Zscaler’s revenue and ARR guidance for Q4 and fiscal 2027 fell short of consensus, triggering a sharp sell-off in its stock.
Zscaler (NASDAQ: ZS) shares dropped over 30% after the company issued weaker-than-expected guidance for fiscal 2026 Q4 and fiscal 2027. Revenue is forecast to grow 22% year over year to $875 million-$878 million, below the $878.6 million consensus. Annual recurring revenue (ARR) growth for fiscal 2027 is projected at 16%-17%, also missing expectations.
The company cited leadership changes in its sales team and challenges in attracting new customers as key factors. Excluding its Red Canary acquisition, full-year new ARR growth is expected to be just 9.5%. However, Zscaler reported a strong 115% net dollar retention rate over the past 12 months, indicating strength in expanding existing customer relationships.
The stock has now lost half its value over the past year, reflecting investor concerns about growth deceleration in its core business despite the Red Canary acquisition outperforming expectations.