in a research note on Friday. Finally, B. Riley Financial decreased their price objective on Zscaler from $225.00 to $215.00 and set a "buy" rating for the company in a report on Wednesday, May 27th. Thirty-four investment analysts have rated the stock with a Buy rating, six have assigned a Hold rating and one has given a Sell rating to the company's stock. Based on data from MarketBeat, the company presently has an average rating of "Moderate Buy" and a consensus price target of $217.33.

Zscaler Trading Down 3.7%

The business has a 50 day moving average of $160.51 and a two-hundred day moving average of $150.39. The firm has a market cap of $27.70 billion, a P/E ratio of -356.98, a PEG ratio of 101.67 and a beta of 0.95. The company has a current ratio of 1.86, a quick ratio of 1.86 and a debt-to-equity ratio of 0.72.

Zscaler (NASDAQ:ZS - Get Free Report) last released its quarterly earnings data on Thursday, September 3rd. The company reported $1.19 EPS for the quarter, beating the consensus estimate of $1.09 by $0.10. The firm had revenue of $898.18 million for the quarter, compared to the consensus estimate of $876.96 million. Zscaler had a negative net margin of 2.44% and a negative return on equity of 0.37%. The company's quarterly revenue was up 24.9% on a year-over-year basis. During the same period in the previous year, the company earned $0.89 earnings per share. Zscaler has set its FY 2027 guidance at 4.860-4.900 EPS and its Q1 2027 guidance at 1.150-1.160 EPS. Analysts predict that Zscaler, Inc. will post 0.13 earnings per share for the current year.

Insider Activity at Zscaler

In other Zscaler news, CEO Jagtar Chaudhry sold 2,878 shares of the firm's stock in a transaction that occurred on Tuesday, June 16th. The shares were sold at an average price of $126.43, for a total transaction of $363,865.54. Following the completion of the sale, the chief executive officer directly owned 343,038 shares in the company, valued at $43,370,294.34. This trade represents a 0.83% decrease in their ownership of the stock. The sale was disclosed in a legal filing with the SEC, which is available at this hyperlink. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Also, insider Robert Schlossman sold 3,146 shares of the business's stock in a transaction that occurred on Tuesday, June 16th. The stock was sold at an average price of $126.43, for a total value of $397,748.78. Following the sale, the insider owned 69,366 shares of the company's stock, valued at approximately $8,769,943.38. This represents a 4.34% decrease in their position. The disclosure for this sale is available in the SEC filing. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Insiders have sold a total of 16,772 shares of company stock worth $2,139,799 in the last quarter. Corporate insiders own 17.20% of the company's stock.

Hedge Funds Weigh In On Zscaler

A number of large investors have recently made changes to their positions in the company. Binnacle Investments Inc acquired a new position in Zscaler in the 3rd quarter valued at $25,000. AlphaCentric Advisors LLC acquired a new stake in shares of Zscaler during the fourth quarter worth $29,000. University of Texas Texas AM Investment Management Co. bought a new stake in shares of Zscaler in the fourth quarter valued at about $30,000. Mcguire Capital Advisors Inc. bought a new stake in shares of Zscaler in the fourth quarter valued at about $32,000. Finally, Strive Financial Group LLC bought a new stake in shares of Zscaler in the fourth quarter valued at about $39,000. Institutional investors own 46.45% of the company's stock.

About Zscaler

Zscaler is a cloud security company that delivers a cloud-native platform to protect users, applications and data as organizations move away from traditional, network-centric security architectures. The company focuses on a zero trust approach that assumes no implicit trust for users or devices, providing secure access to the internet, SaaS applications and private applications regardless of where users are located. Zscaler positions its services as an alternative to legacy appliances and site-centric VPNs, aiming to simplify security while enabling modern, distributed workforces.

Key offerings are built around the Zscaler Zero Trust Exchange, a multi-tenant cloud platform that enforces security and access policies in-line.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

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