Key Takeaways
- Zscaler’s fiscal fourth-quarter earnings arrive September 3 following the market close
- Jefferies upgraded its ZS price target to $220 from $200 while reiterating a Buy recommendation
- Wall Street projects Q4 ARR expansion of 24.2% compared to last year
- Last quarter’s guidance underwhelmed the market, projecting FY2027 ARR growth at only 16-17%
- Management’s updated outlook will drive stock movement more than quarterly results
The cybersecurity platform provider unveils its fourth-quarter fiscal results this afternoon, with shares hovering near $172.73 before the announcement. ZS stock has declined more than 3% during today’s trading session.
The circumstances surrounding this report are particularly noteworthy. When the company last reported quarterly results, the actual performance metrics appeared robustāposting 25% growth across both revenue and annual recurring revenue metrics for Q3, alongside best-ever adjusted operating margins. Yet investors dumped the stock regardless. The problem stemmed from management’s projections, particularly their modest FY2027 ARR growth forecast of merely 16-17%, which rattled market confidence.
This conservative forecast essentially lowered expectations heading into this evening’s announcement. Whether executives revise those projections upward represents the critical question investors want answered tonight.
Jefferies equity analyst Joseph Gallo elevated his ZS price objective to $220 from $200 earlier this week while maintaining his Buy stance. He characterized the FY2027 ARR projection as “very reasonable” and identified Q1 as potentially positioned for organic ARR momentum, partially attributable to federal sector catalysts.
Gallo observed that Wall Street consensus anticipates roughly $220 million in net new ARR for the fourth quarter, though some market participants are hoping for figures approaching $245 million. His channel checks indicate the elevated target may prove challenging to achieve.
Attractive Valuation Compared to Competitors
From a valuation perspective, ZS currently commands approximately 41 times forward free cash flow. This compares favorably against Palo Alto Networks at 54 times and Fortinet at 48 times, positioning Zscaler as the more economically priced alternative among large-cap cybersecurity names entering this earnings event.
The company’s remaining performance obligationāessentially contracted future revenueāexpanded 30% during Q3 to reach $6.5 billion. This metric deserves attention in tonight’s release as well. When bookings outpace recognized revenue, it typically signals accelerating growth on the horizon.
Industry Competitors Establish Elevated Expectations
Both CrowdStrike and Palo Alto Networks delivered recent quarterly reports demonstrating that artificial intelligence is fueling increased cybersecurity investment. CrowdStrike achieved its strongest-ever net new ARR growth performance, with management projecting FY2027 net new ARR growth 630 basis points higher than previous forecasts. That announcement propelled shares toward record peaks.
Palo Alto delivered Q4 adjusted earnings of $1.02 per share alongside $3.41 billion in revenue, exceeding analyst projections of $0.98 and $3.35 billion respectively. Despite surpassing expectations, PANW shares tumbled more than 9% as market participants fixated on the first-quarter guidance.
This dynamicāexceeding estimates yet declining nonethelessāprovides important context for Zscaler’s report tonight. Simply beating quarterly expectations likely won’t suffice to move shares higher.
The Jefferies analyst highlighted that the SecOps and Agentic AI opportunities for Zscaler remain approximately one to two quarters away from materializing as fundamental catalysts. The first quarter of FY2027, rather than the fourth quarter of FY2026, may represent when the compelling growth narrative truly begins to unfold.
Shares of Zscaler closed most recently at $172.73.
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