Zscaler (ZS) AI Stock Analysis

• Market Cap: $48.42B
• Dividend Yield: N/A
• Average Volume (3M): 1.44M
• Price to Earnings (P/E): ―
• Beta (1Y): 1.69
• Revenue Growth: 23.31%
• EPS Growth: 31.04%
• Country: US
• Employees: 7,348
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Infrastructure
• EPS (TTM): 0.89
• Shares Outstanding: 158,300,830
• 10 Day Avg. Volume: 1,312,565
• 30 Day Avg. Volume: 1,444,153
• 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: 0.89
• Enterprise Value/Revenue: 16.05
• Enterprise Value/Gross Profit: 20.88
• Enterprise Value/Ebitda: 381.75
• 1Y Price Target: $329.63
• Price Target Upside: 6.21% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 36

• Rating: 71 Outperform
• Price Target: $343.00 ▲(10.51% Upside)

Zscaler's overall stock score of 71 reflects strong growth prospects and effective cash management, as highlighted in the earnings call. The technical analysis supports a positive outlook with bullish momentum. However, the company's profitability challenges and valuation concerns, due to negative earnings and lack of dividends, weigh on the score. The strategic initiatives and robust revenue growth are significant strengths, but addressing profitability will be crucial for future stability.

Positive Factors

Revenue Growth

Consistent revenue growth and record operating margins indicate strong market demand and operational efficiency, supporting long-term business expansion.

ARR Milestone

Reaching over $3 billion in ARR highlights Zscaler's robust subscription model and customer retention, ensuring stable and predictable future revenues.

Cash Flow Management

Strong free cash flow margin demonstrates effective cash management, providing financial flexibility for strategic investments and growth initiatives.

Negative Factors

Profitability Challenges

Ongoing profitability issues, with negative net income and EBIT margins, may hinder long-term financial stability and shareholder returns.

Gross Margin Decline

A decline in gross margin could indicate rising costs or pricing pressures, potentially impacting future profitability if not addressed.

Higher Churn in New Segment

Increased churn in a new business segment may signal integration challenges, affecting customer retention and future revenue stability.

Zscaler Business Overview & Revenue Model

Company Description

Zscaler, Inc. (ZS) is a leading cloud security company that specializes in providing secure access to applications and data for businesses of all sizes. Operating primarily in the cybersecurity sector, Zscaler offers a suite of services designed to protect users, devices, and applications regardless of location. Its core products include Zscaler Internet Access (ZIA) and Zscaler Private Access (ZPA), which enable secure internet access and application access for remote users, respectively, leveraging a cloud-native architecture to ensure scalability and speed.

How the Company Makes Money

Zscaler generates revenue primarily through a subscription-based model. Customers pay for access to its cloud security services on a recurring basis, which allows for predictable revenue streams. The company offers various pricing tiers based on the number of users, the level of service, and additional features required. Key revenue streams include fees from ZIA and ZPA subscriptions, as well as professional services related to implementation and support. Zscaler has established significant partnerships with major technology providers and cloud platforms, enhancing its market reach and credibility, which further contributes to its earnings.

Zscaler Financial Statement Overview

Summary

Zscaler demonstrates strong revenue growth and effective cash management, which are positive indicators for future performance. However, the company continues to face profitability challenges, as evidenced by negative net income and EBIT margins. The balance sheet shows improved leverage, but the negative return on equity highlights the need for better profitability. Overall, Zscaler is on a growth trajectory but needs to address its profitability issues to enhance financial stability.

Income Statement

Zscaler has shown consistent revenue growth, with a 4.96% increase in the latest year. The gross profit margin remains strong at approximately 76.87%, indicating effective cost management. However, the company is still operating at a net loss, with a net profit margin of -1.55%, which is an improvement from previous years but still a concern. The EBIT and EBITDA margins are also negative, reflecting ongoing operational challenges.

Balance Sheet

The debt-to-equity ratio has improved to 0.99, suggesting better leverage management compared to previous years. However, the return on equity remains negative at -2.31%, indicating that the company is not generating positive returns on shareholder investments. The equity ratio is stable, showing a balanced asset structure.

Cash Flow

Zscaler's free cash flow has grown by 6.1%, and the operating cash flow to net income ratio is strong at 0.40, indicating good cash generation relative to net income. The free cash flow to net income ratio is also healthy at 0.75, suggesting efficient cash management despite the net losses.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	2.67B	2.67B	2.17B	1.62B	1.09B	673.10M
Gross Profit	2.05B	2.05B	1.69B	1.25B	847.63M	522.46M
EBITDA	112.41M	112.41M	64.79M	-76.72M	-183.43M	-105.80M
Net Income	-41.48M	-41.48M	-57.71M	-202.34M	-390.28M	-262.03M
Balance Sheet
Total Assets	6.42B	6.42B	4.70B	3.61B	2.83B	2.26B
Cash, Cash Equivalents and Short-Term Investments	3.57B	3.57B	2.41B	2.10B	1.73B	1.50B
Total Debt	1.80B	1.80B	1.24B	1.21B	1.05B	964.61M
Total Liabilities	4.62B	4.62B	3.43B	2.88B	2.26B	1.73B
Stockholders Equity	1.80B	1.80B	1.27B	725.11M	573.30M	528.89M
Cash Flow
Free Cash Flow	770.44M	730.99M	584.95M	333.62M	231.33M	143.74M
Operating Cash Flow	976.75M	976.75M	779.85M	462.34M	321.91M	202.04M
Investing Cash Flow	-427.02M	-427.02M	-683.18M	-259.34M	374.06M	-109.67M
Financing Cash Flow	420.51M	420.51M	64.21M	45.99M	41.34M	41.67M

Zscaler Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 310.37
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• 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 Positive. The current price of 310.37 is above the 20-day moving average (MA) of 303.66, above the 50-day MA of 288.63, and above the 200-day MA of 250.94, indicating a bullish trend. The MACD of 4.83 indicates Positive momentum. The RSI at 56.87 is Neutral, neither overbought nor oversold. The STOCH value of 52.26 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ZS.

Zscaler Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PANW	78 Outperform	$143.37B	133.99	17.45%	―	14.87%	-57.43%
FTNT	76 Outperform	$65.03B	33.87	165.17%	―	14.46%	48.06%
ZS	71 Outperform	$48.42B	―	-2.70%	―	23.31%	31.04%
NET	70 Neutral	$74.24B	―	-11.04%	―	27.32%	-11.94%
CRWD	66 Neutral	$126.38B	―	-8.99%	―	23.46%	-270.07%
OKTA	63 Neutral	$15.57B	104.14	2.61%	―	12.68%	―
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%

Zscaler Corporate Events

Zscaler’s Earnings Call Highlights Robust Growth

Zscaler’s recent earnings call painted a picture of robust performance and promising growth, despite a few challenges. The company reported significant increases in revenue, annual recurring revenue (ARR), and the adoption of innovative technologies such as AI and Zero Trust. Although there was a slight dip in gross margin and higher churn in the newly acquired Red Canary segment, the overall sentiment was positive, reflecting strong business momentum.

Zscaler’s Strong Growth and Strategic Advances in Cloud Security

Zscaler, Inc. is a leading cloud security company that offers a Zero Trust Exchange platform to protect users, devices, and applications from cyber threats, operating in the cybersecurity industry with a focus on digital transformation and secure connectivity.