Zscaler (ZS) AI Stock Analysis

• Market Cap: $42.69B
• Dividend Yield: N/A
• Average Volume (3M): 1.71M
• Price to Earnings (P/E): ―
• Beta (1Y): 1.70
• Revenue Growth: 23.31%
• EPS Growth: 31.04%
• Country: US
• Employees: 7,348
• Sector: Technology
• Sector Strength: 82
• Industry: Software - Infrastructure
• EPS (TTM): 0.89
• Shares Outstanding: 155,695,680
• 10 Day Avg. Volume: 2,248,027
• 30 Day Avg. Volume: 1,712,316
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 1.01
• Enterprise Value/Revenue: 16.05
• Enterprise Value/Gross Profit: 20.88
• Enterprise Value/Ebitda: 381.75
• 1Y Price Target: $327.71
• Price Target Upside: 19.51% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 35

• Rating: 67 Neutral
• Price Target: $298.00 ▲(8.68% Upside)

Zscaler's overall stock score is driven by strong financial performance in terms of revenue growth and cash management, as well as positive sentiment from the latest earnings call. However, ongoing profitability challenges and a negative valuation score due to net losses weigh down the overall score. Technical indicators suggest a neutral market sentiment, adding to the mixed outlook.

Positive Factors

Financial Performance

Zscaler closed out FY25 on a high note, beating consensus on revenue, EPS, and billings while crossing the $3 billion ARR milestone.

Innovation

AI Operations is experiencing rapid growth, expected to account for over 10% of total revenue by FY26, showcasing Zscaler's innovative edge.

Market Demand

Zscaler's strategic initiative 'Zero Trust Everywhere' has significantly exceeded customer adoption targets, indicating strong market reception.

Negative Factors

Gross Margin Pressure

Gross margins might face some pressure in the near term due to the company's expansion into new products and markets.

Gross Margins

A drawback on the quarter was the lower than historical gross margins (79% non-GAAP), but this was a onetime dip due to a large deployment of cloud systems for a government customer.

Initial Market Reaction

The stock faded after hours as initial ARR guidance seemed a bit underwhelming at first glance, but this was likely due in part to a change in methodology where the company is no longer including ramped business in its ARR calculation.

Zscaler Business Overview & Revenue Model

Company Description

Zscaler, Inc. (ZS) is a leading cloud security company that specializes in providing secure access to applications and data for businesses of all sizes. Operating primarily in the cybersecurity sector, Zscaler offers a suite of services designed to protect users, devices, and applications regardless of location. Its core products include Zscaler Internet Access (ZIA) and Zscaler Private Access (ZPA), which enable secure internet access and application access for remote users, respectively, leveraging a cloud-native architecture to ensure scalability and speed.

How the Company Makes Money

Zscaler generates revenue primarily through a subscription-based model. Customers pay for access to its cloud security services on a recurring basis, which allows for predictable revenue streams. The company offers various pricing tiers based on the number of users, the level of service, and additional features required. Key revenue streams include fees from ZIA and ZPA subscriptions, as well as professional services related to implementation and support. Zscaler has established significant partnerships with major technology providers and cloud platforms, enhancing its market reach and credibility, which further contributes to its earnings.

Zscaler Financial Statement Overview

Summary

Zscaler demonstrates strong revenue growth and effective cash management, which are positive indicators for future performance. However, the company continues to face profitability challenges, as evidenced by negative net income and EBIT margins. The balance sheet shows improved leverage, but the negative return on equity highlights the need for better profitability. Overall, Zscaler is on a growth trajectory but needs to address its profitability issues to enhance financial stability.

Income Statement

Zscaler has shown consistent revenue growth, with a 4.96% increase in the latest year. The gross profit margin remains strong at approximately 76.87%, indicating effective cost management. However, the company is still operating at a net loss, with a net profit margin of -1.55%, which is an improvement from previous years but still a concern. The EBIT and EBITDA margins are also negative, reflecting ongoing operational challenges.

Balance Sheet

The debt-to-equity ratio has improved to 0.99, suggesting better leverage management compared to previous years. However, the return on equity remains negative at -2.31%, indicating that the company is not generating positive returns on shareholder investments. The equity ratio is stable, showing a balanced asset structure.

