What Happened?
Shares of cloud security platform Zscaler (NASDAQ: ZS) fell 14.9% in the afternoon session after the company reported mixed fourth quarter results. Sales and earnings per share came in ahead of expectations during the quarter.
In addition, Zscaler provided optimistic EPS guidance for the next quarter, which blew past analysts' expectations, and its full-year EPS guidance trumped Wall Street's estimates.
On the other hand, all-important billings (sometimes referred to as cash revenue) missed fairly significantly. To add onto the uncertainty, management broke out some of the financial contribution from Red Canary, a recent acquisition.
While performance of the target is strong, it suggests that ZS standalone organic net new ARR (annual recurring revenue) growth could be tepid. This billings miss and uncertainty around organic growth weighed on shares, and the stock traded down.
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What Is The Market Telling Us
Zscaler’s shares are quite volatile and have had 16 moves greater than 5% over the last year. But moves this big are rare even for Zscaler and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 6.4% on the news that Nvidia CEO Jensen Huang dismissed fears that artificial intelligence would cannibalize the enterprise software sector.
High-growth names like Zscaler (ZS) and CrowdStrike (CRWD) saw significant rebounds as investors reassessed the "AI headwind" narrative that had previously weighed on valuations. Huang's comments acted as a powerful catalyst, signaling that the intersection of generative AI and established software platforms is a symbiotic relationship rather than a zero-sum game. During a CNBC appearance, Huang argued that the market "got it wrong," specifically defending the indispensable role of platforms like ServiceNow. He emphasized that these companies are uniquely positioned to deploy fine-tuned AI agents that utilize their existing specialized tools.
Zscaler is down 35.5% since the beginning of the year, and at $142.17 per share, it is trading 57.7% below its 52-week high of $336.27 from November 2025. Investors who bought $1,000 worth of Zscaler’s shares 5 years ago would now be looking at an investment worth $676.50.
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