CNBC's Jim Cramer warned investors of “slowing sales” ahead for Zscaler Inc. (NASDAQ:ZS) after the cybersecurity firm’s soft fourth-quarter revenue guidance sent shares tumbling.
Despite a strong third-quarter financial beat, the market focused squarely on cooling forward projections and sudden internal executive disruptions.
Cramer Reacts To Post-Earnings Plunge
Following the company's Tuesday evening release, Cramer flagged the cloud security provider’s deceleration, noting that immediate market enthusiasm faded as future metrics weighed on sentiment.
Investors reacted aggressively to the caution, sending Zscaler shares diving 20.78% to $146.24 in after-hours trading. The steep drop highlighted Wall Street’s sensitivity to forward-looking growth over past performance.
Sales Leadership Exit Triggers Soft Outlook
The primary catalyst for the steep stock drop was Zscaler's conservative forecast for the upcoming quarter. The company expects fourth-quarter revenue to land between $875 million and $878 million, falling just short of Wall Street consensus estimates of $878.53 million.
During the earnings call, Zscaler Chief Financial Officer Kevin Rubin revealed that the company is managing internal go-to-market disruptions. “At the end of the third quarter, 2 sales leaders departed the company,” Rubin stated.
He explained the impact on the company’s metrics, adding, “We are taking a prudent approach to our guidance during this transition.” Furthermore, management gave an early look into fiscal 2027, projecting revenue and annual recurring revenue (ARR) growth to decelerate to a pace of 16% to 17%.
AI Wins Masked By Near-Term Headwinds
The anxious market reaction largely overshadowed what was otherwise a record-setting third quarter. Zscaler delivered revenue of $850.48 million, up 25% year-over-year, beating analyst projections of $835.38 million. Adjusted earnings per share reached $1.08, topping the expected $1.01.
CEO Jay Chaudhry defended the long-term trajectory, stating Zscaler is “ideally positioned as the cybersecurity platform for the AI era” as its AI Protect suite surpassed $100 million in bookings.
However, these AI tailwinds were eclipsed by the immediate sales execution concerns flagged by Cramer.
How Has ZS Performed In 2026?
In comparison with the Nasdaq Composite’s 14.72% year-to-date advance, shares of ZS have declined by 17.93% over the same period. It was down 21.23% in overnight trading.
Over the last month, ZS stock was up 36.42, and it fell 26.74% and 27.35% over the last six months and the year, respectively. Benzinga’s Edge Stock Rankings indicate that ZS maintains a weak price trend in the long term but a strong trend in the medium and short terms.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Sundry Photography/Shutterstock
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