Overview
- On May 26 Zscaler reported fiscal Q3 results that beat estimates with $850.48 million in revenue, $1.08 adjusted EPS, and 25.4% year‑over‑year sales growth.
- The company modestly raised full‑year fiscal 2026 ARR and revenue targets while warning that fiscal 2027 ARR and revenue should slow to a 16%–17% growth range.
- Zscaler disclosed the departures of two senior sales leaders and said it will raise capital spending to secure memory, storage and processor capacity, which lowered fiscal 2026 free‑cash‑flow margin guidance to 22.8%–23.3%.
- The guidance and disclosures triggered heavy selling, leaving the stock sharply lower in 2026 and prompting analyst downgrades including Evercore ISI plus an investor inquiry by a securities‑litigation firm.
- Valuation metrics have dropped below many peers with price‑to‑sales under 7, a shift that has some analysts calling the pullback a buying opportunity while others warn the slowdown raises execution risk.