Zscaler (ZS) AI Stock Analysis

• Market Cap: $23.89B
• Dividend Yield: N/A
• Average Volume (3M): 2.90M
• 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): 1.01
• Shares Outstanding: 160,790,710
• 10 Day Avg. Volume: 4,252,579
• 30 Day Avg. Volume: 2,897,848
• PEG Ratio: 34.55
• Price to Book (P/B): 24.51
• Price to Sales (P/S): 16.49
• P/FCF Ratio: 60.67
• Enterprise Value/Market Cap: 1.02
• Enterprise Value/Revenue: 8.12
• Enterprise Value/Gross Profit: 10.60
• Enterprise Value/Ebitda: 176.90
• 1Y Price Target: $233.56
• Price Target Upside: 58.90% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 33
• EPS Forecast (FY): 3.81
• Revenue Forecast (FY): $3.29B

• Rating: 66 Neutral
• Price Target: $159.00 ▲(8.17% Upside)
• Action: Reiterated Date: 02/28/26
• Date: Action: Reiterated 02/28/26

The score is driven primarily by strong underlying business economics and cash flow (high margins and expanding free cash flow) plus a constructive earnings update with raised guidance. These strengths are offset by very weak price/technical momentum (trading far below key moving averages) and valuation constraints tied to ongoing GAAP losses (negative P/E).

Positive Factors

Cash generation

Robust, repeatable cash generation (TTM OCF ~$1.11B; FCF ~$0.94B) indicates the subscription model converts revenue to cash reliably. This funds R&D, go‑to‑market expansion and integration costs, reducing reliance on external financing and supporting durable reinvestment and margin improvement.

High gross margins and operating leverage

Sustained cloud security gross margins (~76–80%) provide structural operating leverage as revenue scales. High margins allow incremental revenue to flow to operating profit, enabling profitability expansion over time and resilience to moderate cost volatility in infrastructure or components.

Recurring ARR scale and large‑deal traction

Large and growing ARR base (3.4B, +25% YoY) with expanding big‑deal counts signals durable, high‑quality recurring revenue. Enterprise concentration of large customers and improved pipeline conversion support predictable renewals, upsell opportunities and long‑term revenue visibility.

Negative Factors

Balance sheet leverage

Material debt (~$1.86B) leaves leverage that can constrain capital allocation and raise interest exposure if rates rise. While improved from prior years, continued debt servicing and potential acquisition financing reduce optionality for strategic investments or cushioning during demand shocks.

Post‑acquisition churn & integration risk

Elevated churn at the acquired MDR business threatens ARR quality and could require extra retention spending. Integration execution risk can distract sales/product teams, slow cross‑sell benefits and temporarily depress net new ARR, weakening durable revenue growth metrics.

GAAP profitability and margin pressure

Despite improving non‑GAAP metrics, GAAP net losses persist and FCF margin showed quarter‑level decline. This indicates earnings still need to absorb cost inflation and integration effects; persistent GAAP losses could delay full profit conversion and constrain long‑term return metrics.

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

Strong and scaling cash generation (TTM operating cash flow ~$1.11B; free cash flow ~$0.94B) and very strong gross margins (~76–78%) support operating leverage. Revenue scale is solid (~$3.0B TTM) with improving profitability (EBITDA now positive), but GAAP net margin remains slightly negative and leverage is still notable (debt ~$1.86B; debt-to-equity ~0.85).

Income Statement

Top-line momentum remains solid, with revenue up to $3.0B in TTM (Trailing-Twelve-Months) and strong growth historically. Profitability has improved meaningfully versus prior years (losses have narrowed and EBITDA is now positive), and gross margin remains very strong (~76–78%), supporting long-term operating leverage. However, the company is still not consistently profitable at the bottom line (TTM net margin is slightly negative), which keeps the score from moving higher.

Balance Sheet

The balance sheet is improving but still carries notable leverage: total debt is ~$1.86B in TTM (Trailing-Twelve-Months) against ~$2.20B of equity (debt-to-equity ~0.85), better than the >1.6 levels seen in earlier years. Equity has grown significantly over time, which helps flexibility. The key weakness is that returns remain negative (negative return on equity), reflecting that earnings have not yet turned sustainably positive.

Cash Flow

Cash generation is a clear strength. TTM (Trailing-Twelve-Months) operating cash flow is ~$1.11B and free cash flow is ~$0.94B, with free cash flow up strongly versus the prior annual period. Free cash flow remains positive and expanding even while net income is still slightly negative, indicating strong cash conversion and a business model that is funding itself well. The main watch-out is that the business is still in an accounting-loss position, so investors will want to see cash strength translate into durable earnings over time.

Breakdown	TTM	Jul 2025	Jul 2024	Jul 2023	Jul 2022	Jul 2021
Income Statement
Total Revenue	3.00B	2.67B	2.17B	1.62B	1.09B	673.10M
Gross Profit	2.30B	2.05B	1.69B	1.25B	847.63M	522.46M
EBITDA	137.70M	112.41M	64.79M	-76.72M	-183.43M	-105.80M
Net Income	-67.63M	-41.48M	-57.71M	-202.34M	-390.28M	-262.03M
Balance Sheet
Total Assets	6.75B	6.42B	4.70B	3.61B	2.83B	2.26B
Cash, Cash Equivalents and Short-Term Investments	3.51B	3.57B	2.41B	2.10B	1.73B	1.50B
Total Debt	1.86B	1.80B	1.24B	1.21B	1.05B	964.61M
Total Liabilities	4.56B	4.62B	3.43B	2.88B	2.26B	1.73B
Stockholders Equity	2.20B	1.80B	1.27B	725.11M	573.30M	528.89M
Cash Flow
Free Cash Flow	943.74M	726.69M	584.95M	333.62M	231.33M	143.74M
Operating Cash Flow	1.11B	972.45M	779.85M	462.34M	321.91M	202.04M
Investing Cash Flow	-2.09B	-427.02M	-683.18M	-259.34M	374.06M	-109.67M
Financing Cash Flow	419.89M	420.51M	64.21M	45.99M	41.34M	41.67M

Zscaler Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 146.99
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

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 146.99 is below the 20-day moving average (MA) of 168.00, below the 50-day MA of 198.79, and below the 200-day MA of 265.42, indicating a bearish trend. The MACD of -14.62 indicates Positive momentum. The RSI at 33.98 is Neutral, neither overbought nor oversold. The STOCH value of 36.67 is Neutral, 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
FTNT	72 Outperform	$58.59B	32.63	135.72%	―	14.78%	22.52%
PANW	72 Outperform	$122.52B	83.08	16.26%	―	15.30%	-60.71%
ZS	66 Neutral	$23.89B	-347.88	-3.56%	―	23.24%	-8.83%
CRWD	62 Neutral	$97.02B	-304.62	-8.88%	―	22.05%	-341.24%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
OKTA	60 Neutral	$13.11B	67.91	2.96%	―	12.12%	―
NET	57 Neutral	$63.75B	-614.67	-8.16%	―	28.06%	-7.44%

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.