Cash Flow

Zscaler's free cash flow has grown by 6.1%, and the operating cash flow to net income ratio is strong at 0.40, indicating good cash generation relative to net income. The free cash flow to net income ratio is also healthy at 0.75, suggesting efficient cash management despite the net losses.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	2.67B	2.67B	2.17B	1.62B	1.09B	673.10M
Gross Profit	2.05B	2.05B	1.69B	1.25B	847.63M	522.46M
EBITDA	112.41M	112.41M	64.79M	-76.72M	-183.43M	-105.80M
Net Income	-41.48M	-41.48M	-57.71M	-202.34M	-390.28M	-262.03M
Balance Sheet
Total Assets	6.42B	6.42B	4.70B	3.61B	2.83B	2.26B
Cash, Cash Equivalents and Short-Term Investments	3.57B	3.57B	2.41B	2.10B	1.73B	1.50B
Total Debt	1.80B	1.80B	1.24B	1.21B	1.05B	964.61M
Total Liabilities	4.62B	4.62B	3.43B	2.88B	2.26B	1.73B
Stockholders Equity	1.80B	1.80B	1.27B	725.11M	573.30M	528.89M
Cash Flow
Free Cash Flow	770.44M	730.99M	584.95M	333.62M	231.33M	143.74M
Operating Cash Flow	976.75M	976.75M	779.85M	462.34M	321.91M	202.04M
Investing Cash Flow	-427.02M	-427.02M	-683.18M	-259.34M	374.06M	-109.67M
Financing Cash Flow	420.51M	420.51M	64.21M	45.99M	41.34M	41.67M

Zscaler Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 274.20
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ZS, the sentiment is Positive. The current price of 274.2 is above the 20-day moving average (MA) of 273.80, below the 50-day MA of 285.40, and above the 200-day MA of 235.17, indicating a neutral trend. The MACD of -2.11 indicates Negative momentum. The RSI at 54.44 is Neutral, neither overbought nor oversold. The STOCH value of 58.78 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ZS.

Zscaler Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PANW	80 Outperform	$130.07B	121.53	17.45%	―	14.87%	-57.43%
NET	70 Neutral	$74.72B	―	-11.04%	―	27.32%	-11.94%
ZS	67 Neutral	$42.69B	―	-2.70%	―	23.31%	31.04%
FTNT	67 Neutral	$60.40B	31.46	165.17%	―	14.46%	48.06%
CRWD	67 Neutral	$104.81B	721.64	-8.99%	―	23.46%	-270.07%
OKTA	66 Neutral	$16.13B	107.86	2.61%	―	12.68%	―
Sector *	61 Neutral	$35.55B	8.91	-10.55%	1.87%	8.47%	-8.26%

Zscaler Corporate Events

Zscaler Issues $1.725 Billion Convertible Notes

On July 3, 2025, Zscaler, Inc. issued $1.725 billion in 0.00% Convertible Senior Notes due 2028, with net proceeds expected to be approximately $1.70 billion. The funds will be used for capped call transactions and general corporate purposes, including potential acquisitions. The notes are convertible under specific conditions and are subject to customary terms and covenants. Additionally, capped call transactions were entered to mitigate potential stock dilution upon note conversion.

Zscaler Announces CTO Departure Effective July 2025

On June 23, 2025, Zscaler, Inc. announced the upcoming departure of its Chief Technology Officer, Syam Nair, effective July 4, 2025. This change in leadership may impact the company’s operations as Mr. Nair is expected to receive benefits under the company’s severance policy, highlighting a significant transition within the company’s executive team.

Zscaler Announces Transition Agreement for Retiring CFO

On June 9, 2025, Zscaler, Inc. announced a Transition Agreement with its retiring CFO, Remo Canessa, to ensure a smooth transition to a new CFO by December 31, 2025. During this period, Mr. Canessa will maintain his current salary and benefits, and upon completion, he will receive a lump sum payment and accelerated vesting of restricted stock units, highlighting the company’s commitment to a seamless leadership transition.