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Zscaler
(NASDAQ:ZS)
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Rating:71Outperform
Price Target:
$195.00
▲(37.02% Upside)
Action:Upgraded
Date:08/12/26
The score is driven primarily by strong financial momentum and cash generation (rapid revenue scaling, high gross margins, and substantial free cash flow). This is partially offset by continued GAAP unprofitability and valuation weakness (negative P/E, no dividend support). Technicals are constructive but short-term overbought signals and being below the 200-day average add caution, while the earnings call was solid yet tempered by guidance deceleration and higher CapEx/sales execution risks.
Positive Factors
Free Cash Flow Generation
Consistent and rising free cash flow from subscription operations provides durable internal funding for product R&D, M&A integration, and go-to-market investment. Strong FCF improves optionality versus reliance on external capital and supports multiyear platform expansion and margin improvement.
Negative Factors
GAAP Profitability Remains Negative
Despite revenue and margin progress, persistent GAAP losses and negative ROE indicate the business has not yet converted scale into consistent accounting profitability. This constrains long-term capital returns and means execution must sustain margin gains to fully realize durable operating profits.
Read all positive and negative factors
Positive Factors
Negative Factors
Free Cash Flow Generation
Consistent and rising free cash flow from subscription operations provides durable internal funding for product R&D, M&A integration, and go-to-market investment. Strong FCF improves optionality versus reliance on external capital and supports multiyear platform expansion and margin improvement.
Read all positive factors
Zscaler Key Performance Indicators (KPIs)
Any
Revenue by Geography
Shows how Zscaler's revenue is split across regions, revealing where customer adoption is strongest, which markets drive growth, and where the company faces concentration or currency risk. A growing share outside core markets points to expansion opportunity, while heavy reliance on one region can amplify economic or competitive headwinds.
Shows how Zscaler's revenue is split across regions, revealing where customer adoption is strongest, which markets drive growth, and where the company faces concentration or currency risk. A growing share outside core markets points to expansion opportunity, while heavy reliance on one region can amplify economic or competitive headwinds.
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The Fly
The FlyZscaler (ZS) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$28.57B
Dividend YieldN/A
Average Volume (3M)3.12M
Price to Earnings (P/E)―
Beta (1Y)1.39
Revenue Growth24.61%
EPS Growth-91.58%
CountryUS
Employees7,923
SectorTechnology
Sector Strength88
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)-0.48
Shares Outstanding161,709,520
10 Day Avg. Volume2,070,403
30 Day Avg. Volume3,117,885
Financial Highlights & Ratios
PEG Ratio34.37
Price to Book (P/B)24.51
Price to Sales (P/S)16.49
P/FCF Ratio60.67
Enterprise Value/Market Cap<0.01
Enterprise Value/Revenue<0.01
Enterprise Value/Gross Profit<0.01
Enterprise Value/Ebitda<0.01
Forecast
1Y Price Target
$194.09Price Target Upside36.38% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering35
EPS Forecast (FY)4.58
Revenue Forecast (FY)$3.89B
Zscaler Business Overview & Revenue Model
Company Description
Globally recognized, Zscaler, Inc. functions as a leading provider of cloud-based security solutions. Its core offerings include Zscaler Internet Access (ZIA), which ensures secure connectivity for a diverse range of entities – including users, se...
How the Company Makes Money
Zscaler primarily makes money by selling subscriptions to its cloud-delivered security platform. Revenue is generated from recurring subscription fees tied to customer contracts (typically priced by number of users, devices, or workloads and the s...
Zscaler Earnings Call Summary
Earnings Call Date:May 26, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:Sep 03, 2026
Earnings Call Sentiment Positive
The call conveyed strong operating performance and clear product and commercial momentum — ARR and revenue both grew 25% YoY, operating margin hit a record 23%, cloud marketplace and AI/security offerings showed accelerating traction, and cash and RPO remain robust. Management, however, took a cautious tone on near-term growth due to recent sales leadership turnover, supply-chain driven CapEx pressure (pull-forward purchases) that compresses quarterly free cash flow, and an early FY27 outlook implying a deceleration to mid-teens growth. Overall the tone is confident about long-term AI-driven opportunity and platform differentiation, while prudent on short-term guide and investments.Positive Updates
Strong ARR Growth
Total ARR reached $3.5B, up 25% year-over-year; Q3 net new ARR was $166M, up 24% YoY (or $153M net new ARR excluding Red Canary, up 14% YoY).
Negative Updates
Guidance Prudence and Deceleration Signals
Q4 revenue guide of $875M–$878M implies ~22% YoY growth (below current quarter 25%); full-year ARR guidance $3.74B–$3.75B (~24% YoY) and preliminary FY27 outlook for ARR and revenue growth of 16%–17%, signaling a deceleration vs FY26.
