Zscaler faces investigation amid mixed earnings report
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Feb 15 2025
0mins
Zscaler Inc's stock rose by 5.11% as it crossed above the 5-day SMA, despite broader market declines in the Nasdaq-100 and S&P 500 indices.
The company's recent Q3 2026 fiscal results showed strong financial performance, exceeding expectations in revenue and earnings. However, Zscaler's guidance for the current quarter fell short of analyst consensus, indicating potential growth slowdown. Additionally, Pomerantz LLP has launched an investigation into Zscaler for possible securities fraud, raising concerns about corporate governance and investor confidence.
This investigation could have significant implications for Zscaler, as it may affect the company's reputation and shareholder trust, especially following the recent earnings report that highlighted both strong performance and potential challenges ahead.
Trade with 70% Backtested Accuracy
Stop guessing "Should I Buy ZS?" and start using high-conviction signals backed by rigorous historical data.
Sign up today to access powerful investing tools and make smarter, data-driven decisions.
Analyst Views on ZS
Wall Street analysts forecast ZS stock price to rise
30 Analyst Rating
24 Buy
6 Hold
0 Sell
Strong Buy
Current: 150.420
Low
260.00
Averages
325.62
High
390.00
Current: 150.420
Low
260.00
Averages
325.62
High
390.00
About ZS
Zscaler, Inc. is a cloud security company. The Company has developed a platform incorporating core security functionalities needed to enable fast and secure access to cloud resources based on identity, context and an organization's policies. Its Zscaler Zero Trust Exchange is a cloud-native platform that securely connects users, devices, applications and workloads, including artificial intelligence (AI) agents, without relying on hub-and-spoke network architecture and firewall-centric security. It delivers its solutions using a software-as-a-service (SaaS) business model and sells subscriptions to customers to access its cloud platform, together with related support services. Its services include Zscaler Internet Access (ZIA), Zscaler Private Access (ZPA), and Zscaler Digital Experience (ZDX). ZIA provides secure access to externally managed applications, including SaaS applications and internet destinations, regardless of device, location or network.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
CrowdStrike Executes 4-for-1 Stock Split, Making Shares More Accessible
- Stock Split Impact: On July 1, CrowdStrike executed a 4-for-1 stock split, reducing its share price from $767 to $194, making it more accessible for small investors; however, this does not change the company's underlying value, and near-term upside may be limited.
- Significant Revenue Growth: As of Q1 FY2027, CrowdStrike reported total annual recurring revenue (ARR) of $5.5 billion, a 24% year-over-year increase, with Falcon Flex's ARR doubling to $1.9 billion, indicating strong customer adoption of its flexible subscription model.
- Optimistic Market Outlook: CrowdStrike anticipates its addressable market will grow to $325 billion in the long term, and management's forecast suggests ARR could reach $20 billion by FY2036, highlighting substantial long-term growth potential in the cybersecurity sector.
- Valuation Pressure: Although the stock split makes CrowdStrike shares more appealing, its current price-to-sales ratio of 38.7 is significantly higher than its competitors, suggesting that investors may face disappointment in the short term, necessitating a long-term investment strategy for potential positive returns.
See More
CrowdStrike Executes 4-for-1 Stock Split to Enhance Affordability
- Stock Split Impact: On July 1, CrowdStrike executed a 4-for-1 stock split, reducing its share price from $767 to $194, making it more accessible for retail investors and employees, although this does not alter the company's underlying value.
- Annual Recurring Revenue Surge: In Q1 of fiscal 2027, CrowdStrike's AI Detection and Response (AIDR) module saw a staggering 250% increase in annual recurring revenue (ARR) from the previous quarter, driving total ARR to $5.5 billion, a 24% year-over-year growth, indicating strong demand for its flexible subscription model.
- Market Outlook: CrowdStrike anticipates its addressable market will grow to $325 billion in the long term, coupled with management's forecast of ARR reaching $20 billion by fiscal 2036, highlighting the company's long-term growth potential in the cybersecurity sector.
- Valuation Caution: Despite the stock split enhancing affordability, CrowdStrike's current price-to-sales ratio of 38.7 is significantly higher than its competitors, potentially limiting short-term price appreciation, prompting investors to carefully assess the risks associated with its high valuation.
See More
US Stocks Close Higher, Led by Tech Gains
- Strong Market Performance: The S&P 500 rose by 0.72%, reaching a 2.5-week high, while the Dow Jones Industrial Average increased by 0.29%, setting a new all-time high, reflecting robust confidence in tech stocks and chipmakers.
- Supportive Economic Data: The US June ISM services index stood at 54.0, meeting expectations, with the employment sub-index rising to 51.2, surpassing the anticipated 48.2, indicating ongoing economic expansion that may alleviate Fed rate hike pressures.
- Optimistic Earnings Outlook: Bloomberg Intelligence forecasts a 23% increase in Q2 earnings, close to Q1's 30% surge, primarily driven by strong performance in AI infrastructure stocks, expected to contribute nearly 60% of earnings growth, further boosting market sentiment.
