Times have become difficult for the stock of cybersecurity firm Zscaler (NASDAQ: ZS).
The company, known for its zero-trust security, recently received downgrades from investment company Evercore ISI
This occurred following its earnings release for the third quarter of fiscal 2026 (ended April 30). However, those moves also come as Zscaler stock trades at its lowest level since 2023. Amid such conditions, history shows this downgrade may ultimately be bullish, and here’s why.
The downgrade Much of the negativity appears to stem from the fiscal Q3 earnings release. Investors did not react well to the projected annual recurring revenue (ARR) range of 16% to 17% for fiscal 2027, well below the 25% revenue growth in fiscal Q3. Additionally, Zscaler revised its free cash flow margin projections for fiscal 2026 to 22.8% to 23.3%, down from the 26.5% to 27% range previously predicted.