Zscaler (ZS) AI Stock Analysis

• Market Cap: $34.12B
• Dividend Yield: N/A
• Average Volume (3M): 1.50M
• Price to Earnings (P/E): ―
• Beta (1Y): 1.56
• Revenue Growth: 23.24%
• EPS Growth: -8.83%
• Country: US
• Employees: 7,348
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Infrastructure
• EPS (TTM): 0.96
• Shares Outstanding: 159,471,200
• 10 Day Avg. Volume: 1,709,912
• 30 Day Avg. Volume: 1,500,531
• PEG Ratio: 34.55
• Price to Book (P/B): 24.51
• Price to Sales (P/S): 16.49
• P/FCF Ratio: 60.32
• Enterprise Value/Market Cap: 1.55
• Enterprise Value/Revenue: 18.71
• Enterprise Value/Gross Profit: 24.40
• Enterprise Value/Ebitda: 430.31
• 1Y Price Target: $324.07
• Price Target Upside: 51.45% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 30
• EPS Forecast (FY): 3.81
• Revenue Forecast (FY): $3.30B

• Rating: 62 Neutral
• Price Target: $227.00 ▲(6.08% Upside)

The score is driven primarily by solid underlying financial quality (strong cash flow and high gross margins) and a very upbeat earnings call with robust growth and guidance. Offsetting these positives are weak technicals (broad downtrend and oversold momentum), ongoing profitability/ROE challenges, and limited support from traditional valuation metrics due to negative earnings.

Positive Factors

Recurring revenue and ARR growth

Sustained 26% ARR growth to over $3.2B reflects a large, sticky subscription base and strong remaining performance obligations (RPO). That recurring revenue mix increases long-term revenue visibility, supports multi-year customer value, and enables predictable investment in product and sales expansion.

High gross margins from cloud-native platform

Consistently high gross margins from a cloud-delivered security stack imply scalable unit economics as revenue grows. Strong product-level margins provide capacity to fund R&D, go-to-market expansion, and strategic initiatives without immediate dilution of cash reserves, supporting durable profitability potential.

Strong cash generation and free cash flow growth

Positive FCF growth and solid operating cash conversion despite negative net income show the business converts subscriptions to cash effectively. Robust cash generation enables debt reduction, sustained product investment, and runway for strategic M&A, strengthening long-term financial flexibility.

Negative Factors

Ongoing unprofitability and weak shareholder returns

Negative ROE and a TTM net loss (negative net profit margin) indicate the company has yet to reliably convert revenue growth into shareholder returns. Persistent unprofitability raises questions about long-term ability to deliver sustainable earnings without continued high investment or margin improvement.

Intense competition from large incumbents

Facing entrenched security vendors with broad product suites and channel reach creates sustained pricing and feature-competition pressure. Incumbents can bundle offerings and leverage existing customer relationships, making durable share gains and margin expansion harder in enterprise security markets.

Gross margin pressure from go-to-market product tradeoffs

Prioritizing faster adoption through product choices that sacrifice unit margins can compress long-term gross margins if sustained. If new offerings remain lower-margin, the company may face structural limits on operating margin expansion despite revenue growth, constraining durable profitability gains.

Zscaler Business Overview & Revenue Model

Company Description

Zscaler, Inc. operates as a cloud security company worldwide. The company provides Zscaler Internet Access solution that provides users, servers, operational technology, Internet of Things device secure access to externally managed applications, including software-as-a-service (SaaS) applications and Internet destinations; and Zscaler Private Access solution, which is designed to provide access to managed applications hosted internally in data centers, and private or public clouds. It also offers Zscaler Digital Experience that measures end-to-end user experience across business applications, as well as provides an easy to understand digital experience score for each user, application, and location within an enterprise. In addition, the company provides workload segmentation solutions comprising Zscaler Cloud Security Posture Management that identifies and remediates application misconfigurations in SaaS, infrastructure as a service, and platform as a service to reduce risk and ensure compliance with industry and organizational benchmarks; and Zscaler Cloud Workload Segmentation, which is designed to secure application-to-application communications inside public clouds and data centers to stop lateral threat movement, as well as prevents application compromise and reduces the risk of data breaches. Its platform modules include Zscaler Central Authority, Zscaler Enforcement Node, and Zscaler Log Servers. It serves customers in airlines and transportation, conglomerates, consumer goods and retail, financial services, healthcare, manufacturing, media and communications, public sector and education, technology, and telecommunications services industries. The company was formerly known as SafeChannel, Inc., and changed its name to Zscaler, Inc. in August 2008. Zscaler, Inc. was incorporated in 2007 and is headquartered in San Jose, California.

