• However, 38 of 47 analysts covering the stock rate it a ‘Buy’ or higher.
• For the fourth quarter, Zscaler expects revenue between $875 million and $878 million, and forecasts adjusted EPS of $1.08 and $1.09.
• Evercore believes most of the positive data points from the quarter were overshadowed by a more cautious outlook.

Shares of cloud security company Zscaler, Inc. (ZS) tumbled over 31% on Wednesday morning and are on track for their biggest single-day percentage decline ever.

Following the third-quarter results, Evercore ISI said the company’s strong report was overshadowed by a more cautious outlook and a "disappointing" initial fiscal 2027 outlook.

Evercore stated that Zscaler’s slowing net new logos and sales changes created an overhang on the shares, TheFly reported. The firm now sees a "meaningful shift in the narrative" following the earnings report as it cut its rating on ZS to ‘In Line’ from ‘Outperform’ and slashed its price target by $70 to $155, now implying a downside potential of more than 16% based on the stock’s last close on Tuesday.

Other Analyst Takeaways

At least 22 firms lowered their price target on the company. TD Cowen said “healthy” results were tempered by indications of growth deceleration in fiscal 2027. JPMorgan said the company reported "solid" Q3 results with "strong" Z-Flex momentum, but its implied Q4 and early fiscal 2027 outlooks disappointed, TheFly reported.

Morgan Stanley, which has the lowest price target of $145 on ZS stock, pointed to its last update, in which the firm highlighted signs of increasing competition in SASE that "largely played out" in fiscal Q3.

Wedbush’s Dan Ives said ZS shares will be under pressure “with Q4 revenue guidance coming in relatively light versus Street expectations and an early look to FY27 guidance, which implies a 700-bps deceleration in ARR and revenue growth year-over-year and came in below Street expectations,” per TheFly.

ZS Results At A Glance

For the third quarter (Q3), the company’s total revenue rose 25% to $850.5 million, and came in ahead of the $835.7 million consensus estimate polled by Fiscal AI. Adjusted earnings per share (EPS) were $1.08, beating the consensus estimate of an adjusted EPS of $1.01.

For the fourth quarter, Zscaler expects revenue between $875 million and $878 million, with the midpoint below the $878 million estimate. It forecast adjusted EPS of $1.08 and $1.09, matching ⁠estimates at the lower end of the range.

What Retail Thinks About ZS

On Stocktwits, retail sentiment toward the ZS stock turned ‘extremely bullish’ from ‘bullish’ over the last 24 hours.

Despite the price target cuts, Wall Street remains largely bullish, with 38 of 47 analysts covering the stock rating it a ‘Buy’ or higher, and 9 rating it a ‘Hold.’

Many users on the platform commented on the heavy pullback in shares.

ZS stock has lost nearly 44% in value so far this year and fallen nearly 51% over the past 12 months, underperforming the benchmark S&P Index.

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