Zscaler sees downbeat quarterly revenue as competition heats up in cybersecurity market
Zscaler (ZS.O) projected fourth-quarter revenue below analyst estimates, signaling increased competition in the cybersecurity market. Enterprises are scrutinizing spending on cloud security products, leading to a more challenging environment. Following the announcement, Zscaler's shares fell 15% in extended trading on Tuesday.
The cloud-based security solution provider expects fourth-quarter revenue to range between $875 million and $878 million. This forecast falls below analysts' average estimate of $878.6 million, according to data compiled by LSEG.
Zscaler primarily operates in the Secure Access Service Edge (SASE) market. SASE integrates networking and security into a unified platform, designed to connect users, devices, and applications from any location.
The SASE market is one of the fastest-growing segments within cybersecurity. Its expansion is driven by the increasing adoption of cloud technologies, further boosted by the artificial intelligence boom, which continues to reshape network security architectures.
In the third quarter, Zscaler reported revenue of $850.5 million, surpassing analysts' estimates of $835.4 million. The company's total operating expenses for the third quarter rose approximately 25% year-over-year, reaching $687.5 million from $547.5 million a year ago.
Earlier, Zscaler had also reported strong performance in other periods. In Q1 CY2026, the company's sales were up 25.4% year-on-year to $850.5 million, beating Wall Street's revenue expectations, according to StockStory.org. For the subsequent quarter, StockStory.org reported that Zscaler expected revenue around $876.5 million.
In a separate report, Zscaler's second-quarter revenue increased 26% to $815.8 million, exceeding analysts' average estimate of $798.8 million, LSEG data showed. Prior to that, the company's revenue was reported at $788.1 million in a preceding quarter.
Despite strong past performance, the latest fourth-quarter forecast indicates a tightening market as competition intensifies and businesses become more cautious with their cloud security investments.