How the Company Makes Money

Zscaler generates revenue primarily through a subscription-based model, offering its cloud security services on a recurring basis to businesses of all sizes. Key revenue streams include subscriptions for ZIA and ZPA, which are sold based on the number of users or the amount of data processed. Zscaler also benefits from upselling and cross-selling additional features and services to existing customers. Significant partnerships with major technology providers and integrators enhance its market reach and contribute to customer acquisition, while its focus on a zero trust security framework aligns with increasing demand for advanced cybersecurity solutions in a rapidly digitizing world.

Zscaler Financial Statement Overview

Summary

Zscaler demonstrates robust revenue growth and strong cash flow generation, which are positive indicators of its financial health. However, the company continues to face profitability challenges, as evidenced by negative net income and EBIT margins. While leverage has improved, the negative return on equity suggests that the company needs to enhance its profitability to deliver shareholder value.

Income Statement

Zscaler has shown consistent revenue growth, with a TTM growth rate of 5.99%. However, the company is still operating at a net loss, as indicated by a negative net profit margin of -1.45%. The gross profit margin remains strong at 76.68%, indicating efficient cost management. Despite improvements, the negative EBIT margin suggests challenges in achieving operational profitability.

Balance Sheet

The company's debt-to-equity ratio has improved to 0.93, reflecting better leverage management compared to previous years. However, the return on equity remains negative at -2.28%, indicating that the company is not currently generating positive returns for shareholders. The equity ratio is stable, suggesting a balanced asset structure.

Cash Flow

Zscaler's cash flow performance is strong, with a notable free cash flow growth rate of 16.71% in the TTM. The operating cash flow to net income ratio of 0.47 indicates healthy cash generation relative to net income, despite the latter being negative. The free cash flow to net income ratio of 0.81 further highlights the company's ability to generate cash.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	2.67B	2.17B	1.62B	1.09B	673.10M
Gross Profit	2.05B	1.69B	1.25B	847.63M	522.46M
EBITDA	112.41M	64.79M	-76.72M	-183.43M	-105.80M
Net Income	-41.48M	-57.71M	-202.34M	-390.28M	-262.03M
Balance Sheet
Total Assets	6.42B	4.70B	3.61B	2.83B	2.26B
Cash, Cash Equivalents and Short-Term Investments	3.57B	2.41B	2.10B	1.73B	1.50B
Total Debt	1.80B	1.24B	1.21B	1.05B	964.61M
Total Liabilities	4.62B	3.43B	2.88B	2.26B	1.73B
Stockholders Equity	1.80B	1.27B	725.11M	573.30M	528.89M
Cash Flow
Free Cash Flow	726.69M	584.95M	333.62M	231.33M	143.74M
Operating Cash Flow	972.45M	779.85M	462.34M	321.91M	202.04M
Investing Cash Flow	-427.02M	-683.18M	-259.34M	374.06M	-109.67M
Financing Cash Flow	420.51M	64.21M	45.99M	41.34M	41.67M

Zscaler Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 213.98
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ZS, the sentiment is Negative. The current price of 213.98 is below the 20-day moving average (MA) of 223.57, below the 50-day MA of 252.78, and below the 200-day MA of 269.86, indicating a bearish trend. The MACD of -10.06 indicates Negative momentum. The RSI at 32.49 is Neutral, neither overbought nor oversold. The STOCH value of 16.63 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ZS.

Zscaler Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PANW	73 Outperform	$130.80B	119.03	15.33%	―	15.30%	-60.71%
FTNT	71 Outperform	$56.06B	31.04	228.04%	―	14.78%	22.52%
CRWD	66 Neutral	$114.42B	-359.25	-8.88%	―	22.05%	-341.24%
ZS	62 Neutral	$34.12B	-815.47	-2.41%	―	23.24%	-8.83%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
NET	61 Neutral	$64.51B	―	-8.88%	―	28.06%	-7.44%
OKTA	60 Neutral	$15.87B	82.22	2.96%	―	12.12%	―

Zscaler Corporate Events

Zscaler Shareholders Back Governance Changes at Annual Meeting

At its annual meeting of stockholders held on January 12, 2026, Zscaler shareholders elected Andrew Brown, Scott Darling, and David Schneider as Class II directors to serve until the 2028 annual meeting, ratified the appointment of PricewaterhouseCoopers LLP as the independent auditor for the fiscal year ending July 31, 2026, and approved on an advisory basis the compensation of the company’s named executive officers. Investors also voted to hold future advisory votes on executive pay annually and backed a non-binding stockholder proposal to declassify the board, signaling support for more frequent say-on-pay oversight and a potential shift toward a more annually elected, less staggered board structure that could increase board accountability and influence the company’s corporate governance framework over time.

The most recent analyst rating on (ZS) stock is a Buy with a $243.00 price target. To see the full list of analyst forecasts on Zscaler stock, see the ZS Stock Forecast page.