Zscaler's Next Earnings Report on September 3 Could Send the Stock Soaring. Here's Why.

Zscaler (NASDAQ:ZS) reports its fiscal fourth-quarter results after the market's close tomorrow, Sept. 3. While several cybersecurity stocks are near all-time highs, Zscaler has been out of favor recently, as management gave cautious guidance in its previous earnings report.

However, with two of the largest cybersecurity companies, CrowdStrike (NASDAQ: CRWD) and Palo Alto Networks (NASDAQ: PANW), recently reporting results that show AI is boosting cybersecurity demand, could Zscaler beat the modest expectations investors have for its business?

Image source: The Motley Fool.

As we've seen numerous times this earnings season, beating top- and bottom-line expectations isn't always enough. With that in mind, here are some of the things I'll be watching tomorrow when the company reports.

3 Things I'll be watching

First of all, Zscaler doesn't exactly have a high bar to clear. Management's previous guidance calls for roughly 22% year-over-year revenue growth in the fiscal fourth quarter, and the company has a strong recent history of outperforming its own expectations. In the fiscal third quarter, Zscaler reported 25% growth in both revenue and ARR, as well as its highest-ever adjusted operating margin. But while I'll be watching this, it isn't my main focus.

In the company's fiscal third-quarter report, the problem wasn't Zscaler's top and bottom line. That isn't why the stock fell sharply after the report. It was the guidance. The company's initial fiscal 2027 outlook called for annual recurring revenue growth to slow to just 16%-17%. With CrowdStrike just reporting its highest net new ARR growth rate ever, a significant guidance raise from Zscaler could be a major catalyst for the stock.

After all, a big reason CrowdStrike is trading near all-time highs is that management issued fiscal 2027 guidance calling for net new ARR growth of 630 basis points (6.3 percentage points) above the previous level.

I'll also be watching the RPO (remaining performance obligation), which essentially tells us Zscaler's revenue backlog. This grew 30% in the fiscal third quarter to $6.5 billion, and if the company continues to book revenue faster than its top-line reflects, it could indicate healthy growth acceleration in the near future.

It's all about the outlook

As we've seen with several other AI-focused businesses in this earnings season, simply beating expectations isn't enough. As I'm writing this, Palo Alto's stock is falling despite topping estimates. The biggest factor is what management says about the future. If the company confirms a deceleration in growth, even a strong top-line beat might not matter. On the other hand, strong guidance would likely make investors far more confident heading into the new fiscal year.

The acceleration of agentic AI and the threats that come with it have forced enterprises to bump up spending on cyber defenses. Zscaler's two largest peers just issued earnings reports that clearly show this. The company is well-positioned, with its zero-trust architecture, to lead the way in securing agentic workflows. If the numbers it reports tomorrow, along with its forward guidance and management commentary, indicate that the company is gaining traction in the agentic AI cybersecurity push, the stock could react very positively.

Matt Frankel, CFP® has positions in Zscaler. The Motley Fool has positions in and recommends CrowdStrike and Zscaler. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.