Zscaler Struggles to Win New Customers Despite AI Fears

Agentic AI , Governance & Risk Management , Managed Detection & Response (MDR) Zscaler Struggles to Win New Customers Despite AI Fears Zscaler CEO Jay Chaudhry Says New AI Frontier Models Have Yet to Boost Revenue Michael Novinson (MichaelNovinson) , Tiffany Wang • May 27, 2026     Credit Eligible Get Permission Jay Chaudhry, founder, chairman and CEO, Zscaler (Image: Zscaler) Zscaler is falling short on bringing in new customers despite bullish talk about the potential of zero trust in the age of AI-powered vulnerability discovery. See Also: Privilege Blind Spots: Part 1, Uncover Risk from Siloed Identity Tools Zscaler CFO Kevin Rubin told investors Tuesday that the San Jose, California-based cloud security vendor will focus on improving new logo growth, but the recent departure of two sales leaders under the chief revenue officer could create short-term disruption (see: Zscaler Targets AI Identity Risk With Symmetry Acquisition). "The area that we haven't been performing as well as we'd like is new logo," Rubin said during Zscaler's earnings call. "It certainly is a large priority for us, but I did take a tempered view of new logos going into [fiscal] '27 [which begins Aug. 1]." To improve new logo growth, Zscaler CEO Jay Chaudhry said the company will expand its reach to smaller enterprises that serve 2,000 to 10,000 users. To do this, Zscaler will lean on value-added resellers, a network of third-party brokers that buy IT products and resell them to end-users, as well as global system integrators, which are IT consultant firms that design technology solutions for enterprises. "As I looked at what we had in front of us in terms of the different components of the business, that was one area where I think we can do better," Rubin said. On top of that, the company is cautious when it comes to projecting next fiscal year's revenue contribution from Red Canary, a managed detection and response firm Zscaler acquired for $651.4 million in August. "As we think about Red Canary and its contributions, we will be rolling out the integrated SecOps solution that will be available, we would expect in [fiscal] '27," Rubin said. "What I don't know is the pace of uptake amongst the existing customers for that. So as a result, we are expecting Red Canary's net new ARR to grow at a slower rate than the overall business in '27." As for new frontier models like Claude Mythos Preview, Chaudhry said firms worry about AI-powered bug hunting capabilities and "want zero trust access for everyone from every location, even for the headquarters," Chaudhry said. Since patching every vulnerability is no longer realistic, he said hiding applications and data from attackers through zero trust has become a more effective security approach (see: Zero Trust Anchors AI Security Strategy). But that sentiment has not yet translated into material revenue. "We aren't really factoring any meaningful impact of new opportunities for Q4, but I do believe we will have impact in fiscal 27," Chaudhry said. Stock Nosedives as Sales Outlook Falls Short of Expectations Zscaler Quarter Ended Oct. 31 2023 Quarter Ended Oct. 31 2022 Change Revenue $850.5M $678M 25.4% Net Loss $13.9M $4.1M -236.7% Loss Per Diluted Share $0.09 $0.03 -200% Non-GAAP Net Income $177.9M $137M 29.8% Non-GAAP Earnings Per Diluted Share $1.08 $0.84 28.6% Source: Zscaler Zscaler's revenue of $850.5 million in the quarter ended April 30 beat Seeking Alpha's sales estimate of $835.7 million. And the company's non-GAAP earnings of $1.08 per share bested Seeking Alpha's estimate of $1.01 per share. The company's stock plummeted $38.36 - or 20.78% - to $146.24 per share in after-hours trading Tuesday, which is the lowest the company's stock has traded since May 12. The Americas accounted for 56% of Zscaler's revenue in the most recent fiscal quarter, while EMEA and APAC generated 28% and 16% of the company's sales, respectively, Chief Financial Officer Kevin Rubin said. For the quarter ending July 31, Zscaler expects non-GAAP net income of $1.08 to $1.09 per share on revenue of between $875 million and $878 million. Analysts had been projecting non-GAAP net income of $1.03 per share on sales of $878.7 million, according to Seeking Alpha.