Read all updates
Q3-2026 Updates
Positive
Negative
Strong ARR Growth
Total ARR reached $3.5B, up 25% year-over-year; Q3 net new ARR was $166M, up 24% YoY (or $153M net new ARR excluding Red Canary, up 14% YoY).
Read all positive updates
Company Guidance
Guidance for Q4 FY26 and the full year was detailed: Q4 revenue is expected at $875–878M (≈22% YoY), non‑GAAP gross margin ~80%, operating profit $206–208M (company said roughly a 30%–31% YoY improvement), net other income ≈$24.5M, and EPS $1.08–1.09 (assumes 21% tax rate and 168M diluted shares). For full‑year FY26 the company targets ARR of $3.74–3.75B (≈24% YoY) — implying organic net new ARR growth (ex‑Red Canary) of ~9.5% — revenue $3.33–3.34B (≈24.6%–24.7% YoY), operating profit $755–757M (≈30% YoY), EPS $4.10–4.11 (21% tax, 168M shares), and free cash flow margin ~22.8%–23.3% (down from prior expectations due to higher CapEx). Red Canary is expected to contribute ≈$137M ARR and ≈$137M revenue in FY26 (up from prior guidances) with ~$10M net new ARR in Q4. The company flagged higher near‑term CapEx (Q3 CapEx was $42M or 5% of revenue; FY26 CapEx now expected in the high‑single‑digits % of revenue with Q4 activity pulled forward) and said FY27 CapEx could rise up to ~200 basis points versus FY26, while giving an early look for FY27 of total ARR and revenue growth of about 16%–17%.Zscaler Financial Statement Overview
Summary
Income Statement
68
Positive
Balance Sheet
64
Positive
Cash Flow
86
Very Positive
| Breakdown | TTM | Jul 2025 | Jul 2024 | Jul 2023 | Jul 2022 | Jul 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 3.17B | 2.67B | 2.17B | 1.62B | 1.09B | 673.10M |
| Gross Profit | 2.43B | 2.05B | 1.69B | 1.25B | 847.63M | 522.46M |
| EBITDA | 121.76M | 112.41M | 64.79M | -76.72M | -183.43M | -105.80M |
| Net Income | -77.39M | -41.48M | -57.71M | -202.34M | -390.28M | -262.03M |
Balance Sheet | ||||||
| Total Assets | 7.10B | 6.42B | 4.70B | 3.61B | 2.83B | 2.26B |
| Cash, Cash Equivalents and Short-Term Investments | 3.54B | 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 | 4.73B | 4.62B | 3.43B | 2.88B | 2.26B | 1.73B |
| Stockholders Equity | 2.37B | 1.80B | 1.27B | 725.11M | 573.30M | 528.89M |
Cash Flow | ||||||
| Free Cash Flow | 960.23M | 726.69M | 584.95M | 333.62M | 231.33M | 143.74M |
| Operating Cash Flow | 1.10B | 972.45M | 779.85M | 462.34M | 321.91M | 202.04M |
| Investing Cash Flow | -2.53B | -427.02M | -683.18M | -259.34M | 374.06M | -109.67M |
| Financing Cash Flow | 419.61M | 420.51M | 64.21M | 45.99M | 41.34M | 41.67M |
Zscaler Technical Analysis
Positive
142.32
Price Trends
143.16
Positive
143.37
Positive
185.17
Negative
Market Momentum
7.89
Negative
73.08
Negative
95.40
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 142.32 is below the 20-day moving average (MA) of 154.28, below the 50-day MA of 143.16, and below the 200-day MA of 185.17, indicating a neutral trend. The MACD of 7.89 indicates Negative momentum. The RSI at 73.08 is Negative, neither overbought nor oversold. The STOCH value of 95.40 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
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $120.48B | 57.42 | 187.95% | ― | 18.77% | 12.93% | |
78 Outperform | $313.81B | 322.52 | 6.30% | ― | 19.51% | -33.05% | |
75 Outperform | $26.20B | 107.38 | 3.59% | ― | 11.75% | 85.38% | |
75 Outperform | $229.27B | -4,671.58 | -0.58% | ― | 23.17% | 73.57% | |
71 Outperform | $28.57B | -371.98 | -3.71% | ― | 24.61% | -91.58% | |
68 Neutral | $110.59B | -526.26 | -6.23% | ― | 33.53% | -72.17% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% |
* Technology Sector Average
ZS
Zscaler
178.55
-96.88
-35.17%
FTNT
Fortinet
161.89
83.42
106.31%
PANW
Palo Alto Networks
383.80
208.40
118.81%
OKTA
Okta
150.33
61.00
68.29%
CRWD
CrowdStrike Holdings
221.90
112.95
103.67%
NET
Cloudflare
306.97
104.64
51.72%
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.