- International Market Fluctuations: While US stocks rose, European markets generally declined, with Eurozone May retail sales increasing by only 0.2%, below the expected 0.3%, highlighting uneven global economic recovery that could impact investor confidence.
See More
Mixed Performance in US Stocks, Led by Chipmakers
- Chipmaker Rally: Chipmakers and AI infrastructure stocks are leading the market today, with the iShares Semiconductor ETF (SOXX) up over 3%, and Advanced Micro Devices (AMD) and Western Digital (WDC) rising more than 9%, indicating a resurgence of confidence in tech stocks that could drive overall market gains.
- Service Sector Expansion: The US June ISM services index fell to 54.0, meeting expectations, and although the pace of growth has slowed, the employment sub-index rose to 51.2, surpassing the expected 48.2, suggesting that companies are still hiring amid easing cost pressures, potentially supporting economic growth.
- Strong Q2 Earnings Outlook: Bloomberg Intelligence forecasts a 23% increase in Q2 earnings, close to Q1's 30% growth, primarily driven by AI spending, which is expected to account for nearly 60% of S&P 500 earnings-per-share growth, providing an optimistic outlook for investors.
- International Market Volatility: While US markets show positive performance, overseas markets are generally declining, with the Euro Stoxx 50 down 0.43%, reflecting global economic uncertainties that may impact investor sentiment.
See More
US Stocks Show Mixed Movement, Led by Chipmakers
- Market Performance: The S&P 500 Index rose by 0.43% and the Nasdaq 100 Index increased by 1.17%, driven by strong performances from chipmakers and AI infrastructure stocks, reflecting heightened investor confidence in technology shares.
- Oil Price Impact: WTI crude oil prices fell by 0.5% as Saudi Arabia and the UAE ramped up shipments to near pre-war levels, which eased inflation expectations and led to a 2 basis point drop in the 10-year T-note yield to 4.46%, providing support for the bond market.
- Earnings Outlook: Bloomberg Intelligence forecasts a 23% increase in Q2 earnings, close to Q1's 30% growth, indicating that AI spending will be a major driver, expected to contribute nearly 60% to the S&P 500's earnings-per-share growth.
- International Market Dynamics: European stock markets are generally down, with Eurozone May retail sales rising 0.2% month-over-month, below the expected 0.3%, while German May factory orders increased by 1.9%, exceeding the expected 1.1%, indicating a mixed economic recovery.
See More
Faruqi & Faruqi Investigates Zscaler Investor Losses
- Legal Investigation Launched: Faruq & Faruqi is investigating Zscaler to determine if the company misled investors regarding its growth outlook before issuing weaker-than-expected guidance, particularly following disruptions tied to sales leadership changes that have diminished investor confidence.
- Significant Stock Decline: On May 27, 2026, Zscaler's stock plummeted by $58.19, or 31.52%, closing at $126.41 per share, marking its steepest single-day decline since going public, which reflects market concerns over the company's sales execution and customer expansion.
- Investor Rights Protection: Faruq & Faruqi encourages investors who purchased Zscaler stock or options and suffered losses during this period to contact them to evaluate their legal rights and potential claims, indicating the firm's commitment to supporting affected investors.
- Historical Performance Review: Since its founding in 1995, Faruq & Faruqi has recovered hundreds of millions of dollars for investors, showcasing its extensive experience and successful track record in securities litigation, which further enhances investor trust in their capabilities.
See More
CrowdStrike Executes 4-for-1 Stock Split, Making Shares More Accessible
- Stock Split Impact: On July 1, CrowdStrike executed a 4-for-1 stock split, reducing its share price from $767 to $194, making it more accessible for small investors; however, this does not change the company's underlying value, and near-term upside may be limited.
- Significant Revenue Growth: As of Q1 FY2027, CrowdStrike reported total annual recurring revenue (ARR) of $5.5 billion, a 24% year-over-year increase, with Falcon Flex's ARR doubling to $1.9 billion, indicating strong customer adoption of its flexible subscription model.
- Optimistic Market Outlook: CrowdStrike anticipates its addressable market will grow to $325 billion in the long term, and management's forecast suggests ARR could reach $20 billion by FY2036, highlighting substantial long-term growth potential in the cybersecurity sector.
- Valuation Pressure: Although the stock split makes CrowdStrike shares more appealing, its current price-to-sales ratio of 38.7 is significantly higher than its competitors, suggesting that investors may face disappointment in the short term, necessitating a long-term investment strategy for potential positive returns.
See More
CrowdStrike Executes 4-for-1 Stock Split to Enhance Affordability
- Stock Split Impact: On July 1, CrowdStrike executed a 4-for-1 stock split, reducing its share price from $767 to $194, making it more accessible for retail investors and employees, although this does not alter the company's underlying value.
