Zscaler stock dropped 32% after reporting 2027 guidance of 16% to 17% annualized recurring revenue growth, down from 21% last quarter, but the company is shifting to usage-based pricing as artificial intelligence agents increase network traffic.

Zscaler, a cybersecurity software company, issued early-2027 guidance for 16% to 17% annualized recurring revenue (ARR) growth, a marked slowdown from the 21% ARR growth it reported last quarter, causing the stock to fall 32% after its earnings report.

The slowdown partly reflects how the company accounts for Red Canary contracts following its acquisition at the start of fiscal 2026; on a comparable basis excluding Red Canary renewals, ARR growth would have been 14% last quarter. Zscaler is also shifting to usage-based pricing instead of its historical per-user model, because artificial intelligence agents could generate significant network traffic for just a handful of users. Usage-based pricing accounted for over 30% of new annualized contract value in the third quarter, with total contract value for non-seat-based solutions climbing more than 100% year over year.

The company expects to ultimately reaccelerate revenue growth after the 2027 slowdown, as the usage-based pricing model scales with increasing AI agent traffic over time, and its current stock price of 6.5 times revenue expectations is viewed as an opportunity for patient investors.