Updated November 30, 2025
Zscaler Inc. (NASDAQ: ZS) just delivered one of its strongest financial quarters ever — and then watched its share price get hammered.
As of the close on Friday, November 28, Zscaler stock finished at $251.50, giving the cloud security leader a market capitalization of about $40 billion and leaving shares roughly 25% below their 52‑week high of $336.99. [1] Yet even after the recent slide, the stock is still up close to 60% in 2025, according to Reuters. [2]
The tension is clear: the business is firing on most cylinders, but investors are suddenly nervous about guidance, profitability optics, and valuation. Here’s a deep dive into what changed in late November and what it means for Zscaler stock going into 2026.
Zscaler stock today: price, performance and November pain
Zscaler enters the final month of 2025 on the defensive:
- Share price: $251.50 at the November 28 close, with an after-hours quote near $251.25.
- 52-week range: $164.78 – $336.99.
- Market cap: roughly $40.1 billion.
- Analyst consensus: “Buy” with an average 12‑month price target around $320, implying ~27% upside from current levels. [3]
The real story, though, is the November drawdown. A MarketWatch analysis of major tech names lists Zscaler among the month’s worst performers, with the stock down around 24% for November after its post‑earnings plunge. [4]
The big hit came in the days after the company reported fiscal Q1 2026 results on November 25. Zscaler beat Wall Street estimates and raised its full‑year outlook — yet the stock fell more than 7% in extended trading, and subsequent sessions saw losses deepen into the low‑teens on a single day. [5]
Inside Zscaler’s Q1 FY 2026 earnings beat
Zscaler’s fiscal first quarter of 2026 (ended October 31, 2025) looked, on paper, like the kind of result growth investors usually celebrate.
From the company’s official release and investor summaries: [6]
- Revenue: $788.1 million, up 26% year over year, and comfortably ahead of consensus estimates around $773–774 million.
- Annual Recurring Revenue (ARR): $3.204 billion, also up 26%.
- Deferred revenue: $2.351 billion, 32% growth year over year.
- Remaining performance obligations (RPO): about $5.9 billion, up 35% vs. a year ago, with current RPO up 29%. [7]
- GAAP profitability: Net loss of $11.6 million, or –$0.07 per share, narrower than the prior year’s –$0.08.
- Non‑GAAP profitability: Net income of $159.5 million, or $0.96 per share, beating estimates near $0.85–0.86. [8]
- Free cash flow: $413.3 million, representing a 52% free cash flow margin, up from 46% a year earlier. [9]
Management highlighted that Zscaler is now operating at what it calls the “Rule of 78” — combining roughly 26% revenue growth with a 52% free cash flow margin, far above the “Rule of 40” benchmark that many investors use to judge mature SaaS businesses. [10]
Strategically, Zscaler also:
- Closed the Red Canary and SPLX acquisitions for an aggregate $692 million in Q1, strengthening its managed detection and AI security capabilities.
- Ended the quarter with $3.3 billion in cash, cash equivalents and short‑term investments, even after the deals. [11]
On the surface, this is exactly what growth investors usually want: fast top‑line expansion, expanding cash margins, and a large, growing backlog.
So why did the stock tank?
Guidance was raised — but not enough for a momentum stock
Part of the answer lies in Zscaler’s fiscal 2026 outlook.
The company raised guidance, but only modestly:
- Full‑year revenue: Now $3.282–$3.301 billion, up from $3.27–$3.28 billion previously. [12]
- Full‑year non‑GAAP EPS: Now $3.78–$3.82, up from $3.64–$3.68. [13]
- Full‑year ARR:$3.698–$3.718 billion, implying roughly 23% growth, and only a modest uplift versus the prior ARR outlook. [14]
For Q2 FY 2026, Zscaler guided to: [15]
- Revenue of $797–$799 million
- Non‑GAAP EPS of $0.89–$0.90
Those numbers are not weak. But several analysts highlighted that the revenue and ARR raises were smaller than the size of the Q1 beat, effectively “using up” much of the upside to de‑risk the rest of the year rather than resetting expectations higher. RBC, for example, noted that the revenue forecast increase was narrower than the Q1 revenue surprise, framing the guidance as conservative. [16]
Needham went further. In a widely watched note, the firm cut its price target on Zscaler from $350 to $310 while keeping a Buy rating. The report flagged ARR guidance “messaging” issues, pointing out that Zscaler only raised full‑year ARR guidance by about $21 million, even as it lifted its AI security ARR forecast by about $100 million, creating confusion about how the moving parts fit together. [17]
For a premium‑multiple stock that was up more than 60% year‑to‑date heading into earnings, that kind of nuanced caution was enough to spook momentum‑oriented holders.
