WS Investor
04 Sep 2026, 09:07
Zscaler Stock Falls 3.3% Premarket as FY2027 Outlook Points to Slower Growth
Zscaler (NASDAQ: ZS) shares fell about 3.3% in premarket trading Friday despite reporting strong fiscal fourth-quarter results, as investors focused on guidance pointing to slower growth in fiscal 2027.
Fourth-quarter revenue rose 25% year over year to $898.2 million, while annual recurring revenue (ARR) increased 25% to $3.77 billion. Excluding the Red Canary acquisition, ARR grew 20%.
Profitability also improved. Non-GAAP operating income reached $218.4 million, producing a record 24% operating margin, while adjusted EPS increased to $1.19 from $0.89 a year earlier.
One weaker area was cash generation. Quarterly free cash flow dropped to $60.8 million from $171.9 million a year earlier, largely reflecting higher capital expenditures and internal-use software investment.
FY2027 Growth Outlook Weighs on Shares
The stock's decline appears primarily tied to Zscaler's forward outlook. For fiscal 2027, the company expects revenue of $3.91 billion to $3.94 billion, representing growth of 16.6% to 17.5%. ARR is projected to increase by roughly 16.6% to 17.4%.
That represents a substantial deceleration from the 25% headline revenue and ARR growth reported for fiscal 2026.
Zscaler nevertheless remains strongly positioned within the cloud cybersecurity and Zero Trust market. Management sees artificial intelligence as a major growth opportunity, with investments spanning Zero Trust SASE, Agentic SecOps, data security and security for AI.
The 3.3% premarket decline therefore appears less about weak quarterly execution and more about expectations for slower growth ahead. Investors will be watching whether Zscaler's expanding AI-security portfolio can sustain growth while the company continues improving profitability.
Zscaler (NASDAQ: ZS) shares fell about 3.3% in premarket trading Friday despite reporting strong fiscal fourth-quarter results, as investors focused on guidance pointing to slower growth in fiscal 2027.
Fourth-quarter revenue rose 25% year over year to $898.2 million, while annual recurring revenue (ARR) increased 25% to $3.77 billion. Excluding the Red Canary acquisition, ARR grew 20%.
Profitability also improved. Non-GAAP operating income reached $218.4 million, producing a record 24% operating margin, while adjusted EPS increased to $1.19 from $0.89 a year earlier.
One weaker area was cash generation. Quarterly free cash flow dropped to $60.8 million from $171.9 million a year earlier, largely reflecting higher capital expenditures and internal-use software investment.
FY2027 Growth Outlook Weighs on Shares
The stock's decline appears primarily tied to Zscaler's forward outlook. For fiscal 2027, the company expects revenue of $3.91 billion to $3.94 billion, representing growth of 16.6% to 17.5%. ARR is projected to increase by roughly 16.6% to 17.4%.
That represents a substantial deceleration from the 25% headline revenue and ARR growth reported for fiscal 2026.
Zscaler nevertheless remains strongly positioned within the cloud cybersecurity and Zero Trust market. Management sees artificial intelligence as a major growth opportunity, with investments spanning Zero Trust SASE, Agentic SecOps, data security and security for AI.
The 3.3% premarket decline therefore appears less about weak quarterly execution and more about expectations for slower growth ahead. Investors will be watching whether Zscaler's expanding AI-security portfolio can sustain growth while the company continues improving profitability.