- Annual Recurring Revenue Surge: In Q1 of fiscal 2027, CrowdStrike's AI Detection and Response (AIDR) module saw a staggering 250% increase in annual recurring revenue (ARR) from the previous quarter, driving total ARR to $5.5 billion, a 24% year-over-year growth, indicating strong demand for its flexible subscription model.
- Market Outlook: CrowdStrike anticipates its addressable market will grow to $325 billion in the long term, coupled with management's forecast of ARR reaching $20 billion by fiscal 2036, highlighting the company's long-term growth potential in the cybersecurity sector.
- Valuation Caution: Despite the stock split enhancing affordability, CrowdStrike's current price-to-sales ratio of 38.7 is significantly higher than its competitors, potentially limiting short-term price appreciation, prompting investors to carefully assess the risks associated with its high valuation.
See More
US Stocks Close Higher, Led by Tech Gains
- Strong Market Performance: The S&P 500 rose by 0.72%, reaching a 2.5-week high, while the Dow Jones Industrial Average increased by 0.29%, setting a new all-time high, reflecting robust confidence in tech stocks and chipmakers.
- Supportive Economic Data: The US June ISM services index stood at 54.0, meeting expectations, with the employment sub-index rising to 51.2, surpassing the anticipated 48.2, indicating ongoing economic expansion that may alleviate Fed rate hike pressures.
- Optimistic Earnings Outlook: Bloomberg Intelligence forecasts a 23% increase in Q2 earnings, close to Q1's 30% surge, primarily driven by strong performance in AI infrastructure stocks, expected to contribute nearly 60% of earnings growth, further boosting market sentiment.
- International Market Fluctuations: While US stocks rose, European markets generally declined, with Eurozone May retail sales increasing by only 0.2%, below the expected 0.3%, highlighting uneven global economic recovery that could impact investor confidence.
See More
Mixed Performance in US Stocks, Led by Chipmakers
- Chipmaker Rally: Chipmakers and AI infrastructure stocks are leading the market today, with the iShares Semiconductor ETF (SOXX) up over 3%, and Advanced Micro Devices (AMD) and Western Digital (WDC) rising more than 9%, indicating a resurgence of confidence in tech stocks that could drive overall market gains.
- Service Sector Expansion: The US June ISM services index fell to 54.0, meeting expectations, and although the pace of growth has slowed, the employment sub-index rose to 51.2, surpassing the expected 48.2, suggesting that companies are still hiring amid easing cost pressures, potentially supporting economic growth.
- Strong Q2 Earnings Outlook: Bloomberg Intelligence forecasts a 23% increase in Q2 earnings, close to Q1's 30% growth, primarily driven by AI spending, which is expected to account for nearly 60% of S&P 500 earnings-per-share growth, providing an optimistic outlook for investors.
- International Market Volatility: While US markets show positive performance, overseas markets are generally declining, with the Euro Stoxx 50 down 0.43%, reflecting global economic uncertainties that may impact investor sentiment.
See More
US Stocks Show Mixed Movement, Led by Chipmakers
- Market Performance: The S&P 500 Index rose by 0.43% and the Nasdaq 100 Index increased by 1.17%, driven by strong performances from chipmakers and AI infrastructure stocks, reflecting heightened investor confidence in technology shares.
- Oil Price Impact: WTI crude oil prices fell by 0.5% as Saudi Arabia and the UAE ramped up shipments to near pre-war levels, which eased inflation expectations and led to a 2 basis point drop in the 10-year T-note yield to 4.46%, providing support for the bond market.
- Earnings Outlook: Bloomberg Intelligence forecasts a 23% increase in Q2 earnings, close to Q1's 30% growth, indicating that AI spending will be a major driver, expected to contribute nearly 60% to the S&P 500's earnings-per-share growth.
- International Market Dynamics: European stock markets are generally down, with Eurozone May retail sales rising 0.2% month-over-month, below the expected 0.3%, while German May factory orders increased by 1.9%, exceeding the expected 1.1%, indicating a mixed economic recovery.
See More
Faruqi & Faruqi Investigates Zscaler Investor Losses
- Legal Investigation Launched: Faruq & Faruqi is investigating Zscaler to determine if the company misled investors regarding its growth outlook before issuing weaker-than-expected guidance, particularly following disruptions tied to sales leadership changes that have diminished investor confidence.
- Significant Stock Decline: On May 27, 2026, Zscaler's stock plummeted by $58.19, or 31.52%, closing at $126.41 per share, marking its steepest single-day decline since going public, which reflects market concerns over the company's sales execution and customer expansion.
- Investor Rights Protection: Faruq & Faruqi encourages investors who purchased Zscaler stock or options and suffered losses during this period to contact them to evaluate their legal rights and potential claims, indicating the firm's commitment to supporting affected investors.
- Historical Performance Review: Since its founding in 1995, Faruq & Faruqi has recovered hundreds of millions of dollars for investors, showcasing its extensive experience and successful track record in securities litigation, which further enhances investor trust in their capabilities.
See More
