Key points:
- Zscaler exceeded Wall Street revenue and profit estimates on robust demand for cloud and AI-driven security tools.
- The company raised its full-year revenue and earnings outlook, reflecting confidence in enterprise demand.
- Despite strong results, shares fell in extended trading as investors weighed tempered guidance increases.
Strong Quarter Fueled by Cloud and AI Security Demand
Zscaler delivered better-than-expected quarterly results, underscoring sustained demand for advanced cybersecurity solutions as enterprises confront increasingly complex digital threats.
The company reported first-quarter revenue of $788.1 million, a 26% increase from a year earlier, surpassing analysts’ expectations of $773.8 million, according to LSEG data. Adjusted earnings came in at 96 cents per share, well above the consensus estimate of 86 cents.
The strong performance was driven by heightened enterprise investment in cyber protection, particularly tools designed to secure cloud environments and artificial intelligence-driven workloads. As organizations expand their digital footprints, they are seeking more comprehensive and flexible security platforms capable of protecting users and data from anywhere.
Zscaler has benefited from its flexible purchasing program, which has helped attract larger, multi-year platform agreements with enterprise customers. These longer-term deals have strengthened revenue visibility and reinforced the company’s position with large organizations modernizing their security architectures.
Riding this momentum, Zscaler lifted its full-year revenue outlook to a range of $3.28 billion to $3.30 billion, up slightly from its prior forecast. The company also raised its fiscal 2026 adjusted earnings per share guidance to $3.78 to $3.82, compared with its earlier projection of $3.64 to $3.68.
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Market Reaction and Competitive Landscape
Despite the upbeat results and higher forecasts, Zscaler’s shares fell more than 7% in extended trading. The stock had gained nearly 61% so far this year, and some investors appeared cautious about the modest increase in the company’s revenue outlook relative to the size of its quarterly beat.
Analysts at RBC noted that while management raised annual guidance, the bump in projected revenue was smaller than the first-quarter performance might have suggested. That dynamic, combined with the strong run-up in the stock, likely contributed to the post-earnings pullback.
Zscaler operates primarily in the secure access service edge, or SASE, market—a fast-growing segment that blends networking and security into a single cloud-based platform. SASE enables secure connections for users, devices, and applications regardless of location, an approach increasingly favored as hybrid work and cloud adoption expand.
The broader cybersecurity sector has also been showing strength. Last week, larger rival Palo Alto Networks reported higher first-quarter revenue and raised its own annual forecasts, signaling that enterprise security spending remains resilient across the industry.
As artificial intelligence continues to reshape IT infrastructures, demand for scalable, cloud-native security solutions is expected to remain strong. While short-term market reactions may fluctuate, Zscaler’s results highlight its growing role in a cybersecurity market being reshaped by cloud computing and AI-driven transformation.