Zscaler woke up to a nightmare of a Wednesday, with its stock plunging more than 15% in premarket trading. To make matters worse, options trading volume has surged over 260% and let’s just say investors aren’t piling into call options if you know what I mean.

So, what happened? Zscaler’s revenue forecast for fiscal 2025 landed between $2.60 billion and $2.62 billion—just a hair under the $2.63 billion analysts were hoping for. 

A small miss, sure, but as we’ve seen with 2024’s tech sector, "close enough" is like losing by a single point in the finals. Investors don’t like it, and it makes them nervous. They immediately started overthinking, “What’s next? Is this the tip of the iceberg? Should I buy more NFTs” Ok maybe, not the NFT part but you get the point.

But the real punch in the gut? Zscaler’s earnings per share (EPS) forecast. The company predicted an EPS between $2.81 and $2.87—far below the $3.33 Wall Street had in mind. 

Now, while Zscaler is stumbling, its competitors are sprinting. Palo Alto Networks and SentinelOne recently boosted their revenue forecasts and are practically patting themselves on the back. Meanwhile, Zscaler is looking like the kid who showed up to the race without tying their shoes. Even CrowdStrike is gaining ground, as companies rethink their cybersecurity needs after a global IT outage. Zscaler? It’s stuck playing catch-up while everyone else is moving ahead.

And let’s not forget about the short-sellers. These folks are circling Zscaler like vultures over a desert—they’ve seen the vulnerability, and they’re pouncing. With options volume skyrocketing and mostly put options in play, traders are betting Zscaler’s stock will fall even further. 

Adding to the mix is Zscaler’s weak billings growth forecast—just 7% for the first half of 2025. Analysts at Rosenblatt Securities pointed out that this reflects some lingering macroeconomic challenges, meaning Zscaler is still trying to get back on its feet while its competitors are partying like it’s 1999.

Now, not everyone’s writing Zscaler off just yet. Analysts at Bernstein think there might be light at the end of the tunnel. They’re banking on improved “sales effectiveness” to turn things around. Maybe Zscaler is just in a tough-love phase, trying to sort itself out before making a comeback. But honestly, Wall Street’s patience is running thin, and they want to see results now, not later.

To make matters worse, five brokerages have already cut their price targets on Zscaler. The median target has dropped from $224 to $220—not a huge dip, but certainly not a confidence booster. 

In the end, Zscaler isn’t completely out of the game. The company still has strong products and a global presence, but right now, it’s in a rough patch. Until it figures out how to get its growth back on track, expect the short-sellers to keep cashing in on the chaos. Zscaler has a chance to turn things around, but the clock’s ticking, and the market’s watching closely.

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Stock.News does not have positions in companies mentioned.