New York, Feb 27, 2026, 05:39 EST — Premarket
- Zscaler dropped 8.6% ahead of the bell, trading at $152.99.
- Cloud security company posted a deeper GAAP loss for the quarter, though revenue climbed 26% and its guidance beat expectations.
- Investors want to see if ramped-up sales and R&D spending starts to cool off as demand for AI-powered security gains traction.
Zscaler dropped 8.6% to $152.99 in premarket action Friday, a decline of $14.37 from Thursday’s close, after its quarterly numbers came out late yesterday.
That early slide counts—software investors have grown skittish about costs creeping up. Cybersecurity stocks have fared better than much of tech, but these days, it’s not enough to land contracts. The new standard is growth with proof in the margins.
Zscaler posted a deeper net loss for its fiscal second quarter as the company poured more into sales, marketing, and research. Revenue cleared forecasts, and guidance came in strong, but management flagged tougher conditions for big-ticket deals with IT budgets under pressure. The sector’s been jittery lately, with investors trying to gauge the impact of new AI-powered security tools—Zscaler faces competition from Palo Alto Networks and Cloudflare here. “AI is driving demand for security,” CEO Jay Chaudhry said. Reuters
Zscaler’s results show annual recurring revenue hit $3.359 billion, up 25%. Free cash flow climbed 18% to $169.1 million. “We believe Zscaler is the cybersecurity platform for the AI age,” said Chaudhry. CFO Kevin Rubin highlighted a non-GAAP operating margin “over 22%.” Non-GAAP excludes items like stock-based pay and acquisition costs. GlobeNewswire
Zscaler is guiding for April quarter revenue to land between $834 million and $836 million. The company also raised its full-year targets, now projecting fiscal 2026 ARR in the $3.73 billion to $3.75 billion range, and revenue of roughly $3.31 billion to $3.32 billion.
The company filed its earnings release via an 8-K with the U.S. Securities and Exchange Commission, according to a regulatory document.
Citizens cut its price target, citing worries about valuation, but left its Market Outperform call unchanged. Analyst Trevor Walsh highlighted lingering questions about how much the latest acquisitions are actually fueling growth, despite the company providing extra details.
Traders are tracking the line between “clean” growth and what’s driven by acquisitions. Zscaler keeps pushing its AI security pitch, but the market doesn’t take kindly to growth that’s fueled by extra spending.
The risk? Simple enough: when key clients delay buying, and costs refuse to budge, any rally in the stock can sputter out quickly. Early premarket gains have a habit of disappearing once regular trading kicks in and liquidity picks up.
