Zscaler Stock Falls as Weak FY2027 Guidance Overshadows Earnings Beat

Zscaler Inc. (ZS) shares fell more than 4% in pre-market trading after the cybersecurity firm's strong fiscal fourth-quarter earnings report was overshadowed by a significantly weaker growth forecast for the upcoming year.

Guidance Signals Growth Deceleration

For its fiscal fourth quarter of 2026, Zscaler reported results that surpassed analyst expectations. The company posted:

• Revenue of $898.2 million, up 25% year-over-year and ahead of the $877 million consensus.
• Adjusted earnings per share (EPS) of $1.19, beating the forecast of $1.09.

Despite the quarterly beat, investors focused on the company's guidance for fiscal year 2027. Zscaler projected revenue and annual recurring revenue growth between 16.6% and 17.5%, a marked slowdown from the 25% pace set in the fiscal year that just concluded.

Restructuring and Cash Flow Concerns

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Compounding the weaker outlook, Zscaler also announced a restructuring plan to reduce its global headcount by approximately 3%. The company expects to recognize $30 million to $33 million in associated charges, primarily in the first half of fiscal 2027.

Furthermore, the company's free cash flow margin compressed sharply in the fourth quarter, falling to 6.8% from 16% in the previous quarter. Zscaler attributed the decline to accelerated purchases of data-center equipment ahead of anticipated hardware cost increases.

Market Context

The negative reaction from investors mirrors a pattern seen with other high-growth technology stocks, where forward-looking guidance is weighed more heavily than past performance. Cybersecurity peer Palo Alto Networks recently experienced a similar sell-off after it beat quarterly estimates but provided a cautious near-term forecast.

For Zscaler, this dynamic is a repeat of its third-quarter earnings in May, when a strong report was also met with a stock decline due to a conservative outlook. The pre-market selling suggests the market is treating the decelerating growth narrative as the dominant factor for the stock's valuation.