Why Zscaler (ZS) Shares Are Trading Lower Today

What Happened?

Shares of cloud security platform Zscaler (NASDAQ:ZS) fell 4.4% in the morning session after a broader market rotation out of the technology sector led to profit-taking following a recent rally. 

The move was part of a wider trend that saw high-growth technology stocks fall, with the Nasdaq experiencing the sharpest decline among the major indices. Multiple reports indicated that traders were locking in profits, particularly from the artificial-intelligence trade, which had previously seen a strong run-up. This market action represented a shift in investor focus, as money moved out of tech. Defense stocks emerged as the primary beneficiary of this capital shift, surging after President Trump proposed a massive $1.5 trillion defense budget for 2027. Major contractors rallied on the news, with Northrop Grumman jumping over 10% and Lockheed Martin gaining nearly 8%, providing a counterbalance to the tech slump that kept the S&P 500 flat. The rotation into heavy industry was further supported by a stabilization in energy markets, as crude prices rebounded.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Zscaler? Access our full analysis report here.

What Is The Market Telling Us

Zscaler’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was about 1 month ago when the stock dropped 11.1% as the company's third-quarter results showed a miss on billings, a key metric for future growth, which overshadowed an impressive "beat and raise" quarter. 

The cloud security company reported revenue of $788.1 million, up 25.5% year over year, and an adjusted profit of $0.96 per share, both surpassing analysts' expectations. Zscaler also raised its full-year guidance for revenue and earnings. However, investors focused on the company’s billings, which came in at $597 million. This figure, which is an indicator of future revenue, missed expectations and sparked concerns about a potential slowdown in growth. The market's negative reaction suggested that for a highly-valued company like Zscaler, simply beating estimates isn't enough; all growth metrics need to be strong.

Zscaler is flat since the beginning of the year, and at $220.58 per share, it is trading 34.4% below its 52-week high of $336.27 from November 2025. Investors who bought $1,000 worth of Zscaler’s shares 5 years ago would now be looking at an investment worth $1,118.

The 1999 book Gorilla Game predicted Microsoft and Apple would dominate tech before it happened. Its thesis? Identify the platform winners early. Today, enterprise software companies embedding generative AI are becoming the new gorillas. Click here for access to our special report that reveals one profitable leader already riding this wave.