SAN JOSE, California, May 26, 2026, 14:01 PDT
Zscaler shares slid after hours Tuesday, dropping more than 13% to around $156, after the company’s July-quarter revenue forecast fell just shy of what analysts were looking for. That weaker outlook outweighed better-than-expected results for the fiscal third quarter. Investor’s Business Daily reported the stock slide, while Seeking Alpha put the after-hours loss near 14%.
Zscaler’s outlook was enough to rattle investors used to strong growth from software stocks, even in cybersecurity, a pocket of tech where budgets have held up. The company said it sees fourth-quarter revenue of $875 million to $878 million, or $876.5 million at the midpoint. Wall Street had wanted about $879 million, according to Investor’s Business Daily.
Zscaler posted better-than-expected results for the latest quarter. Adjusted earnings came in at $1.08 a share, while revenue reached $850.5 million. Analysts had looked for $1.01 a share and $835.6 million in sales.
Zscaler posted 25% revenue growth for the quarter through April 30, compared with a year ago. Annual recurring revenue also climbed 25%, hitting $3.525 billion. The company’s GAAP net loss widened to $13.9 million from $4.1 million, but non-GAAP operating income increased to $195.8 million.
Zscaler CEO Jay Chaudhry described the company as the “cybersecurity platform for the AI era,” pointing to its system’s ability to hide applications from attackers and restrict lateral movement once a breach happens. CFO Kevin Rubin said non-GAAP operating margin hit a record 23%. Zscaler, Inc.
Zscaler, Inc. to a range of $3.3295 billion to $3.3325 billion, up from $3.309 billion to $3.322 billion before. Adjusted earnings guidance is now at $4.10 to $4.11 per share. The company lowered its free-cash-flow margin target to 22.8% to 23.3% from its earlier range of 26.5% to 27%, blaming higher capital spending.
Zscaler’s cash-flow drop got investor attention. The company said it will move some fiscal 2027 equipment buys into the fourth quarter due to pricing pressure, lifting its expected fiscal 2026 capex to the high single digits of revenue.
Zscaler is pushing into AI security as more businesses look to manage how workers use AI tools and as autonomous software agents catch on. In its shareholder letter, the company said bookings for its AI Protect offering passed $100 million in the past year. Data Security ARR is now over $500 million.
The company closed the quarter with 748 customers bringing in over $1 million in ARR and 4,003 at $100,000 or more in ARR. The Z-Flex program, which lets customers use or exchange software modules as part of longer contracts, logged total contract value at just above $480 million for the quarter. The company said bigger customer commitments helped fuel results.
Zscaler faces stiff competition. The company pushes its secure access service edge (SASE) and zero-trust tools, going up against Palo Alto Networks, Microsoft, and Wiz, according to Investor’s Business Daily.
Still, investors may see the July-quarter forecast and trimmed cash-flow outlook as meaning growth is costing more. Zscaler also flagged risks in its outlook, naming macro uncertainty, AI risks, rivals, customer adoption and long deal cycles as possible reasons actual results could break from its view.
Zscaler, Inc. has set an analyst call for 1:30 p.m. Pacific Tuesday to review quarterly results and its forecast for the fourth quarter and full year.
