Key Highlights
- Shares of ZS touched a 52-week bottom at $140.56, sliding 8.16% in a single session
- The stock has plummeted 34.48% year-over-year and nearly 47% in the last six months
- Fiscal Q2 2026 sales jumped 26% annually to $815.8 million, surpassing Wall Street projections
- Price targets were slashed by TD Cowen, BMO Capital, and Stifel after the earnings release
- Wells Fargo launched coverage with an Overweight stance and $200 target, viewing the selloff as an attractive entry
Shares of Zscaler tumbled to a new 52-week bottom on Monday, shedding 8.16% to close at $140.56. The decline marks a steep fall from grace for a security stock that commanded prices above $300 in recent memory.
The downturn occurred even as the cloud security provider delivered impressive fiscal second-quarter results. Top-line performance reached $815.8 million, reflecting a robust 26% year-over-year expansion and exceeding the Street’s $798 million projection. Adjusted earnings per share of $1.01 similarly outpaced the $0.89 consensus by a comfortable margin.
What triggered the selloff? The culprit was forward-looking commentary.
Executives issued conservative billings growth projections and tempered profitability expectations for the current fiscal year. Wall Street interpreted this as evidence that the company’s torrid expansion era may be decelerating — prompting investors to exit positions before seeking clarity.
Since the start of the year, ZS has surrendered approximately 32.51% of its value. The six-month window shows an even steeper decline of roughly 47%.
Technical indicators paint a bearish picture as well. The equity displays a Sell signal based on technical analysis, while market capitalization has contracted to approximately $24.41 billion.
Wall Street firms wasted no time adjusting their outlooks following the report. TD Cowen reduced its price objective to $220 from $260, expressing concern about market compression. BMO Capital lowered its target to $210 from $315, while increasing its fiscal 2026 annual recurring revenue projection by $32 million but citing predominantly external factors for the reduction.
Stifel made the most dramatic adjustment, cutting its target to $180 from $320. Despite this, the firm recognized that Zscaler’s quarterly performance surpassed both its own internal projections and consensus across critical operating metrics.
Contrarian Optimism from Wells Fargo
Not all analysts are turning bearish. Wells Fargo launched coverage on March 3 with an Overweight rating and $200 price objective. The investment bank argued that anxieties surrounding Red Canary created an attractive buying window.
Wells Fargo emphasized Zscaler’s dominant position among major corporations — penetrating 45% of Fortune 500 companies and 40% of Global 2000 firms — as a durable competitive moat. The bank projects new customer wins will generate $300 to $400 million in annual contributions and dismissed market saturation concerns as “overstated.”
The firm anticipates the company can maintain 20% expansion rates powered by Zero Trust Exchange adoption, data protection solutions, and artificial intelligence-enhanced products.
From a fundamental perspective, Zscaler boasts a 77% gross profit margin while annual recurring revenue climbed 25% to match overall revenue momentum. The organization also revealed plans to establish a Canadian data center facility, strengthening its data sovereignty infrastructure.
Street Estimates Versus Trading Levels
Thirty-nine Wall Street analysts have recently raised their earnings projections, per InvestingPro data, which also characterizes the shares as trading below fair value at present levels.
For the upcoming third quarter of fiscal 2026, management projected revenue between $834 and $836 million with adjusted EPS ranging from $1.00 to $1.01, both modestly above Street expectations at issuance.
The stock settled at $140.56 on March 24, 2026 — marking its weakest closing price over the trailing twelve months.
