Key Takeaways
- ZS plummeted to a 52-week nadir of $140.56, shedding 8.16% in a single trading session
- Shares have declined 34.48% year-over-year and approximately 47% over the last half-year
- Fiscal Q2 2026 sales climbed 26% annually to $815.8 million, surpassing Wall Street projections
- Multiple firms including TD Cowen, BMO Capital, and Stifel reduced their price objectives post-results
- Wells Fargo launched coverage with an Overweight stance and $200 target, viewing the dip as an attractive entry
Zscaler tumbled to a new annual low on Monday, plummeting 8.16% to settle at $140.56. The decline marks a stark reversal for shares that were commanding prices north of $300 in recent memory.
The dramatic downturn occurred even as the cybersecurity firm delivered impressive fiscal second-quarter numbers. Sales reached $815.8 million, representing a 26% annual increase and exceeding the Street’s $798 million projection. Adjusted earnings per share of $1.01 similarly outperformed expectations, topping the $0.89 consensus by a comfortable margin.
What triggered the sell-off? Forward-looking commentary.
Executives’ tempered outlook on billings expansion and measured profit projections for fiscal 2025 rattled the investment community. The Street interpreted the conservative stance as evidence that the company’s rapid expansion era may be moderating — prompting immediate selling pressure.
On a year-to-date basis, ZS has surrendered approximately 32.51% of its value. The six-month performance is even more concerning, with shares declining nearly 47%.
Technical indicators paint a similarly bearish picture. The equity registers a Sell signal based on momentum analysis, while the enterprise’s market capitalization has contracted to roughly $24.41 billion.
Wall Street responded swiftly following the quarterly disclosure. TD Cowen reduced its valuation target to $220 from $260, expressing apprehension about marketplace contraction. BMO Capital lowered its objective to $210 from $315, though the firm did raise its fiscal 2026 recurring revenue projection by $32 million while noting the target adjustment stemmed primarily from external considerations.
Stifel implemented the most aggressive revision, slashing its target to $180 from $320. Nevertheless, Stifel recognized that Zscaler’s Q2 performance outpaced both its own projections and consensus across critical operational indicators.
Wells Fargo Strikes a Contrarian Tone
Not all analysts share the pessimistic outlook. On March 3, Wells Fargo launched coverage with an Overweight recommendation and a $200 valuation target. The institution suggested that anxiety surrounding Red Canary had generated an appealing accumulation opportunity.
Wells Fargo highlighted Zscaler’s penetration among major corporations — capturing 45% of Fortune 500 companies and 40% of Global 2000 enterprises — as a fundamental competitive moat. The bank projects new customer acquisitions will deliver $300 to $400 million in annual value and dismissed market penetration concerns as exaggerated.
The research team anticipates sustained 20% expansion driven by Zero Trust Exchange adoption, data protection solutions, and artificial intelligence-enhanced products.
From a fundamental perspective, Zscaler preserves a robust 77% gross profit margin while annual recurring revenue expanded 25% in lockstep with topline growth. The organization also revealed intentions to establish a data center presence in Canada, broadening its data residency capabilities.
Price Target Landscape Versus Trading Levels
Thirty-nine sell-side researchers have elevated their profit forecasts recently, per InvestingPro data, which additionally identifies the shares as trading below intrinsic value at prevailing levels.
For the third fiscal quarter of 2026, Zscaler projected revenue between $834 and $836 million with earnings per share of $1.00 to $1.01, both marginally above prevailing consensus forecasts.
The stock concluded trading at $140.56 on March 24, 2026 — establishing its weakest level across the trailing 52-week period.
