GET DAILY SIGNALSZscaler (ZS) Delivers +25% Revenue Growth and Record Margins in Q3
Key Takeaways
- Revenue rose 25% year-over-year to $850.5 million for the third quarter of fiscal 2026 ended April 30, 2026.
- Annual recurring revenue (ARR) grew 25% to $3.525 billion, with net new ARR of $166 million during the quarter.
- Non-GAAP operating margin reached a record 23%, up from 22% a year ago, with non-GAAP operating income of $195.8 million.
- Non-GAAP earnings per share (EPS) increased to $1.08 from $0.84 in the prior-year quarter.
- The company raised its full-year fiscal 2026 guidance for revenue, ARR, and non-GAAP profitability.
- GAAP results showed a net loss of $13.9 million, or $0.09 per share, compared to a $4.1 million loss a year earlier.
Why These Results Matter
Zscaler delivers cloud security solutions centered on its Zero Trust Exchange platform. The company’s fiscal year ends July 31, making the third quarter a key indicator of momentum heading into the final period. In my view, investors closely monitor these results for signs of sustained demand in cybersecurity amid rising AI-related threats and enterprise digital transformation. Strong ARR growth and improving profitability can influence valuation multiples and future guidance expectations in a competitive sector.
Breaking Down the Reported Results
Revenue reached $850.5 million, a 25% increase from $678.0 million in the third quarter of fiscal 2025. ARR expanded 25% to $3.525 billion. Non-GAAP operating income totaled $195.8 million, or 23% of revenue, compared with $146.7 million, or 22%, a year earlier. Non-GAAP net income rose to $177.9 million, or $1.08 per diluted share, versus $136.8 million, or $0.84 per share, previously. GAAP net loss widened slightly to $13.9 million, or $0.09 per share. Deferred revenue grew 25% to $2.477 billion. The company beat consensus estimates on both revenue and non-GAAP EPS and raised full-year fiscal 2026 guidance across key metrics. From what I see, these figures highlight consistent execution even as the business scales.
Market Reaction and Investor Sentiment
Following the release after market close on May 26, 2026, shares initially reacted negatively in after-hours trading. Investors appeared to focus on the pace of growth relative to elevated expectations and forward commentary, even as the company delivered record margins and raised guidance. Sentiment heading into the report had been constructive given the company’s positioning in AI security, though post-print volatility reflected typical earnings uncertainty in high-growth technology names. I’m watching this closely as the market digests the details.
Using AI Tools to Compare Performance
When analyzing results like these, I often turn to Tickeron’s AI Screener to see how ZS stacks up against peers on fundamentals and technical trends. It provides a quick way to filter for similar growth profiles and margin trajectories across the software sector. This helps put the quarter in broader context without relying solely on manual comparisons.
Forward Outlook and Key Factors to Monitor
Zscaler raised its full-year fiscal 2026 revenue guidance to a range of approximately $3.3295 billion to $3.3325 billion, implying growth of 24.6% to 24.7%. ARR guidance was lifted to $3.740 billion to $3.749 billion. Non-GAAP operating income is now expected at $755 million to $757 million. The company also provided fourth-quarter fiscal 2026 targets, including revenue of $875 million to $878 million.
Investors will watch execution on the recently announced acquisition of Symmetry Systems and partnerships involving frontier AI models. Demand signals in public sector and international markets, along with the impact of new product initiatives such as Project AI-Guardian, remain important. Margin expansion trends and free cash flow generation will be monitored closely as the company balances growth investments with profitability targets.
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Momentum Indicator for ZS turns positive, indicating new upward trend
ZS saw its Momentum Indicator move above the 0 level on October 08, 2026. This is an indication that the stock could be shifting in to a new upward move. Traders may want to consider buying the stock or buying call options. Tickeron's A.I.dvisor looked at 79 similar instances where the indicator turned positive. In 67 of the 79 cases, the stock moved higher in the following days. The odds of a move higher are at 85%.
Technical Analysis (Indicators)
Bullish Trend Analysis
The Moving Average Convergence Divergence (MACD) for ZS just turned positive on October 22, 2026. Looking at past instances where ZS's MACD turned positive, the stock continued to rise in 34 of 46 cases over the following month. The odds of a continued upward trend are 74%.
Following a +9.54% 3-day Advance, the price is estimated to grow further. Considering data from situations where ZS advanced for three days, in 260 of 345 cases, the price rose further within the following month. The odds of a continued upward trend are 75%.
The Aroon Indicator entered an Uptrend today. In 182 of 230 cases where ZS Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are 79%.
Bearish Trend Analysis
The 10-day RSI Indicator for ZS moved out of overbought territory on October 29, 2026. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 36 similar instances where the indicator moved out of overbought territory. In 28 of the 36 cases, the stock moved lower in the following days. This puts the odds of a move lower at 78%.
The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 4 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where ZS declined for three days, the price rose further in 50 of 62 cases within the following month. The odds of a continued downward trend are 81%.
ZS broke above its upper Bollinger Band on October 23, 2026. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
Fundamental Analysis (Ratings)
The Tickeron Valuation Rating of 2 (best 1 - 100 worst) indicates that the company is seriously undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (15.552) is normal, around the industry mean (15.799). ZS has a moderately low P/E Ratio (-635.436) as compared to the industry average of (60.453). Projected Growth (PEG Ratio) (2.043) is also within normal values, averaging (3.648). Dividend Yield (0.000) settles around the average of (0.211) among similar stocks. P/S Ratio (9.158) is also within normal values, averaging (103.889).
The Tickeron Price Growth Rating for this company is 35 (best 1 - 100 worst), indicating steady price growth. ZS’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron SMR rating for this company is 92 (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron PE Growth Rating for this company is 97 (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is 100 (best 1 - 100 worst), indicating that the returns do not compensate for the risks. ZS’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 91, placing this stock worse than average.
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an antivirus & cloud security platform
Industry ComputerCommunications
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