Zscaler plummets after revenue guidance falls short of estimates

Zscaler shares fell more than 20% in premarket trading Wednesday after the cloud security company issued fiscal 2027 revenue and ARR growth guidance of 16% to 17%, signaling weaker-than-expected new customer additions. The company reported better-than-expected fiscal Q3 results, including revenue of $850 million and adjusted EPS of $1.08, but its Q4 revenue forecast of $875 million to $878 million fell short of Wall Street's $879 million estimate. Analysts at Bloomberg Intelligence, Mizuho, RBC Capital Markets, and Evercore ISI lowered price targets on the stock, citing concerns over muted new logo growth and the lack of identity security for AI agents in Zscaler's product suite.

Zscaler plummets after revenue guidance falls short of estimates The market has deeply ingrained software-phobia right now, as traders are highly sensitive to anything software related giving off any whiff of AI-related weakness. So, it's not a huge surprise to see Zscaler https://robinhood.com/us/en/stocks/ZS/?source=sherwood down more than 20% in premarket trading on Wednesday after the cloud security company gave a softer customer growth outlook than expected, despite reporting solid results for its fiscal Q3. Zscaler announced better-than-expected results across its key metrics for the quarter ended April 30, 2026, including revenue of $850 million topping analyst estimates of $835 million, compiled by Bloomberg , annual recurring revenue ARR of $3.53 billion vs. $3.51 billion expected , and adjusted EPS of $1.08 vs. expectations of $1.01 . But Zscaler's ability to continue its winning streak is the main question — and as far as the company’s early guidance for new customer additions, its future looks bleaker than expected. The security firm now anticipates total ARR and revenue growth of 16% to 17% for fiscal 2027. In the nearer term, Zscaler also expects Q4 revenue to fall between $875 million to $878 million, with its upper limit below Wall Street estimates of $879 million. Bloomberg Intelligence analysts note that Zscaler’s fiscal 2027 ARR growth figure “suggests muted new customer additions are likely to weigh on the top line,” adding that the company “lacks identity security for AI agents in the suite, which may limit larger order closings.” Mizuho https://www.investing.com/news/analyst-ratings/mizuho-cuts-zscaler-stock-price-target-on-guidance-concerns-93CH-4711436 , RBC Capital Markets, and Evercore ISI analysts, similarly focusing on future guidance, also lowered their price targets for the stock following the call. Separately, Citi analysts, who spoke to the company's management following the results, noted that new customer growth could provide some upside, as new logo growth wasn't factored into the 2027 baseline. However, they also noted disruptions to the sales organization from two leadership changes, although the Zscaler's CEO and CFO seem confident that those impacts will be absorbed, and don't expect disruptions at the "quota-bearing level." Peers CrowdStrike https://robinhood.com/us/en/stocks/CRWD/?source=sherwood and Palo Alto Networks https://robinhood.com/us/en/stocks/PANW/?source=sherwood also sunk around 2% before the bell on Wednesday.