Zscaler beat earnings and raised its outlook, yet the market still sold the stock off. That about sums up where ZS stands right now.

Key Numbers

The cybersecurity company reported fourth-quarter adjusted earnings of $1.19 per share, up from 89 cents a year ago and ahead of the Wall Street estimate of $1.09. Revenue for the quarter ended July 31 came in at $898.2 million, a 25% jump year-over-year and above the consensus of $877 million. Gross profit margin was 77%.

Annual recurring revenue reached $3,771 million, beating the consensus estimate by $26 million, a 25% year-over-year increase. For a subscription software business like Zscaler, ARR is the metric investors watch most closely, because it reflects committed recurring revenue rather than one-time bookings — which is why the growth rate embedded in forward guidance often matters more to the stock than the quarterly print itself.

Zscaler also raised its Q1 FY2027 revenue guidance to a range of $935 million to $939 million, above the $927 million Wall Street had expected. EPS guidance of $1.15 to $1.16 for the quarter also cleared the analyst estimate of $1.08.

Stock Reaction

The stock climbed 5% to $186.27 in after-hours trading Thursday before pulling back. By Friday premarket, ZS was down 3.4%, having closed Thursday's regular session at $177.80. The last reported premarket price was $171.65, down $6.15 or 3.46%. The reversal after an initial pop is a pattern familiar to high-multiple software names, where a beat on reported results can be offset by any hint of deceleration in the forward outlook.

🚨 $ZS EARNINGS UPDATE 🚨 Zscaler just delivered a strong Q4: 📈 Revenue: $898.2M (+25% YoY) 💰 Adjusted EPS: $1.19 vs. $1.09 expected 🔥 ARR: $3.77B (+25%) 🤖 AI security becoming a major growth driver But there's a catch… FY2027 ARR growth is guided to only ~17%, a… — Geovany (@Geovany2300) September 4, 2026 (https://x.com/Geovany2300/status/2095852833681649936?ref_src=twsrc%5Etfw)

Analyst Reaction

JPMorgan kept its Overweight rating and $215 price target, noting the beat on both revenue and ARR was larger than anything seen earlier in the year. The firm described the updated guidance as appropriately prudent.

Stephens raised its price target to $225. Needham lifted its target to $215. Stifel reiterated a Buy with a $200 target. Scotiabank also raised its target to $200, pointing to the acceleration in new ARR. Canaccord Genuity held its Buy rating with a $210 target.

The prior quarter's guidance miss had rattled investor confidence, so this quarter's clean beat was seen as a step in the right direction.

The Bigger Picture for ZS

ZS is down 21% this year, a stark contrast to peers CrowdStrike and Palo Alto Networks, which are up 83% and 80% respectively.

Investors have been worried that AI could make traditional security software redundant. Zscaler pushed back on that view, arguing AI-driven attacks are increasing the need for the kind of infrastructure it provides. Zscaler's core business is cloud-based security — routing and inspecting traffic through its platform rather than through on-premises appliances — and the company has positioned AI-related security workloads as a driver of demand for that architecture.

The company also announced a 3% reduction in workforce and said it filled two vacant senior sales roles. Canaccord flagged that FY2027 guidance may be conservative partly due to the ongoing sales force transition. How quickly that rebuilt sales organization converts pipeline into new ARR will be a key metric to watch in coming quarters, along with whether the guided FY2027 ARR growth rate proves conservative as Canaccord suggests.

InvestingPro analysis flagged ZS as appearing undervalued at current levels relative to its fair value estimate.