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Zscaler (ZS)
NASDAQ:ZS

Zscaler (ZS) AI Stock Analysis

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ZS

Zscaler

(NASDAQ:ZS)

Rating:74Outperform
Price Target:
$328.00
▲(10.08%Upside)
Zscaler's strong financial performance and positive earnings call sentiment contribute significantly to its overall score. Technical indicators suggest strong momentum but caution due to overbought conditions. The valuation score reflects challenges due to unprofitability, while recent corporate appointments are expected to support strategic growth.
Positive Factors
Acquisitions
Zscaler's recent acquisition of Red Canary will allow expansion into SoC categories of managed detection and response, or MDR, and threat intelligence.
Financial Performance
Zscaler delivered a strong quarter with results ahead of both analyst and consensus expectations across the board.
Product Innovation
Zscaler announced a number of capabilities centered on AI and extending Zero Trust Everywhere.
Negative Factors
Operational Costs
The increase in cost of goods sold year-over-year was primarily driven by higher data center and equipment-related costs for hosting and operating the cloud platform.

Zscaler (ZS) vs. SPDR S&P 500 ETF (SPY)

Zscaler Business Overview & Revenue Model

Company DescriptionZscaler, 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 MoneyZscaler generates revenue primarily through the sale of subscriptions to its cloud-based security services. The company's revenue model is based on a recurring subscription fee, which provides customers with access to its comprehensive suite of cybersecurity solutions. Zscaler's key revenue streams include its Zscaler Internet Access (ZIA) and Zscaler Private Access (ZPA) services. ZIA acts as a secure internet gateway, protecting users from threats on the internet, while ZPA provides secure access to internal applications without the need for a traditional VPN. Additionally, Zscaler benefits from significant partnerships with technology vendors, system integrators, and managed service providers, which help to drive sales and expand its market presence. The company's focus on innovation and customer satisfaction also contributes to its ability to maintain and grow its revenue base in a competitive cybersecurity landscape.

Zscaler Key Performance Indicators (KPIs)

Any
Any
Revenue by Geography
Revenue by Geography
Breaks down revenue across different regions, revealing where Zscaler is strongest and where it may face risk or growth potential due to local economic conditions or market share shifts.
Chart InsightsZscaler's revenue growth is robust across all regions, with the United States leading the charge. The latest earnings call highlights a 23% year-over-year revenue increase, driven by strong performance in the Zero Trust Everywhere initiative and AI-powered solutions. Despite macroeconomic challenges, the company is strategically positioned for further expansion, aiming for $3 billion in ARR by fiscal year-end. This growth trajectory is supported by strategic partnerships and a diversified product suite, indicating strong future potential despite some variability in net retention rates.
Data provided by:Main Street Data

