Zscaler Inc (ZS  ) shares are declining in the premarket session on Wednesday after the company issued third-quarter results. Zscaler Earnings Highlights

The cybersecurity company posted third-quarter revenue of $850.48 million, beating the consensus estimate of $835.38 million. It reported third-quarter adjusted earnings of $1.08 per share. It beat analyst estimates of $1.01 per share, according to Benzinga Pro.

Adjusted operating margin hit a record 23%, expanding 140 basis points, driven by operating leverage in sales and marketing.

Key Metric

Annual Recurring Revenue (ARR) rose 25% year over year (Y/Y) to $3.5 billion. The Zero Trust platform helped support that growth.

Its data security segment surpassed $500 million in ARR, growing over 30%, driven by platform consolidation and AI-related demand.

The company also saw broad customer expansion. Up to 748 customers now generate over $1 million in ARR (up 18%). Some 4,003 customers have ARR above $100,000 in ARR (up 19%).

Zscaler strengthened its cloud security position with a major eight-figure deal spanning 2,000 healthcare sites, replacing legacy firewall and VPN infrastructure.

Its AI Protect offering surpassed $100 million in bookings over the past 12 months, signaling rising enterprise demand for AI-driven security controls. The Z-Flex program also generated more than $480 million in Q3 contract value, up over 60% sequentially and supporting longer-term customer commitments.

Remaining performance obligations (RPO) ended the quarter at $6.5 billion, up ~30% year over year, with 46% classified as current. Operating cash flow came in at $198 million, reflecting continued financial discipline alongside AI and platform investments.

Outlook

For the fourth quarter, Zscaler expects revenue of $875 million-$878 million, versus estimates of $878.53 million and adjusted EPS of $1.08 to $1.09, versus estimates of $1.03.

Zscaler raised its fiscal 2026 revenue outlook from a range of $3.31 billion-$3.32 billion to $3.330 billion-$3.333 billion, versus estimates of $3.32 billion.

The company also raised its full-year adjusted EPS guidance from $3.99 -$4.02 to $4.10-$4.11, versus estimates of $4.01.

While guidance was impacted by recent sales leadership transitions, management maintained a constructive FY27 outlook, expecting ARR and revenue growth of 16%-17%.

ZS Stock Price Activity: Zscaler shares were down 24.86% at $138.69 during premarket trading Wednesday.