Zscaler Sinks 9% on Chief Revenue Officer Exit, Fastly Drops 6% as Citi Questions AI Traffic Payoff

Two sharp selloffs are happening side by side for unrelated reasons. Cybersecurity provider Zscaler (NASDAQ:ZS | ZS Price Prediction) is losing its chief revenue officer. Meanwhile, edge cloud company Fastly (NYSE:FSLY) is absorbing a skeptical Citi note on whether artificial intelligence (AI) traffic pays off under its billing model. Each decline traces back to its own company, and the software group around them is barely moving.

In morning trading, Zscaler stock is down 9% at $195.93 after the company named an internal successor for its departing sales chief. Meanwhile, Fastly shares are down 6% to $25.19, cutting into a 147% gain year to date.

The iShares Expanded Tech-Software Sector ETF (NYSEARCA:IGV) is down 0.1%, leaving software essentially flat. Large caps are stronger, with the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) up 0.3%. That background places each selloff directly inside Zscaler and Fastly themselves.

Zscaler Hands Sales Leadership to an Insider

Zscaler stated that chief revenue officer Mike Rich is stepping down for personal reasons. Ross Tackett, Zscaler’s worldwide head of sales, succeeds him in the role effective October 1. Tackett’s appointment keeps the top revenue job with an executive who already leads the global sales organization.

Jefferies stated that the timing raises execution risk. Tackett helped shape the sales strategy Zscaler already runs, and management isn’t changing the go-to-market approach, which limits how much the handoff could alter day-to-day selling.

Citi Questions How Fastly Gets Paid for AI Traffic

Citi analyst Boolani is pushing back on the Fastly rally. The rally followed reports its network carries traffic for Muse, the new AI assistant from Meta Platforms (NASDAQ:META). Boolani kept a neutral rating and told clients that Fastly bills customers by the gigabyte, a model where large files generate the revenue. Assistants like Muse mostly send small, fast queries, and Boolani sees little sign that Meta Platforms is buying the security products where Fastly earns its highest margins.

Fastly’s chief financial officer, Richard Wong, framed the same tension at a Piper Sandler conference earlier this month, noting that machine traffic is outpacing human requests on a per-request basis, yet it remains a very small portion of the gigabytes Fastly bills on. Wong pointed to security as the nearest-term beneficiary of AI traffic, a business that grew 43% year over year last quarter.

Two Declines, Two Separate Questions

Zscaler’s challenge is about people and timing. A sales leadership handoff arriving after guidance was set could test whether Zscaler delivers the execution it has committed to, but Tackett’s role in building the current strategy is the strongest argument that the transition stays orderly.

For Fastly, Citi’s question is narrower and harder. Traffic crossing Fastly’s network has to turn into revenue under a meter that counts gigabytes, while AI assistants mostly generate lightweight requests. Security offers Fastly a second path to monetize machine traffic, and Meta Platforms’ appetite for those products is exactly what Boolani doubts.

The case for Fastly hinges on management’s view that AI traffic lifts security demand first. Citi’s bear case holds that Muse-style workloads pile up requests without generating many billable gigabytes (we covered seven non-chip companies riding the AI infrastructure expansion, from networking to power, in a free report you can grab here). With Fastly shares already up so much, even a narrow doubt like Citi’s can carry weight.

Software as a group is holding steady, with software funds nearly flat and large caps higher. That split argues for judging Zscaler and Fastly separately, each on the question its own news raised.

What to Watch Next

Zscaler’s first checkpoint arrives when Tackett formally takes the chief revenue officer seat. Investors may want to watch for Zscaler’s commentary on sales execution in its next earnings report. Anyone adding to their Zscaler stake should keep their position size moderate.

Fastly’s next quarterly report could show whether security captures the AI traffic gains that gigabyte billing misses. Traders may want to keep an eye out for any Fastly disclosure tied to Meta Platforms or the Muse assistant. With so much gain already built in, their Fastly positions should stay small enough that a further decline doesn’t strain their broader portfolio.

Owning both Zscaler and Fastly shares means carrying two unrelated risks, one tied to sales execution and one tied to billing mechanics. Weighing their exposure to each name on its own merits keeps a setback in one from driving decisions about the other. The next hard evidence could come from Tackett’s first full quarter in charge at Zscaler and any new detail on Fastly’s role in carrying Muse traffic for Meta Platforms.

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