Zscaler (ZS) Stock Plunges 23% Following Disappointing Q4 Revenue Forecast
Zscaler’s stock dropped over 23% after its Q4 revenue forecast of $875M–$878M fell below Wall Street’s $878.6M estimate, despite strong Q3 results of $850.5M revenue and 25% year-over-year growth. The company cited slowing new customer additions and two senior sales executive departures as key concerns, prompting analysts to slash price targets across the board.
Zscaler’s stock plummeted more than 23% in premarket trading after the cybersecurity firm issued a cautious fourth-quarter revenue forecast that disappointed investors. The company projected Q4 revenue between $875 million and $878 million, slightly below the $878.6 million consensus estimate, despite reporting a strong third quarter with $850.5 million in revenue, a 25% year-over-year increase. Third-quarter adjusted earnings per share (EPS) came in at $1.08, beating the $1.01 consensus, though the company posted a GAAP net loss of $13.9 million. Full-year revenue guidance was raised marginally to $3.32–$3.33 billion, with adjusted EPS expected at $4.10–$4.11. However, the Q4 outlook overshadowed these gains, with revenue projections falling just under expectations. The company attributed the conservative forecast to decelerating new customer acquisitions, a key focus for executives. CFO Kevin Rubin acknowledged underperformance in new customer wins and described the outlook as “prudent,” though investors reacted skeptically. Zscaler plans to shift focus to mid-market enterprises and introduce new incentive programs to boost growth. Two senior sales executives departed at quarter-end, adding to concerns about leadership stability. Analysts responded swiftly, cutting price targets: Morgan Stanley lowered its estimate to $145 from $155, UBS to $225 from $260, and Mizuho to $185 from $210. RBC and BMO also reduced targets, reflecting broader market skepticism about Zscaler’s near-term growth prospects.
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