Zscaler (ZS) Stock: Wall Street Braces for Q3 Earnings with 13% Volatility Expected

Key Takeaways

• Q3 FY26 earnings announcement scheduled for Tuesday, May 26 after market close
• Analyst consensus calls for $835.60 million in revenue (23% YoY growth) and $1.01 earnings per share (20% YoY increase)
• Market makers are pricing in approximately 13% volatility following the earnings release
• Shares have declined 19% in 2025, currently at $181.92, while analysts maintain an average target of $224.78
• Company unveiled acquisition of Symmetry Systems to strengthen AI-powered data security offerings

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As Zscaler (ZS) prepares to unveil its third-quarter fiscal 2026 results on Tuesday, the cloud security provider’s shares are struggling with a 19% decline year-to-date, currently changing hands at approximately $181.92. Despite this weakness, Wall Street maintains optimism with a consensus price target of $224.78 — suggesting potential upside of about 23%.

Zscaler, Inc., ZS

Analyst projections point to quarterly revenue reaching $835.60 million, marking a 23% climb compared to the year-ago period. On the bottom line, earnings per share are anticipated to hit $1.01, representing a 20% annual improvement.

The options market signals significant volatility ahead. Data from TipRanks’ Options Tool indicates an implied movement of roughly 13% in either direction following the results — notably higher than the company’s 8.25% average post-earnings swing over the previous four quarters.

In the prior quarter, Zscaler delivered revenue of $815.8 million, representing 25.9% year-over-year expansion that surpassed Wall Street expectations. The company also issued guidance above consensus for both quarterly and full-year earnings projections.

The cybersecurity industry has shown strength recently, with peer companies averaging approximately 10% gains over the past 30 days. Zscaler has significantly outperformed this benchmark, surging 35.6% during the same timeframe.

Among competitors, Varonis Systems recently delivered 26.9% annual revenue growth, exceeding estimates by 4.6%, which propelled shares up 7.3%. Meanwhile, Tenable posted 9.6% revenue growth and beat projections by 1.2%, yet saw shares fall 2.7% following its announcement.

Key Metrics Under the Microscope

Market participants will scrutinize several critical areas: momentum in closing large enterprise contracts, expansion of the zero-trust security platform, and whether emerging AI security offerings are generating substantial annual recurring revenue growth.

Executives have indicated that AI Security ARR should surpass $500 million by fiscal year-end 2026. Additionally, non-seat-based revenue streams now represent over 25% of new annual contract value — a metric analysts view as evidence of successful business model expansion.

UBS analyst Roger Boyd maintained his Buy recommendation with a $260 target ahead of the report. He pointed to improving April channel feedback and expressed growing confidence in the company’s second-half trajectory, underpinned by remaining performance obligations growth exceeding 30% for four consecutive quarters.

Cantor Fitzgerald’s Jonathan Ruykhaver similarly reaffirmed an Overweight stance while keeping his $300 target unchanged. His recent partner surveys showed strength, with only 5% of channel partners reporting below-target performance.

Strategic Acquisition Announcement

Just before the earnings release, Zscaler revealed plans to acquire Symmetry Systems, a specialist in identity mapping and AI data security solutions. The transaction is anticipated to finalize soon, though specific financial details remain undisclosed.

Morgan Stanley’s Meta Marshall maintained an Equalweight rating with a $155 target following the announcement. While acknowledging the acquisition strengthens Zscaler’s AI and data security positioning, she emphasized that investors are seeking more concrete proof that emerging product lines can scale sufficiently to compensate for decelerating growth in the core secure access service edge (SASE) business.

The Street’s collective view on ZS stock remains decidedly optimistic. Shares hold a Strong Buy consensus rating, supported by 28 Buy recommendations and six Hold ratings issued over the last three months.

Zscaler’s earnings report arrives after Tuesday’s closing bell on May 26.

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