Despite reporting better-than-expected earnings and guidance, cybersecurity firm Zscaler Inc. (ZS.US) saw its shares drop over 13% on Wednesday. However, Wedbush Securities praised the company's "strong" performance, maintaining an "Outperform" rating with a $350 price target.

Analyst Dan Ives and his team noted, "Zscaler delivered solid fiscal Q1 2026 results, surpassing revenue and profit expectations while raising its full-year fiscal 2026 guidance. Demand for its product portfolio remains robust, driven by strong adoption of its new cloud and AI solutions." They added, "Overall, we continue to view Zscaler as a top-tier player in cybersecurity, well-positioned to capitalize on enterprises' shift toward zero-trust and AI-driven security."

For the quarter ended October 31, Zscaler reported adjusted earnings per share (EPS) of $0.96, with revenue rising 26% year-over-year to $788.1 million. Analysts had expected adjusted EPS of $0.86 and revenue of $773.86 million.

Looking ahead, Zscaler forecasts Q2 revenue between $797 million and $799 million, above the consensus estimate of $796.1 million. Adjusted EPS is projected at $0.89–$0.90, in line with market expectations of $0.89. For the full year, the company raised its revenue guidance to $3.28–$3.30 billion, up from prior estimates of $3.27 billion, and adjusted EPS to $3.78–$3.82, exceeding the earlier forecast of $3.65.