ZS Stock Plunges Premarket On Weak Sales Forecast: Retail Rushes To Buy The Dip, Calls Selloff Excessive

• ZS stock plunged 21% in Wednesday’s premarket session.
• The company’s Q3 revenue came in higher than expectations, but its Q4 sales forecast missed the target.
• Stocktwits sentiment for ZS moved up to ‘extremely bullish’ from ‘bullish.’

Zscaler shares plunged more than 21% in premarket trading on Wednesday after the cybersecurity firm issued a weak sales forecast for the current quarter, overshadowing better-than-expected third-quarter results.

Still, retail traders turned more optimistic, viewing the selloff as an overreaction and arguing that ZS stock — which had already declined sharply in recent months — offers an attractive buying opportunity at current levels. 

$ZS let me get this straight. It's down 20 percent AH because, even though it beat on both earnings and revenue, the guidance for the current was below expectations by $1 million????? So they take the stock down $6BILLION? Let that sink in,” a trader said on the ZS stream on Stocktwits.

Another trader claimed that move is an “Over reaction. This will recover pretty fast.”

On Stocktwits, the retail sentiment for ZS moved up to ‘extremely bullish’ on Wednesday, from ‘bullish’ the previous day, while the message volume for the ticker rose by over 5,800% in the last 24 hours, and watcher count increased 1.4%.

ZS Faces Competition

Zscaler operates in the rapidly growing Secure Access Service Edge (SASE) market, which combines networking and cybersecurity into a unified cloud-based platform that securely connects users, devices, and applications from anywhere.

The company faces intense competition from larger rivals such as Palo Alto Networks, which are also expanding their integrated platform offerings to capture more market share. 

To be sure, the demand for SASE solutions has surged as cloud adoption and AI-driven infrastructure growth reshape enterprise network security architectures.

ZS Q3 Results Recap

Zscaler’s revenue increased 25% to $850.5 million in the April quarter, beating analysts’ estimate of $835.4 million from LSEG/Reuters. For the fourth quarter, the company expects revenue between $875 million and $878 million, below the average analyst estimate of $878.6 million. It forecast adjusted EPS of $1.08 and $1.09, higher than ⁠estimates of $1.03.

Zscaler, however, raised its outlook for the year. It now expects full-year revenue to be roughly $3.33 billion, up from $3.31 billion to $3.32 billion, and adjusted EPS to be $4.10 to $4.11, up from earlier guidance of $3.99 to $4.02.

With an 18% drop year to date, as of the last close, Zscaler is part of the software stocks that faced intense pressure recently due to a market view that AI tools will diminish the demand for certain enterprise software.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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