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.
🚨 Our April Stock Picks Are Live!
A new month means new opportunities. Our analysts have just released their top stock picks for April, highlighting companies with strong momentum that rank highly on our KO Score algorithm. We’re also now sharing trade ideas for both long-term and short-term investors, giving you more ways to spot potential opportunities in the market.
Sign up to Knockout Stocks today and get 50% off to unlock the full list and see which stocks made the cut.
Use coupon code Special50 for your exclusive discount!
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
