Key Highlights
- The company delivered Q4 adjusted earnings per share of $1.19, surpassing analyst expectations of $1.09, while revenue hit $898.2 million against a forecast of $927 million
- Year-over-year revenue climbed 25%, accompanied by a strong gross profit margin of 77%
- First-quarter FY2027 revenue projections of $935-$939 million exceeded the Street’s $927 million consensus
- Shares jumped 5% in Thursday’s extended session but retreated 3.4% during Friday’s premarket hours
- Wall Street analysts remain bullish: JPMorgan maintained its Overweight stance with a $215 target, while Stephens increased its price objective to $225
Earnings came in strong, guidance was liftedāyet the market response was tepid. That’s the paradox facing Zscaler investors this morning.
The cloud security provider delivered fourth-quarter adjusted earnings of $1.19 per share, marking a substantial increase from 89 cents in the same period last year and comfortably exceeding the Street’s $1.09 projection. Quarterly revenue totaling $898.2 million for the period ending July 31 represented a solid 25% year-over-year gain and topped the $877 million consensus figure.
Shares initially rallied 5% to $186.27 during Thursday’s after-hours session before momentum faded. When Friday’s premarket opened, ZS had reversed course, trading down 3.4% from Thursday’s regular-session close of $177.80.
The company’s annual recurring revenue climbed to $3,771 million, exceeding consensus projections by $26 million and marking a 25% year-over-year expansion.
Management also upgraded its first-quarter FY2027 revenue outlook to $935-$939 million, comfortably above Wall Street’s $927 million expectation. The projected earnings per share range of $1.15-$1.16 similarly outpaced the analyst consensus of $1.08.
Wall Street’s Take
JPMorgan maintained its Overweight rating alongside a $215 price target, highlighting that the revenue and ARR beats represented the strongest performance relative to expectations seen all year. Analysts characterized the forward guidance as reasonably conservative.
Stephens bumped its price target up to $225. Needham increased its objective to $215. Stifel reaffirmed its Buy recommendation with a $200 target. Scotiabank similarly raised its target to $200, citing momentum in new ARR additions. Canaccord Genuity held steady with a Buy rating and $210 price target.
After the previous quarter’s guidance disappointment shook investor sentiment, this quarter’s decisive beat was viewed as a meaningful step toward restoring confidence.
Broader Context for Investors
Year-to-date, ZS has declined 21%, lagging significantly behind industry peers CrowdStrike and Palo Alto Networks, which have surged 83% and 80% respectively.
Market participants have expressed concern that artificial intelligence could diminish the relevance of conventional security solutions. Zscaler has countered this narrative, maintaining that AI-powered threats are actually intensifying demand for the type of infrastructure the company specializes in.
Management disclosed a 3% workforce reduction while confirming it has filled two key senior sales positions that had been vacant. Canaccord noted that FY2027 projections might reflect some conservatism tied to the ongoing transition within the sales organization.
According to InvestingPro’s valuation analysis, ZS appears to be trading below its calculated fair value at present levels.
The most recent premarket quote showed shares at $171.65, representing a decline of $6.15 or 3.46%.
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