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Zscaler Stock Tanks After Weak Guidance
28 May
Summary
- Zscaler's stock dropped over 30% on Wednesday.
- The company issued underwhelming fiscal 2027 guidance.
- Sales leader departures contributed to cautious outlook.
Zscaler's stock experienced a historic plunge of over 30% on Wednesday, marking its worst trading day. This severe market reaction was triggered by the company's fiscal 2027 annual recurring revenue (ARR) guidance, which was projected to grow 16% to 17% year-over-year, falling short of analyst estimates.
While Zscaler reported better-than-expected fiscal third-quarter results, its forward-looking guidance overshadowed these positive numbers. The company anticipates revenue between $875 million and $878 million for the current quarter, slightly missing FactSet's consensus of $878.6 million. Zscaler projected FY2026 ARR to reach $3.74 billion to $3.75 billion, representing approximately 24% year-over-year growth.
The cybersecurity firm also noted the departure of two sales leaders during the quarter. Finance chief Kevin Rubin stated that the company is adopting a "prudent approach" to its guidance due to these leadership transitions. Additionally, Zscaler anticipates increased capital expenditures, as a percentage of revenues, by 200 basis points in fiscal year 2027 due to escalating memory costs.
