# Zscaler's growth engine strong, but ARR slowdown looms

> The cybersecurity company posted solid results, but guidance suggests its growth rate could drop from 25% to the high teens.
- Title: Zscaler's growth engine strong, but ARR slowdown looms
- Summary: The cybersecurity company posted solid results, but guidance suggests its growth rate could drop from 25% to the high teens. Zscaler's strong profitability…
- Keywords: zscaler, cybersecurity, arr growth, stock valuation, palo alto networks, crowdstrike, data security, ai security, zero trust, hedge funds, nasdaq zs, business
- Source: Yahoo Finance — https://finance.yahoo.com/markets/stocks/articles/zscaler-inc-zs-growth-engine-102049877.html
- Published: 2026-09-16T10:20:49+00:00
- Read time: 1 min
- Topics: zscaler, cybersecurity, arr growth, stock valuation, palo alto networks, crowdstrike, data security, ai security, zero trust, hedge funds, nasdaq zs, business
## Zscaler posts strong Q4 results
Fourth-quarter revenue jumped 25% year over year to $898.2 million, while ARR grew 25% to $3.77 billion. Organic ARR growth hit 20%, signaling healthy recurring revenue expansion.

> The momentum was evident as it delivered solid fourth-quarter and fiscal 2026 results on September 3.
## Profitability reaches record levels
Non-GAAP operating margin hit a record 24% in Q4, up from 22% for the full year. Net loss per share narrowed sharply to $0.02 from $0.11 a year earlier.

> non-GAAP operating margin reached a record high of 24% in the fourth quarter
## New growth areas beyond seats
Zscaler is expanding beyond traditional seat-based licensing into data security, AI security, and Zero Trust Everywhere. These new product lines are driving platform adoption and revenue diversification.

> The company's growth story is increasingly expanding beyond its traditional seat-based business
## ARR growth expected to slow
Fiscal 2027 ARR guidance of $4.396 to $4.426 billion implies growth of only 16.6% to 17.4%, down from 25% in the prior year. This slowdown could shift investor perception from a 25% growth company to a high-teens one.

> it implies growth of only 16.6% to 17.4%, suggesting potential slowing in ARR growth
## Intense competition from larger rivals
Zscaler faces stiff competition from Palo Alto Networks and CrowdStrike. Customers increasingly prefer consolidated security from a single supplier, putting Zscaler at risk of losing major deals.

> the company is facing stiff competition from formidable competitors, including Palo Alto Networks and CrowdStrike
## Hedge funds building positions
Hedge fund interest in Zscaler has grown to 52 funds as of Q2, up from 46 in Q1. Short interest remains modest at 3.85% of shares, suggesting bearish positioning is not elevated.

> As of the second quarter, 52 hedge funds held stakes in the company, a slight improvement from 46 hedge funds
## Key takeaway

Zscaler's strong profitability and new product lines are impressive, but slowing ARR growth could trigger a stock re-rating if the market downgrades it from a 25% growth story to a high-teens one.