Post‑earnings reaction: sharp drop, then sustained pressure
The short‑term price action has been brutal:
- On November 26, the day after earnings, Zscaler shares fell around 12–13%, closing down sharply even though the company had just delivered a substantial beat and raise. [18]
- According to AI‑driven news analysis from AInvest and other market commentary, an 11–12% intraday plunge closely followed Needham’s target cut to $310, which came on top of earlier trims from Bank of America and Scotiabank. [19]
- Over the subsequent month, Zscaler shares are reported to be down roughly 14%, even as fundamentals remained solid — a sign that investor focus had shifted to risk factors like negative net margin (~–1.5%), insider selling and the sheer scale of future obligations. [20]
- A MarketWatch screen of large tech names shows Zscaler down about 23.9% in November, placing it among the worst‑performing high‑growth tech stocks of the month. [21]
The paradox here is straightforward: great quarter, cautious interpretation. Investors are wrestling with whether the guidance is simply conservative or an early sign that sustaining mid‑20s ARR growth will be harder from here. [22]
Wall Street’s verdict: targets cut, but bullish tilt remains
Despite the drawdown, Wall Street has not turned on Zscaler en masse. The tone is more “re‑rating” than “abandon ship.”
Needham, Berenberg and others tweak targets
Recent moves include: [23]
- Needham:
- Price target cut from $350 to $310
- Rating: Buy
- Rationale: ARR guidance appears overly cautious relative to AI security momentum, creating messaging risk.
- Berenberg Bank:
- Target trimmed from $400 to $390, rating Buy
- Still implies ~54% upside from recent trading levels.
- Other firms (Bank of America, Scotiabank, Stifel, Mizuho, Bernstein) have lowered price targets but generally maintained positive or at least neutral ratings, citing strong execution but a need to reconcile guidance conservatism with high expectations.
Across the coverage universe, data from MarketBeat and other aggregators still show: [24]
- A “Moderate Buy” to “Buy” consensus rating for ZS
- A consensus 12‑month price target clustered in the $316–$320 range
- The majority of analysts rating the stock Buy or Strong Buy, with a small minority on Hold and one or two Sell‑equivalent ratings
Wedbush and other bulls highlight AI and platform strength
On the bullish side, Wedbush reiterated an Outperform rating and a $350 price target after the report, calling it a “robust quarter” with “healthy guidance” despite the share‑price reaction. [25]
Wedbush and others emphasize:
- 20% year‑over‑year growth in customers generating $1 million+ in ARR, and 19% growth in those above $100,000.
- Strong traction in newer pillars such as AI Security, Data Security Everywhere and Zero Trust Everywhere, where ARR and customer counts are tracking ahead of multi‑year goals.
- A rapidly scaling Z‑Flex commit‑to‑spend program that simplifies large, multi‑module platform deals.
In short: the Street has definitely brought expectations down a notch, but most analysts still see Zscaler as a top‑tier cybersecurity growth story whose long‑term thesis remains intact.
Growth engines: AI security, Zero Trust and Z‑Flex
Beyond the headline numbers, the composition of Zscaler’s growth is increasingly important for the stock.
From Briefing.com’s breakdown, company commentary and AI‑driven summaries: [26]
- AI Security ARR:
- Already exceeded the prior $400 million FY 2026 goal three quarters early.
- Now expected to surpass $500 million in ARR by year‑end, driven by demand for AI‑native threat detection, data protection and model‑specific security.
- Data Security Everywhere:
- ARR has accelerated to around $450 million, reflecting rising concern over data exfiltration in hybrid and multi‑cloud environments.
- Zero Trust Everywhere:
- Now deployed at more than 450 enterprises, hitting management’s FY 2026 target ahead of schedule and reinforcing Zscaler’s pitch as a full‑platform Zero Trust vendor.
- Z‑Flex program:
- Generated over $175 million in total contract value (TCV) in Q1, up about 70% quarter‑over‑quarter.
- Represents a growing share of bookings and encourages broader adoption of multiple Zscaler modules under a single commit‑to‑spend framework.