Zscaler Earnings Call Summary

Earnings Call Date:May 30, 2025
(Q3-2025)
|
% Change Since: 8.08%|
Next Earnings Date:Sep 04, 2025
Earnings Call Sentiment Positive
Zscaler's earnings call reflects strong growth in revenue and ARR, driven by strategic product expansions and successful program launches like Z Flex. While macroeconomic conditions pose challenges, the company's innovation and customer-centric approach position it well for future growth. The overall sentiment leans towards optimism due to the significant achievements overshadowing the challenges.
Q3-2025 Updates
Positive Updates
Record TCV Bookings and RPO Growth
Achieved best Q3 with TCV bookings over $1 billion and remaining performance obligations nearly $5 billion, indicating strong market demand and growth.
Strong ARR and Revenue Growth
Annual Recurring Revenue (ARR) reached approximately $2.9 billion with year-over-year growth of 23%, on track to exceed $3 billion by the end of the quarter. Fiscal year 2025 revenue growth is at 24%.
Expansion of Zero Trust and AI Solutions
Zscaler's platform now secures over 50 million users, and the company is expanding AI-driven solutions for security operations, enhancing its competitive edge.
Successful Launch of Z Flex Program
The Z Flex program, which offers flexible scaling options for customers, contributed over $65 million in TCV bookings shortly after its launch.
Significant Growth in Emerging Product Categories
The three categories—Zero Trust Everywhere, Data Security Everywhere, and Agentic Operations—are growing significantly faster than the overall ARR, with a combined ARR approaching $1 billion.
Negative Updates
Macro Environment Challenges
Customers remain cautious about IT spending due to ongoing economic uncertainty, affecting large deal scrutiny and elongating sales cycles.
Federal Revenue Growth Limited
Federal business, while aligned with expectations, has not shown significant growth due to the complex nature of government contracts.
Gross Margin Decline
Total gross margin decreased to 80.3% from 81.4% in the year-ago quarter, influenced by the introduction of new products not yet optimized for margins.
Company Guidance
During Zscaler's Third Quarter Fiscal Year 2025 earnings call, the company highlighted several key metrics and milestones. Notably, Zscaler achieved over $1 billion in Total Contract Value (TCV) bookings, marking their best Q3 performance. The company's Annual Recurring Revenue (ARR) reached approximately $2.9 billion, reflecting a 23% year-over-year growth for the third consecutive quarter, with expectations to exceed $3 billion by the end of the fiscal year. Remaining Performance Obligations (RPO) approached $5 billion, showing strong customer commitment. Zscaler's free cash flow margin was reported at 28%, contributing to a 'rule of 52' performance, surpassing the 'rule of 40' benchmark prevalent in the SaaS industry. The company's platform now secures over 50 million users and processed over 100 trillion transactions last year, blocking more than 60 billion threats, and enforcing over 5 trillion policies. Additionally, their new purchasing program, Z Flex, contributed over $65 million in TCV bookings and demonstrated significant client adoption, including a 40% ARR increase from a Fortune 500 customer.

Zscaler Financial Statement Overview

Summary
Zscaler demonstrates impressive revenue growth and strong gross margins, indicative of its competitive position in the software industry. Despite improvements, profitability remains a challenge with negative net income. The company's balance sheet is healthy, marked by manageable leverage and strong equity. Cash flow generation is a strong point, with positive free cash flow trends supporting future growth opportunities.
Income Statement
78
Positive
Zscaler has shown robust revenue growth with a TTM increase of 11.7% compared to the previous year. The company maintains a high gross profit margin of 77.7% in the TTM, indicative of strong operational efficiency. However, the net profit margin remains negative at -0.6%, reflecting ongoing challenges with profitability. Both EBIT and EBITDA margins have improved, yet they still indicate operational losses.
Balance Sheet
74
Positive
The balance sheet reflects a solid equity position with a debt-to-equity ratio of 0.77, suggesting manageable leverage compared to industry norms. The equity ratio stands at 32.1%, indicating a strong capital structure. Return on equity remains negative due to net losses, pointing to profitability challenges.
Cash Flow
83
Very Positive
Zscaler's cash flow performance is strong, with a significant free cash flow growth rate of 31.7% in the TTM. The operating cash flow to net income ratio is robust, highlighting efficient cash generation relative to accounting profits. Free cash flow significantly exceeds net income, reflecting prudent capital management.
Breakdown
TTMSep 2024Sep 2023Sep 2022Sep 2021Sep 2020
Income StatementTotal Revenue
2.55B2.17B1.62B1.09B673.10M431.27M
Gross Profit
1.97B1.69B1.25B848.66M522.78M335.54M
EBIT
-123.17M-121.48M-234.62M-327.43M-207.81M-113.96M
EBITDA
99.95M64.79M-76.72M-277.58M-167.36M-86.83M
Net Income Common Stockholders
-38.78M-57.71M-202.34M-390.28M-262.03M-115.12M
Balance SheetCash, Cash Equivalents and Short-Term Investments
2.71B2.41B2.10B1.73B1.50B1.37B
Total Assets
4.71B4.70B3.61B2.83B2.26B1.83B
Total Debt
1.24B1.24B1.21B1.05B964.61M905.24M
Net Debt
-316.31M-185.12M-51.66M32.51M688.71M763.39M
Total Liabilities
3.28B3.43B2.88B2.26B1.73B1.35B
Stockholders Equity
1.43B1.27B725.11M573.30M528.89M484.83M
Cash FlowFree Cash Flow
730.54M584.95M333.62M231.33M143.74M27.51M
Operating Cash Flow
925.41M779.85M462.34M321.91M202.04M79.32M
Investing Cash Flow
-253.63M-683.18M-259.34M374.06M-109.67M-1.04B
Financing Cash Flow
59.91M64.21M45.99M41.34M41.67M1.02B

