Zscaler shares dropped 17% after forecasting fiscal Q4 revenue of $875M–$878M, slightly below $878.6M consensus, and cutting full-year free cash flow margin to 22.8%–23.3% from 26.5%–27%. The company posted Q3 revenue of $850.5M, up 25%, with a record 23% non-GAAP operating margin.
Zscaler reported $850.5 million in revenue for its fiscal third quarter, up 25% year-on-year, and annual recurring revenue reached $3.53 billion. The company achieved a record 23% non-GAAP operating margin with adjusted operating income of $195.8 million and delivered $1.08 in adjusted EPS despite a $13.9 million net loss.
For fiscal Q4, the company forecast revenue of $875 million to $878 million, slightly below market estimates, and trimmed full-year free cash flow margin outlook to 22.8%–23.3% from 26.5%–27%, reflecting higher capital expenditures.
Shares plunged 17% in extended trading, reflecting investor concern over weaker cash flow projections. Zscaler faces intensified competition from larger cybersecurity vendors in the SASE market while pursuing AI-security partnerships with Anthropic and OpenAI and planning to acquire Symmetry Systems to enhance its AI governance capabilities.
