Sometimes the market doesn't care how good your quarter was. Zscaler, Inc. (ZS) learned that lesson Tuesday evening when shares tumbled after releasing first-quarter earnings that beat Wall Street's expectations on both earnings and revenue.
The Numbers
Zscaler reported quarterly earnings of 96 cents per share, comfortably ahead of the Street estimate of 86 cents. Revenue came in at $788.1 million, surpassing analyst expectations of $773.75 million.
Deferred revenue reached $2.35 billion as of Oct. 31, 2025, marking a 32% jump year-over-year. That's a solid indicator of future business the company has already locked in.
What Management Is Saying
"Our outstanding Q1 results demonstrate the strong demand we are experiencing for our Zero Trust and AI Security platform," said Jay Chaudhry, CEO of Zscaler.
Chaudhry highlighted that the company now has over $3.2 billion in Annual Recurring Revenue, growing more than 25% year-over-year, with what he called "Rule-of-78 performance." He noted that increasing numbers of customers are turning to the platform for improved security, lower operational costs, and reduced IT complexity.
Looking Ahead
Zscaler raised its fiscal 2026 adjusted EPS guidance to a range of $3.78 to $3.82, versus the $3.68 analyst estimate. The company also bumped up its fiscal revenue outlook to $3.7 billion to $3.72 billion, well above the $3.28 billion estimate.
The Stock's Reaction
Despite the beat and raised guidance, Zscaler stock fell 7.77% to $267.21 in Tuesday's extended trading. The disconnect between solid results and the market's reaction suggests investors may have been expecting even more, or perhaps found something in the details that tempered their enthusiasm.
