Key Takeaways
- The company delivered Q4 adjusted earnings per share of $1.19, surpassing analyst expectations of $1.09, while revenue reached $898.2 million versus the anticipated $927 million
- Year-over-year revenue expansion hit 25%, accompanied by a robust gross profit margin of 77%
- First quarter FY2027 revenue projections of $935-$939 million exceeded Wall Street’s $927 million consensus
- Shares of ZS gained 5% during Thursday’s extended trading session but reversed course with a 3.4% decline in Friday’s premarket
- JPMorgan maintained its Overweight stance with a $215 target; Stephens boosted its price objective to $225
Zscaler delivered impressive earnings results and upgraded its future projections. Yet the market responded with a selloff. That’s the paradoxical situation facing ZS shareholders.
The cloud security provider announced fourth quarter adjusted profits of $1.19 per share, representing significant growth from 89 cents in the comparable period last year and surpassing the Street consensus of $1.09. Quarterly revenue ending July 31 totaled $898.2 million, marking a 25% year-over-year expansion and exceeding the $877 million consensus forecast.
Shares surged 5% to $186.27 during Thursday’s after-hours session before momentum reversed. During Friday’s premarket hours, ZS traded down 3.4% after closing Thursday’s regular trading at $177.80.
The company’s annual recurring revenue hit $3,771 million, surpassing consensus projections by $26 million. This represents a 25% expansion compared to the prior year period.
Management also elevated its first quarter FY2027 revenue outlook to $935 million-$939 million, topping the $927 million Street estimate. Projected earnings per share of $1.15 to $1.16 for the upcoming quarter similarly exceeded the analyst consensus of $1.08.
Wall Street’s Take
JPMorgan reaffirmed its Overweight recommendation and maintained a $215 price objective, highlighting that the revenue and ARR outperformance represented the most significant beat witnessed throughout the year. The investment bank characterized the forward-looking guidance as appropriately cautious.
Stephens elevated its price objective to $225. Needham increased its target to $215. Stifel maintained a Buy recommendation with a $200 objective. Scotiabank similarly raised its target to $200, emphasizing the acceleration in new annual recurring revenue. Canaccord Genuity preserved its Buy rating alongside a $210 target.
The previous quarter’s guidance shortfall had shaken shareholder sentiment, making this quarter’s decisive beat a welcome development for restoring confidence.
Broader Context for Zscaler
Year-to-date, ZS has declined 21%, standing in sharp contrast to competitors CrowdStrike and Palo Alto Networks, which have surged 83% and 80% respectively over the same timeframe.
Market participants have expressed concerns that artificial intelligence could render conventional security platforms obsolete. Zscaler countered this narrative, maintaining that AI-powered cyber threats are actually amplifying demand for the infrastructure solutions it delivers.
Management also disclosed a 3% workforce reduction while announcing the completion of hiring for two senior sales leadership positions. Canaccord suggested that FY2027 projections might be deliberately conservative in part because of the continuing sales organization restructuring.
According to InvestingPro analysis, ZS appears to be trading below its calculated fair value at present price levels.
The most recent premarket stock price on Friday registered at $171.65, representing a decline of $6.15 or 3.46%.
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