TLDR
- Zscaler posted adjusted EPS of $1.01 and revenue of $816M in Q2 FY2026, beating estimates on both counts
- The stock fell 9% pre-market Friday despite the earnings beat
- Full-year EPS guidance of $3.99–$4.02 topped the $3.92 consensus
- The stock is down 26% year-to-date, reflecting broader uncertainty around software valuations
- CFO Kevin Rubin noted the company is operating at a “Rule-of-62,” well above the Rule-of-40 benchmark
Zscaler $ZS reported a solid fiscal second quarter, then watched its stock drop anyway. That’s the software market in a nutshell right now.
Zscaler, $ZS, Q2-26.
Rule-of-62, margins at highs.
📊 Adj. EPS: $1.01 🟢
💰 Revenue: $815.75M 🟢
📈 Net Loss: $34.31MARR +25% YoY to $3.36B.
Non-GAAP operating margin 22% with strong FCF at 21%. pic.twitter.com/w3oYZsuyNq— EarningsTime (@Earnings_Time) February 26, 2026
The cybersecurity company posted adjusted earnings of $1.01 per share, clearing the Wall Street estimate of $0.89 by $0.12. Revenue came in at $815.8 million, up 26% year-over-year and ahead of the $798 million consensus.
Despite those numbers, the stock fell around 9% in pre-market trading on Friday.
It capped a chaotic week. ZS dropped 10% on Monday as AI-related panic hit the broader market. It then rebounded 17% over the next three sessions before Thursday’s earnings report sent it back down.
For Q3 FY2026, Zscaler guided for adjusted EPS of $1.00 to $1.01, above the $0.95 consensus. Revenue is projected between $834 million and $836 million, slightly ahead of the $831.9 million estimate.
Full-year FY2026 guidance was raised to adjusted EPS of $3.99–$4.02, topping the prior consensus of $3.82. Full-year revenue is forecast at $3.309 billion to $3.322 billion, modestly above the $3.3 billion estimate.
CEO Jay Chaudhry framed the company’s position around AI, saying organizations accelerating AI adoption are using Zscaler’s platform to secure AI-driven and agentic workflows.
He called Zscaler the “cybersecurity platform for the AI age” and said its Zero Trust platform is well-placed to handle the speed and scale of AI and agentic workflows.
Rule-of-62
CFO Kevin Rubin pointed to a standout efficiency metric. He said Zscaler is operating at a “Rule-of-62” on a fiscal year-to-date basis.
That’s a measure combining revenue growth and profit margin. The Rule-of-40 is the standard benchmark for healthy software companies — Zscaler is running well above it.
A Rough Year for ZS
Heading into earnings, ZS was already down 26% in 2026. The post-earnings drop adds more pressure on a stock that has struggled to find footing this year.
The swings this week tell the story of where software investors are right now. A 10% drop, a 17% bounce, then another sharp decline on a genuine beat — the market clearly hasn’t decided how to value these companies.
The Q3 outlook of $834–$836 million in revenue and EPS of $1.00–$1.01 remains ahead of what analysts had penciled in.
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