Zscaler reported its fiscal third-quarter earnings after the bell on Tuesday, and the numbers looked good — on paper. The cybersecurity company posted revenue of $850.48 million, beating the consensus estimate of $835.38 million, and adjusted earnings of $1.08 per share, topping the $1.01 per share analysts were expecting. Revenue grew 25% year-over-year, and annual recurring revenue also climbed 25% to about $3.53 billion. Cash flow from operations came in at $198 million, with free cash flow of $136 million. The company ended the quarter with roughly $982 million in cash.

CEO Jay Chaudhry struck an optimistic tone, saying, “Zscaler is ideally positioned as the cybersecurity platform for the AI era. Our differentiated Zero Trust SASE architecture, which hides applications from attackers and eliminates lateral movement, has never been more essential in securing against threats exposed by frontier models and compromised AI agents.”

So why did shares tumble 16.85% in after-hours trading, falling to $153.50? The culprit was the company’s fourth-quarter revenue guidance. Zscaler expects Q4 revenue between $875 million and $878 million, while analysts were looking for $878.53 million. That slight miss — even though the midpoint is just a hair below consensus — spooked investors. The company’s adjusted earnings guidance for Q4 was $1.08 to $1.09 per share, comfortably above the $1.03 estimate, but revenue is what the market focused on.

For the full fiscal year 2026, Zscaler raised its revenue outlook from $3.31-$3.32 billion to $3.330-$3.333 billion, versus the $3.32 billion consensus. It also lifted its adjusted earnings guidance from $3.99-$4.02 per share to $4.10-$4.11 per share, above the $4.01 estimate. That’s a clear vote of confidence in the longer-term trajectory, but it wasn’t enough to offset the near-term disappointment.

Zscaler executives will discuss the results further on an earnings call at 4:30 p.m. ET. Investors will be listening closely for any color on what’s driving the cautious Q4 outlook — and whether the AI-driven demand Chaudhry touted is translating into deals as fast as hoped.