Zscaler Technical Analysis

Technical Analysis Sentiment
Positive
Last Price297.97
Price Trends
50DMA
233.14
Positive
100DMA
217.36
Positive
200DMA
202.80
Positive
Market Momentum
MACD
19.57
Negative
RSI
79.25
Negative
STOCH
88.84
Negative
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 297.97 is above the 20-day moving average (MA) of 268.58, above the 50-day MA of 233.14, and above the 200-day MA of 202.80, indicating a bullish trend. The MACD of 19.57 indicates Negative momentum. The RSI at 79.25 is Negative, neither overbought nor oversold. The STOCH value of 88.84 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ZS.

Zscaler Risk Analysis

Zscaler disclosed 59 risk factors in its most recent earnings report. Zscaler reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Zscaler Peers Comparison

Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
82
Outperform
$25.30B30.0830.92%6.40%6.49%
81
Outperform
$130.66B112.1321.16%13.91%-50.96%
80
Outperform
$80.32B42.02205.91%13.83%58.13%
79
Outperform
$116.56B721.64-5.76%25.94%-226.80%
ZSZS
74
Outperform
$47.18B-2.68%25.46%49.20%
73
Outperform
$19.92B1,777.39-5.36%35.12%-191.84%
62
Neutral
$11.90B10.64-7.50%2.90%7.41%-8.19%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
ZS
Zscaler
297.97
109.14
57.80%
CHKP
Check Point
229.65
71.65
45.35%
FTNT
Fortinet
101.63
41.01
67.65%
PANW
Palo Alto Networks
195.95
36.05
22.55%
CYBR
CyberArk Software
396.07
145.30
57.94%
CRWD
CrowdStrike Holdings
467.65
80.28
20.72%

Zscaler Corporate Events

Executive/Board ChangesBusiness Operations and StrategyFinancial Disclosures
Zscaler Appoints Kevin Rubin as New CFO
Positive
May 29, 2025

On May 29, 2025, Zscaler announced the appointment of Kevin Rubin as the new Chief Financial Officer, effective May 26, 2025, succeeding Remo Canessa. Rubin’s extensive experience in finance leadership roles at high-growth companies is expected to bolster Zscaler’s strategic financial management. Concurrently, Zscaler reported its third-quarter fiscal 2025 financial results, highlighting a 23% year-over-year revenue growth to $678 million and a non-GAAP net income increase to $136.8 million. The company continues to expand its Zero Trust Exchange platform, addressing the growing demand for AI security solutions and maintaining its leadership position in the cloud security market.

The most recent analyst rating on (ZS) stock is a Buy with a $210.00 price target. To see the full list of analyst forecasts on Zscaler stock, see the ZS Stock Forecast page.

Executive/Board ChangesBusiness Operations and Strategy
Zscaler Appoints Raj Judge to Board of Directors
Positive
May 23, 2025

On May 20, 2025, Zscaler expanded its Board of Directors from eight to nine members, appointing Raj Judge as a Class III director and Executive Vice President of Corporate Strategy and Ventures. Judge, with over 25 years of experience in tech legal and venture capital, will lead Zscaler’s growth strategy and business development initiatives, aiming to drive the company to $5 billion in annual recurring revenue. His appointment underscores Zscaler’s commitment to advancing its corporate strategy and long-term vision, with expectations to accelerate innovation and broaden the company’s platform for its customers.

The most recent analyst rating on (ZS) stock is a Buy with a $265.00 price target. To see the full list of analyst forecasts on Zscaler stock, see the ZS Stock Forecast page.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.