Zscaler slashes annual free cash flow outlook as capex jumps

Zscaler

26/05/2026 21:15

Overview
US cloud security firm's fiscal Q3 revenue grew 25%, beating analyst expectations
Adjusted EPS for fiscal Q3 beat consensus at $1.08
FY26 free cash flow outlook gets cut as capital expenditure rises

Outlook
Zscaler expects Q4 revenue of $875 mln to $878 mln, up about 22%
Company raises FY26 revenue guidance to $3.3295 bln-$3.3325 bln from $3.309 bln-$3.322 bln
Zscaler lowers FY26 free cash flow margin outlook to 22.8%-23.3% from 26.5%-27%

Result Drivers
CUSTOMER EXPANSION - Co said results were driven by attracting new customers and expanding with existing customers
PRODUCT INNOVATION - Co cited ongoing investment in product innovation, including AI-driven security solutions, as a driver of growth
RED CANARY ACQUISITION - ARR growth included a contribution from the Red Canary acquisition; organic ARR growth was lower
CAPEX INCREASE - Free cash flow margin of approximately 22.8 to 23.3%, down from our prior expectation of 26.5 to 27%, reflecting capex in the high single-digits as a percent of revenue

Company press release: ID:nGNX4ySMqp

Key Details
Metric
Beat/Miss
Actual
Consensus Estimate
Q3 Revenue
Beat
$850.48 mln
$835.39 mln (40 Analysts)
Q3 Adjusted EPS
Beat
$1.08
$1.009 (41 Analysts)
Q3 EPS
 
-$0.09
 
Q3 Adjusted Net Income
Beat
$177.90 mln
$168.24 mln (38 Analysts)
Q3 Net Income
 
-$13.88 mln
 

Analyst Coverage
The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 40 "strong buy" or "buy", 10 "hold" and no "sell" or "strong sell"
The average consensus recommendation for the software peer group is "buy"
Wall Street's median 12-month price target for Zscaler Inc is $210.00, about 15.2% above its May 22 closing price of $182.37
The stock recently traded at 41 times the next 12-month earnings vs. a P/E of 48 three months ago

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)