Shares in Zscaler Inc. fell more than 7% in late trading today after the cloud security company reported earnings and revenue beats in its fiscal 2026 first quarter but failed to impress investors with an outlook that only just met expectations.

For the quarter that ended on Oct. 31, Zscaler reported adjusted earnings per share of 96 cents, up from 77 cents in the first quarter of the previous fiscal year, on revenue of $788.1 million, up 26% year-over-year. Both were solid beats, as analysts had been expecting adjusted earnings of 86 cents per share on revenue of $773.26 million.

Cash flow from operations in the quarter came in at $448.3 million, up from $331.3 million a year prior and as of the end of the quarter, Zscaler was sitting on deffered revenue $2.351 billion, up 32% year-over-year.

Business highlights in the quarter included the launch of new Zscaler Digital Experience innovations, including end-to-end visibility, multipath visualization for Zscaler Managed Monitoring and device scoring and remediation. The company said they provide IT teams with unprecedented end-to-end visibility to proactively remediate performance issues, improving employee productivity and reducing operational costs.

Zscaler also launched FedRAMP Moderate authorized data centers outside the U.S., located in London and Paris. The strategic expansion allows U.S. federal agencies and their partners to accelerate global missions securely while meeting critical data residency requirements.

Just after the end of the quarter, Zscaler announced on Nov. 3 that it acquired SplxAI Inc., a security platform designed for artificial intelligence, to bolster its AI asset discovery and protection for enterprise teams.

“Zero-trust security is the linchpin for AI-Security and Zscaler pioneered zero-trust security with our cloud-native switchboard architecture,”
Chief Executive Jay Chaudhry said in the company’s earnings release. “By integrating the recently acquired SPLX technology with our comprehensive AI Security offerings, we are expanding our best-in-class AI Security solutions to solve emerging security challenges.”

For its fiscal 2026 second quarter, Zscaler expects adjusted earnings per share of 89 cents to 90 cents on revenue of $797 million to $799 million, in line with analysts expectations. For the full year, the company expects adjusted earnings of $3.78 to $3.82 on revenue of $3.282 billion to $3.301 billion, slightly ahead of estimates.

Though there were no bad figures in the report, as was the case with Workday Inc., which also reported today and saw its share drop after-hours despite solid figures, investors are looking for stronger growth figures from listed tech companies than forecasts simply in line with expectations. Zscaler shares dropped as it failed to impress investors with its moderate outlook.

Photo: Zscaler