What Happened?

A number of stocks fell in the afternoon session after markets pulled back as a report raised concerns about artificial intelligence demand and profitability. 

Oracle shares lost more than 5% following news of its cloud business generating lighter margins than expected. According to internal documents cited in the report, the gross profit margin for this business was only 14%, a figure much lower than what analysts had expected. This suggested that the high costs of running the advanced chip infrastructure were weighing on profitability. Compounding these worries was the ongoing U.S. government shutdown, in its second week, with no clear resolution in sight from Washington. These updates drove investors away from riskier assets and towards safe havens, a trend highlighted by gold futures hitting a record $4,000 per ounce for the first time.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Finance and Accounting Software company Workday (NASDAQ: WDAY) fell 3.2%. Is now the time to buy Workday? Access our full analysis report here, it’s free for active Edge members.
• Finance and Accounting Software company BILL (NYSE: BILL) fell 5%. Is now the time to buy BILL? Access our full analysis report here, it’s free for active Edge members.
• Compliance Software company Workiva (NYSE: WK) fell 3.5%. Is now the time to buy Workiva? Access our full analysis report here, it’s free for active Edge members.
• Network Security company Zscaler (NASDAQ: ZS) fell 5.1%. Is now the time to buy Zscaler? Access our full analysis report here, it’s free for active Edge members.
• Data Storage company Snowflake (NYSE: SNOW) fell 4.3%. Is now the time to buy Snowflake? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Zscaler (ZS)

Zscaler’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 11 days ago when the stock gained 3.1% as the release of key inflation data aligned with market expectations, sparking optimism for potential interest rate cuts. 

The August Personal Consumption Expenditures (PCE) price index, which is the Federal Reserve's preferred inflation gauge, came in as forecast, easing concerns about the central bank needing to maintain high interest rates for longer. As a result, investor hopes for future rate cuts have been bolstered. Lower interest rates are typically beneficial for growth sectors like technology because they increase the valuation of future earnings. This positive sentiment was widespread, contributing to gains across major indexes, including the Dow Jones Industrial Average, S&P 500, and the tech-heavy Nasdaq.

Zscaler is up 58.9% since the beginning of the year, and at $288.59 per share, it is trading close to its 52-week high of $316.50 from July 2025. Investors who bought $1,000 worth of Zscaler’s shares 5 years ago would now be looking at an investment worth $1,954.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.