These pillars are designed to turn Zscaler from a “point solution” into a platform — a critical defense against large rivals such as Palo Alto Networks and Microsoft, which leverage broad suites and aggressive bundling. Reuters notes that Zscaler’s flexible purchasing options have already helped it sign larger multi‑year deals as enterprises consolidate security vendors. [27]
Profitability, margins and lingering risks
Despite powerful cash generation, a few issues continue to bother investors:
- GAAP profitability and net margin
- Zscaler still reports a GAAP net loss and a slightly negative net margin (around –1.5%), even as non‑GAAP margins and free cash flow look stellar. [28]
- Some investors worry that sustained heavy investment in AI, sales and integration could delay a clean path to GAAP profitability.
- Guidance optics and ARR messaging
- As Needham and Briefing.com both highlight, the ARR guidance raise was smaller than the Q1 ARR beat, meaning management effectively “banked” most of the upside rather than re‑basing expectations. [29]
- The fact that AI Security ARR guidance jumped by ~$100 million while total ARR only moved ~$21 million at the midpoint has raised questions about how much of the growth is concentrated in one pillar and how conservative management is being elsewhere. [30]
- Integration and execution risk
- The Red Canary and SPLX deals are strategically important for AI‑driven SecOps and AI lifecycle security, but management has acknowledged that they are immaterial to near‑term revenue and more about strengthening the platform. [31]
- Large RPO (about $5.9 billion) is a double‑edged sword: it signals strong demand and visibility, but also demands flawless execution to avoid margin pressure or churn. [32]
- Valuation
- Even after the pullback, Zscaler trades at a forward P/E in the mid‑60s and a rich revenue multiple compared with many peers. [33]
- That’s fine as long as mid‑20s ARR growth and Rule‑of‑78 cash performance continue. Any sustained slowdown, however, would put that multiple under further stress.
These are not company‑specific catastrophes — they’re the usual tensions of owning a high‑growth, high‑multiple SaaS leader — but the November reaction shows that the bar for perfection was very high.
Zscaler stock outlook: what to watch into 2026
For readers tracking Zscaler stock into 2026, several metrics and narrative threads matter more than the day‑to‑day volatility:
- ARR growth vs. guidance
- Does ARR growth stay in the low‑ to mid‑20s and consistently surpass the conservative FY 2026 range of $3.698–$3.718 billion?
- If so, the current guidance reset may eventually look like classic “under‑promise, over‑deliver.” [34]
- Free cash flow and operating leverage
- Can Zscaler maintain free cash flow margins above 50% while investing heavily in AI, go‑to‑market expansion and integrations?
- Sustaining a Rule‑of‑78‑style profile for multiple quarters would strengthen the long‑term bull case significantly. [35]
- Adoption of AI Security, Data Security and Z‑Flex
- Watch for continued AI Security ARR growth toward (and beyond) $500 million, further scaling of Data Security Everywhere, and a rising percentage of bookings through Z‑Flex. [36]
- Competitive dynamics in SASE and Zero Trust
- Zscaler sits at the heart of the rapidly growing SASE and Zero Trust markets, competing with heavyweights like Palo Alto Networks and Cloudflare. Reuters notes that enterprise spending on cybersecurity remains robust as threats grow more sophisticated — a secular tailwind that can support multiple winners, but not at any price. [37]
For now, the November 2025 story of Zscaler is pretty simple: the business is executing well, but expectations — and the valuation that came with them — may have gotten ahead of themselves. The next few quarters will show whether this pullback was a healthy reset in a long‑running growth story or the start of a more prolonged multiple compression.
References
1. stockanalysis.com, 2. www.reuters.com, 3. stockanalysis.com, 4. www.marketwatch.com, 5. www.reuters.com, 6. www.globenewswire.com, 7. www.briefing.com, 8. www.reuters.com, 9. www.globenewswire.com, 10. www.briefing.com, 11. www.globenewswire.com, 12. www.globenewswire.com, 13. www.globenewswire.com, 14. www.briefing.com, 15. www.globenewswire.com, 16. www.reuters.com, 17. www.investing.com, 18. www.barchart.com, 19. www.ainvest.com, 20. www.ainvest.com, 21. www.marketwatch.com, 22. www.briefing.com, 23. www.marketbeat.com, 24. www.marketbeat.com, 25. www.proactiveinvestors.com, 26. www.briefing.com, 27. www.reuters.com, 28. www.globenewswire.com, 29. www.investing.com, 30. www.investing.com, 31. www.briefing.com, 32. www.briefing.com, 33. stockanalysis.com, 34. www.briefing.com, 35. www.globenewswire.com, 36. www.briefing.com, 37. www.reuters.com
