Zscaler: When security becomes a growth driver
Scores at time of recommendation (December 6, 2025)
5-year stock timeline
Zscaler (ZS.NASDAQ) — 2021–2026 timeline
2021‑09‑09 — Q4 FY2021 results; FY2022 guidance
Q4 fiscal‑2021 revenue reached $197.1M (+57% y/y) with full‑year FY2021 revenue of $673.1M. Management guided FY2022 revenue to roughly $940–950M and non‑GAAP EPS to ~$0.52–0.56 [7], [1]. The market positioned Zscaler as a pure high‑growth cloud security compounder, rewarding it with premium growth multiples and uptrend momentum [7], [2].
2022‑02‑24 — Light near‑term guidance → sharp share drop
Despite a strong quarter, lighter near‑term guidance (Q3 and FY) triggered an intraday plunge of as much as ~18%. The quarter also reported a widened GAAP net loss [8]. Sentiment shifted from uncritical growth multiples to near‑term scrutiny, with guidance risk and execution concerns dominating. The rapid drawdown and volatility spike reflected this repricing [8].
2022‑09‑08 — Q4 FY2022: re‑acceleration and cash‑flow improvement
Q4 revenue hit $318.1M (+61% y/y) with full‑year FY2022 revenue of $1,090.9M (+62% y/y). Non‑GAAP net income and free cash flow materially improved. The company launched Posture Control and expanded AWS integrations [4]. Execution and product expansion restored the "growth + efficiency" narrative, with emphasis shifting to durable Zero‑Trust demand and improving cash metrics. This resumed the uptrend with a re‑rating on evidence of scale and cash generation [4].
2023‑11 (early) — Product push + Q1 FY2024 results and GTM hires
On November 8, the company announced Zero‑Trust workload and cloud‑VDI innovations. Q1 FY2024 results (November 27) showed revenue of $497M (+40% y/y), record free cash‑flow margin (~45%), and record new $1M‑ARR logos. Mike Rich joined as CRO and Joyce Kim as CMO to scale GTM [17], [21]. The narrative broadened from "user protection" to a platform story spanning workloads, data protection, and AI security. Investors began valuing both growth and improving margins. The stock consolidated with momentum as the story evolved toward "scale + profitability" [21].
2024‑03‑01 — Q2 FY2024: beat but noticeable deceleration
Q2 FY2024 revenue reached ~$525M (+35% y/y), beating estimates, but growth slowed versus prior quarters and operating expenses rose [14], [13]. The market rotated focus to growth cadence and billings/bookings, becoming more selective about growth durability. Shares fell on growth‑pace concerns, entering a range‑bound pullback with higher scrutiny on leading indicators [13], [14].
2024–2025 — Platform & AI tailwinds; re‑rating into 2025
The company continued expanding its product suite with AI‑driven threat protection, data protection, and workload security, driving large enterprise adoption. The stock rallied through 2025 as investors rewarded the platform/AI positioning, with large year‑to‑date gains reported mid‑2025 [24]. Sentiment shifted toward viewing Zscaler as an AI/security compounder rather than a single‑pillar vendor, with multiple expansion following product and large‑deal evidence. A multi‑quarter rally produced higher highs into late‑2025 as the market re‑rated the name [24].
2025‑11‑25 — Quarter beat and FY outlook raised
The company beat quarterly estimates and raised annual revenue outlook on strong demand for cloud and AI security offerings [16]. This reinforced the growth + AI/security narrative and positioned Zscaler as a leader in Zero‑Trust + AI security. The continued bullish run experienced episodic volatility around results [16].
2026‑02‑26 — Q4 (CY2025) revenue beat but billings miss
Q4 calendar‑year 2025 revenue reached ~$815.8M (+~25.9% y/y), beating on revenue and EPS, but calculated billings disappointed [20]. Investors emphasized billings as a leading signal for future ARR growth, and the shortfall raised doubts about forward revenue momentum despite current strength. The stock dropped on the billings miss, entering a period of short‑term drawdown and higher volatility with the trend leadership questioned [20].
