Zscaler Went From 100x Earnings to 40x. Here’s What Changed.
Zscaler (ZS) reported FY26 revenue of $898.2M, up 25% YoY, with net new ARR growth accelerating to 17% YoY in Q4. However, deferred revenue growth slowed to 18.5%, below revenue growth for the first time. Free cash flow margin dropped 500 bps to 25.4%. FY27 guidance suggests further deceleration, with NTM P/E falling to 40x from highs above 100x.
How this was made
The 30-second read
Why it matters
The earnings beat on revenue is offset by guidance slowdown and cash‑flow compression, likely prompting a re‑rating.
Market read
First‑time disclosure of FY27 guidance and cash‑flow outlook for a mid‑cap tech stock.
What to watch
Potential upside from new Agentic SecOps platform and AI security bookings not yet reflected in guidance.
Background
Zscaler (ZS) is a leading cloud‑based security provider that recently acquired Red Canary.
Ticker impact
Zscaler reported FY26 revenue up 25% YoY and guided FY27 ARR growth slowing to the high teens, a fresh earnings and guidance release.
Potential short-term price decline as investors price in weaker FY27 outlook.
Guidance and cash flow compression are primary disclosures that can shift valuation immediately.
Market effects
Zero‑Trust security sector may see valuation pressure as growth decelerates.
U.S. cloud‑security stocks could face broader sell‑off.
Limited to tech investors; no macro spillover.
Counterpoint
If AI‑security product adoption accelerates faster than guidance, upside upside remains.
Key entities
- ExecutiveKevin Rubin
CFO who discussed capex pressures and FY27 guidance.
- ExecutiveMike Rich
Chief Revenue Officer credited with sales reorganization.
