Zscaler (ZS)
NASDAQ:ZS
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Zscaler
(NASDAQ:ZS)
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Rating:67Neutral
Price Target:
$142.00
▲(8.39% Upside)
Action:ReiteratedDate:04/10/26
The score is driven primarily by strong financial quality (especially expanding free cash flow) and a very constructive earnings update with raised guidance and improving operating leverage. Offsetting these positives are a distinctly bearish technical trend (below all key moving averages with negative MACD) and weak valuation signals due to negative GAAP earnings (negative P/E).
Positive Factors
Free cash flow generation
Consistently large operating and free cash flow indicate strong cash conversion from subscription revenue. This funds organic investment, R&D, and strategic initiatives without reliance on equity raises, bolstering financial flexibility and reducing execution risk over the medium term.
Negative Factors
Balance sheet leverage
Material leverage, while improved, constrains strategic flexibility and increases exposure to interest cost variability. If GAAP profitability or cash conversion weakens, the company may face tougher capital allocation tradeoffs or higher financing costs, limiting long‑term optionality.
Read all positive and negative factors
Positive Factors
Negative Factors
Free cash flow generation
Consistently large operating and free cash flow indicate strong cash conversion from subscription revenue. This funds organic investment, R&D, and strategic initiatives without reliance on equity raises, bolstering financial flexibility and reducing execution risk over the medium term.
Read all positive factors
Zscaler (ZS) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$21.07B
Dividend YieldN/A
Average Volume (3M)2.72M
Price to Earnings (P/E)―
Beta (1Y)1.39
Revenue Growth23.24%
EPS Growth-8.83%
CountryUS
Employees7,348
SectorTechnology
Sector Strength88
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)1.01
Shares Outstanding160,790,710
10 Day Avg. Volume2,971,934
30 Day Avg. Volume2,715,022
Financial Highlights & Ratios
PEG Ratio34.55
Price to Book (P/B)24.51
Price to Sales (P/S)16.49
P/FCF Ratio60.67
Enterprise Value/Market Cap1.03
Enterprise Value/Revenue7.24
Enterprise Value/Gross Profit9.46
Enterprise Value/Ebitda157.78
Forecast
1Y Price Target
$229.53Price Target Upside75.20% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering34
EPS Forecast (FY)4.01
Revenue Forecast (FY)$3.32B
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, i...
How the Company Makes Money
Zscaler primarily makes money by selling subscriptions to its cloud security platform. Revenue is generated largely from recurring subscription contracts (typically sold to enterprises and other organizations) that grant customers access to specif...
Zscaler Key Performance Indicators (KPIs)
Any
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.
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.
Data provided by:
The Fly
The FlyZscaler Earnings Call Summary
Earnings Call Date:Feb 26, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:May 28, 2026
Earnings Call Sentiment Positive
The call featured strong top-line and ARR growth, robust large-deal momentum, improved sales productivity, record pipeline conversion and raised guidance — all signaling durable demand, especially around AI Security, Zero Trust Everywhere and Data Security. Key positives include strong revenue/ARR beats, healthy cash balance and improved operating leverage. Near-term risks center on integration and elevated churn from the Red Canary acquisition, a modest QoQ decline in FCF margin, slight gross margin compression, and potential supply-cost pressures. Overall the quantitative and qualitative positives substantially outweigh the highlighted, manageable challenges.Positive Updates
Strong ARR and Net New ARR Growth
Total ARR reached $3.4B, up 25% year-over-year. Q2 net new ARR was $156M (up 19% YoY); excluding Red Canary net new ARR was $139M (up 7% YoY). Full-year ARR guidance raised to $3.730B–$3.745B (~24% YoY).
Negative Updates
Red Canary Post-Acquisition Churn and Integration Risk
Red Canary (acquired) exited Q2 with $114M ARR but management noted elevated churn post-acquisition (typical for MDR businesses). Red Canary ARR expectation for fiscal '26 was raised to ~$130M (from prior $95M), but elevated churn and integration work create near-term retention uncertainty.
Read all updates
Q2-2026 Updates
Positive
Negative
Strong ARR and Net New ARR Growth
Total ARR reached $3.4B, up 25% year-over-year. Q2 net new ARR was $156M (up 19% YoY); excluding Red Canary net new ARR was $139M (up 7% YoY). Full-year ARR guidance raised to $3.730B–$3.745B (~24% YoY).
Read all positive updates
Company Guidance
Zscaler raised guidance across the board: for Q3 FY26 it expects revenue of $834–836M (~23% YoY), non‑GAAP gross margin of ~80%, operating profit $187–189M (operating margin 22.4–22.6%), net other income of ~$25M and EPS of $1.00–1.01 (assumes 21% tax rate and 167M diluted shares). For full‑year FY26 it now guides ARR of $3.730–3.745B (~24% YoY, implying net new ARR growth ex‑Red Canary of ~9.5%), revenue of $3.309–3.322B (23.8–24.3% YoY), operating profit $742–748M (up ~28–29% YoY; prior guide $732–740M), EPS $3.99–4.02 (assumes 21% tax and ~169M diluted shares), and free cash flow margin of ~26.5–27% with CapEx in the mid‑single digits as a percent of revenue; management also expects Red Canary ARR of ~ $130M for FY26 (up from prior $95M), Red Canary revenue of ~ $125M, with ~ $6M net new ARR in Q3 and ~$10M in Q4, and roughly 40% of H2 net new ARR to be recognized in Q3.Zscaler Financial Statement Overview
Summary
Income Statement
62
Positive
Balance Sheet
58
Neutral
Cash Flow
84
Very Positive
| 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
Negative
131.01
Price Trends
152.83
Negative
192.27
Negative
243.77
Negative
Market Momentum
-8.96
Positive
41.18
Neutral
30.14
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 131.01 is below the 20-day moving average (MA) of 137.85, below the 50-day MA of 152.83, and below the 200-day MA of 243.77, indicating a bearish trend. The MACD of -8.96 indicates Positive momentum. The RSI at 41.18 is Neutral, neither overbought nor oversold. The STOCH value of 30.14 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $133.91B | 71.18 | 15.49% | ― | 15.30% | -60.71% | |
72 Outperform | $58.93B | 31.84 | 123.64% | ― | 14.78% | 22.52% | |
70 Outperform | $104.28B | -686.05 | -4.68% | ― | 22.05% | -341.24% | |
67 Neutral | $21.07B | -232.70 | -3.48% | ― | 23.24% | -8.83% | |
64 Neutral | $11.91B | 63.23 | 3.45% | ― | 12.12% | ― | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
56 Neutral | $66.92B | -671.68 | -7.48% | ― | 28.06% | -7.44% |
* Technology Sector Average
ZS
Zscaler
131.01
-70.08
-34.85%
FTNT
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79.64
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PANW
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164.11
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OKTA
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67.35
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CRWD
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411.16
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9.46%
NET
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190.13
82.23
76.21%
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.