Zscaler Inc. shares plummeted 21.85% in pre-market trading on Wednesday, following the cybersecurity company's release of its fiscal third-quarter earnings results. Despite reporting better-than-expected Q3 performance, investors reacted negatively to the company's forward-looking statements and revised financial outlook.

The sell-off was primarily triggered by Zscaler's fourth-quarter revenue guidance of $875 million to $878 million, which came in below Wall Street's expectations. Additionally, the company significantly reduced its fiscal year 2026 free cash flow margin outlook to 22.8%-23.3% from the previous expectation of 26.5%-27%, citing increased capital expenditure in the high single-digits as a percentage of revenue.

Company executives highlighted challenges in attracting new customers, with Chief Financial Officer Kevin Rubin stating that "new logo" acquisition has not been performing as well as expected. The departure of two key sales leaders also contributed to the cautious guidance. Furthermore, Zscaler faces intensifying competition in the cybersecurity market from larger rivals, adding pressure on the company's growth prospects. Several analysts responded by cutting their price targets on the stock, reflecting diminished confidence in Zscaler's near-term performance.