Zscaler (NASDAQ:ZS) Shares Gap Down – Here’s Why

by · The Markets Daily

Zscaler, Inc. (NASDAQ:ZS – Get Free Report)’s stock price gapped down before the market opened on Friday . The stock had previously closed at $177.80, but opened at $166.15. Zscaler shares last traded at $170.8370, with a volume of 1,960,706 shares.

Key Headlines Impacting Zscaler

Here are the key news stories impacting Zscaler this week:

  • Positive Sentiment: Results exceeded expectations. Zscaler reported fiscal Q4 revenue of $898.2 million, up 24.9% year over year and above the $877.0 million consensus estimate. Non-GAAP earnings of $1.19 per share also topped expectations of $1.09. Zscaler Q4 Earnings and Revenues Top Estimates
  • Positive Sentiment: Profitability and enterprise demand improved. Q4 non-GAAP operating margin reached a record 24%, while annual recurring revenue rose 25% to $3.77 billion. Large-deal activity increased, Fortune 500 penetration reached 50%, and net retention was 115%, supporting continued customer expansion. Zscaler Announces Strong Fourth Quarter and Fiscal 2026 Financial Results
  • Positive Sentiment: Analysts raised targets. Stephens increased its target to $225 and Needham raised its target to $215; Cantor Fitzgerald maintained an overweight rating and a $225 target, while Rosenblatt reiterated buy with a $200 target.
  • Neutral Sentiment: AI remains a growth opportunity. Management highlighted momentum for Agentic SecOps and security products designed for AI workloads, but investors are awaiting evidence that these offerings can reaccelerate growth.
  • Negative Sentiment: Fiscal 2027 growth is expected to slow. Zscaler forecast revenue growth of 16.6%-17.5% and ARR growth of 16.6%-17.4%, down from 25% in fiscal 2026. This deceleration overshadowed the better-than-expected quarterly results, particularly because full-year revenue guidance was broadly in line with consensus. Zscaler Forecasts Fiscal 2027 Growth
  • Negative Sentiment: Restructuring and cash-flow concerns add pressure. The company plans to eliminate about 3% of its workforce as it reallocates resources toward AI and growth initiatives. Q4 free-cash-flow margin fell to 7% from 24% a year earlier because of significantly higher capital spending, while Zscaler remains GAAP unprofitable.
  • Negative Sentiment: Some investors question the valuation case. Although ZS trades at a historically lower forward multiple, analysts note that its projected growth lacks the acceleration seen at some AI-focused cybersecurity peers.

Analysts Set New Price Targets

ZS has been the subject of a number of recent research reports. BMO Capital Markets reissued an “outperform” rating and issued a $200.00 price objective (up from $178.00) on shares of Zscaler in a report on Friday. Stephens raised their target price on shares of Zscaler from $200.00 to $225.00 and gave the stock an “overweight” rating in a report on Friday. Rosenblatt Securities reiterated a “buy” rating and issued a $200.00 price target on shares of Zscaler in a research report on Friday. HC Wainwright upgraded Zscaler from a “buy” rating to a “buy” rating in a research note on Monday, May 18th. Finally, Wells Fargo & Company increased their price target on Zscaler from $210.00 to $215.00 and gave the stock an “overweight” rating in a research report on Friday. Thirty-four equities research analysts have rated the stock with a Buy rating, six have given a Hold rating and one has given a Sell rating to the company. According to data from MarketBeat, Zscaler currently has an average rating of “Moderate Buy” and a consensus target price of $217.33.

Get Our Latest Research Report on Zscaler

Zscaler Stock Performance

The company has a debt-to-equity ratio of 0.72, a current ratio of 1.86 and a quick ratio of 1.86. The stock has a 50-day simple moving average of $160.51 and a 200-day simple moving average of $150.39. The stock has a market cap of $27.70 billion, a P/E ratio of -356.98, a PEG ratio of 101.67 and a beta of 0.95.

Zscaler (NASDAQ:ZS – Get Free Report) last issued its earnings results on Thursday, September 3rd. The company reported $1.19 EPS for the quarter, topping the consensus estimate of $1.09 by $0.10. The firm had revenue of $898.18 million during the quarter, compared to the consensus estimate of $876.96 million. Zscaler had a negative return on equity of 0.37% and a negative net margin of 2.44%.The business’s quarterly revenue was up 24.9% on a year-over-year basis. During the same quarter in the previous year, the firm earned $0.89 earnings per share. Zscaler has set its FY 2027 guidance at 4.860-4.900 EPS and its Q1 2027 guidance at 1.150-1.160 EPS. Research analysts forecast that Zscaler, Inc. will post 0.13 earnings per share for the current year.

Insider Activity at Zscaler

In other Zscaler news, insider Adam Geller sold 2,817 shares of the firm’s stock in a transaction that occurred on Monday, June 22nd. The shares were sold at an average price of $122.60, for a total value of $345,364.20. Following the sale, the insider owned 42,314 shares in the company, valued at $5,187,696.40. This trade represents a 6.24% decrease in their ownership of the stock. The sale was disclosed in a filing with the SEC, which is available at this link. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, CEO Jagtar Chaudhry sold 2,878 shares of the firm’s stock in a transaction that occurred on Tuesday, June 16th. The shares were sold at an average price of $126.43, for a total transaction of $363,865.54. Following the completion of the sale, the chief executive officer owned 343,038 shares in the company, valued at $43,370,294.34. This represents a 0.83% decrease in their position. The disclosure for this sale is available in the SEC filing. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Insiders have sold 16,772 shares of company stock valued at $2,139,799 in the last quarter. 17.20% of the stock is owned by company insiders.

Institutional Inflows and Outflows

Large investors have recently modified their holdings of the company. Binnacle Investments Inc acquired a new stake in shares of Zscaler during the 3rd quarter valued at $25,000. AlphaCentric Advisors LLC acquired a new position in Zscaler in the 4th quarter worth about $29,000. University of Texas Texas AM Investment Management Co. acquired a new position in Zscaler in the 4th quarter worth about $30,000. POM Investment Strategies LLC raised its position in Zscaler by 92.9% in the second quarter. POM Investment Strategies LLC now owns 218 shares of the company’s stock valued at $31,000 after purchasing an additional 105 shares during the last quarter. Finally, Mcguire Capital Advisors Inc. bought a new position in Zscaler in the fourth quarter valued at about $32,000. 46.45% of the stock is currently owned by institutional investors.

Zscaler Company Profile

(Get Free Report)

Zscaler is a cloud security company that delivers a cloud-native platform to protect users, applications and data as organizations move away from traditional, network-centric security architectures. The company focuses on a zero trust approach that assumes no implicit trust for users or devices, providing secure access to the internet, SaaS applications and private applications regardless of where users are located. Zscaler positions its services as an alternative to legacy appliances and site-centric VPNs, aiming to simplify security while enabling modern, distributed workforces.

Key offerings are built around the Zscaler Zero Trust Exchange, a multi-tenant cloud platform that enforces security and access policies in-line.

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