Cybersecurity company Zscaler announced Tuesday that its projected fourth-quarter earnings would fall short of Wall Street expectations, as the firm grapples with mounting competition in the cloud security sector and more cautious business spending on security technologies.
The company’s stock price tumbled 15% during after-hours trading following the announcement, which highlighted the increasingly competitive landscape in cybersecurity services.
Zscaler operates primarily in the Secure Access Service Edge market, known as SASE, which merges network infrastructure and security functions into one unified platform designed to connect users, devices and applications regardless of location.
The SASE sector represents one of cybersecurity’s most rapidly expanding areas, fueled by ongoing cloud migration and the artificial intelligence revolution that continues reshaping network security frameworks.
However, Zscaler must contend with pressure from bigger competitors like Palo Alto Networks, which are aggressively pursuing greater market control through their own comprehensive platform solutions.
For the upcoming fourth quarter, the cloud security provider anticipates revenue ranging from $875 million to $878 million, falling below the $878.6 million average projection from analysts surveyed by LSEG.
The company does expect to exceed profit expectations, projecting adjusted earnings of $1.08 to $1.09 per share for the fourth quarter, surpassing analyst estimates of $1.03.
Zscaler’s third-quarter performance showed revenue of $850.5 million, which topped analyst predictions of $835.4 million.
During the third quarter, the company’s total operational costs climbed approximately 25% to $687.5 million, up from $547.5 million during the same period last year.
