Shares of Zscaler Inc (NASDAQ:ZS) tanked in early trading on Wednesday after the company announced its fiscal third-quarter results.
Here are the key analyst insights for the cloud security leader:
- Wedbush analyst Dan Ives maintained an Outperform rating, while slashing the price target from $300 to $220.
- Canaccord Genuity analyst Kingsley Crane reaffirmed a Buy rating, while cutting the price target from $275 to $210.
- Rosenblatt Securities analyst Catharine Trebnick reiterated a Buy rating, while lowering the price target from $223 to $200.
- Needham analyst Mike Cikos maintained a Buy rating and price target of $180.
- Guggenheim Securities analyst John DiFucci reiterated a Neutral rating on the stock.
Check out other analyst stock ratings.
Wedbush: Zscaler's results topped expectations across the board. Total revenues came in at about $850.5 million. That’s higher than the consensus of $835.6 million, Ives said. Although management raised their fiscal 2026 guidance, this came below Street expectations, exerting pressure on the company's shares, he added.
Management's outlook for fiscal 2027 implies a deceleration of 700 basis points (bps) in both ARR (annual recurring revenue) and revenue growth. While Zscaler is "a premier name to own as increased enterprise AI adoption further amplifies the need for zero-trust architecture," the company needs to improve its execution, Ives added.
Canaccord Genuity: Zscaler delivered "admirable" results for the fiscal third quarter. The company reported 25% year-on-year revenue growth and ARR up 25% to $3.5 billion. The company posted a record non-GAAP operating margin expanded 140 bps year-on-year to 23%, Crane said.
The analyst cited the following:
- Execution risk due to the departure of two sales leaders from the CRO organization
- Early outlook for fiscal 2027 implies lower new-logo assumptions and the lack of contribution from Red Canary
- The EMEA (Europe, the Middle East, and Africa) region remains soft, although management indicated that this is due to execution, rather than low demand
- Component costs are likely to drive capex as a percent of revenue to high single digits in fiscal 2026
Rosenblatt Securities: Zscaler reported revenue of $850.5 million, ARR of $3.53 billion and non-GAAP earnings of $1.08 per share, all three figures beating expectations, Trebnick said. She added that:
- Net new ARR reached $166 million ($153 million excluding the Red Canary contribution)
- Customers generating more than $100,000 in ARR reached 4,003, up 19% year-on-year
- Customers with over $1 million in ARR grew to 748, up 18% year-on-year
"We view the quarter as another validation that the core platform remains healthy…with strong large-deal momentum, and continued traction across AI Protect, Data Security Everywhere, Zero Trust Everywhere, and Z-Flex," the analyst wrote. Forward-looking indicators were also healthy, with RPO (remaining performance obligations) growing 30% year-on-year to about $6.5 billion, she further stated.
Needham: Zscaler's initial outlook for fiscal 2027 showed 16%-17% year-on-year growth in ARR and revenue, which missed consensus expectations of 18.4% and 19.5%, respectively, Cikos said. He added, however, that these were just "preliminary" numbers.
Zscaler noted that the conservatism stemmed from the departure of two senior sales leaders and the uncertain adoption of the company's integrated SecOps offering, the analyst stated. "We believe Zscaler has a high degree of confidence in executing against the relatively modest 16%-17% growth targets in FY27, given NRR has remained stable around ~115%," he further wrote.
Guggenheim Securities: Red Canary contributed $13 million to Zscaler's net new ARR, above the guidance of $6 million, DiFucci said. Adjusted new ARR is estimated to have grown 18% year-on-year, implying business momentum, he added.
Zscaler raised its fiscal 2026 total revenue guidance by slightly more than the third-quarter beat. It slightly missed consensus, the analyst stated. "Current FY26 revenue and ARR guidance now implies growth of 24.6% y/y and 24.2% y/y, at the midpoint, respectively," he further wrote.
ZS Price Action: Shares of Zscaler had declined by 30.87% to $127.61 at the time of publication on Wednesday.
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