2026‑05‑26/27 — Q3 FY2026: operational beat but conservative FY27 outlook → historic selloff
The quarter ending April 30 showed strong results with positive revenue and ARR growth (ARR +25%) and improved margins. However, the company issued conservative FY27/ARR growth guidance (~16–17%), cited a "prudent" stance amid GTM changes, and saw two sales leaders depart [19], [15]. Shares plunged roughly 31% on May 27, 2026—the company's worst single‑day drop—triggering downgrades and a reassessment of execution risk [19], [15]. The market pivoted from the "AI + platform" re‑rating to heightened execution and bookings durability concerns, with perception shifting toward elevated execution risk and multiple compression. A sudden large drawdown transitioned the stock into a volatile/downtrend regime consolidating at materially lower multiples [15], [19].
2026‑07‑11 — Latest market price
Current price: 139.27. After the May 2026 sell‑off and ensuing volatility, Zscaler trades well below its late‑2025 highs. Investor views remain polarized between platform/AI proponents and execution‑skeptics. The stock consolidates in a controlled downtrend near a lower trading range with a bearish‑to‑neutral technical posture.
Key Points
- Cloud security specialist with 26% sales growth to €788 million USD in Q1 FY2026
- ARR climbs to 3.2 billion USD, operating cash flow increases by 35% to 448 million USD
- Strategic acquisitions (Red Canary, SPLX) strengthen AI security portfolio
- Zero Trust Exchange runs across 160+ data centers worldwide
- Partnerships with Peraton and Orca Security extend market reach
Investment Thesis
Zscaler is positioning itself as the infrastructure layer for Zero Trust Security in a world that is migrating inexorably to the cloud. While traditional perimeter security is becoming obsolete, the company is benefiting from a structural change that is likely to last for years. The combination of strong organic growth, high customer loyalty and strategic AI acquisitions creates a rare mix of scalability and market penetration. With operating cash flow of 448 million USD and a net retention rate of over 125%, Zscaler shows that cloud security is not only necessary, but also profitably scalable.
Key risks and downside factors
Zscaler operates in the cloud-native SASE/SSE and Zero Trust space alongside established public competitors and several private SASE providers. The competitive landscape is sharp, with feature differentiation narrowing across players. The company's durable advantages rest on its globally distributed, multi-tenant cloud infrastructure and substantial enterprise customer base. It contends with operational constraints around availability and security, reliance on channel partners, and ongoing pressure on capital efficiency and earnings. Detailed context available in Zscaler Form 10‑K (FY2025): https://www.sec.gov/Archives/edgar/data/1713683/000171368325000158/zs-20250731.htm
- Intense competition from large networking and security vendors, combined with pressure from cloud-native SASE and SSE providers, may drive pricing down, slow new customer acquisition, and compress margins.
- Operational and security vulnerabilities present material downside risk. A major cloud outage, inability to scale infrastructure, or a platform breach could trigger significant customer losses, legal exposure, and lasting reputational harm.
- Channel and concentration risk stem from heavy reliance on a small number of large partners—the top five channel partners accounted for roughly 28% of FY2025 revenue. This concentration creates real exposure: if key partners underperform or renegotiate terms, the impact flows directly to the top line.
- Sustained net losses paired with aggressive R&D and sales spending, layered against significant convertible debt obligations (such as the 2028 Notes), create financial and liquidity pressures that could limit strategic flexibility, force refinancing, or trigger equity dilution.
Competitive landscape
Zscaler operates as a cloud-native SASE and zero-trust security vendor positioned between large incumbent players—Palo Alto Networks, Fortinet, Cisco Systems, Broadcom, Check Point—and newer cloud-native competitors like Cloudflare, CrowdStrike, and Okta. This middle ground exposes the company to pricing and bundling pressure, particularly from larger competitors leveraging broader product portfolios and established channel relationships. The business carries meaningful execution risk around subscription retention and net retention metrics, alongside technology scaling and integration challenges. There's also material exposure to security, privacy, and regulatory developments that could damage either revenue or reputation.
| Company | Ticker |
|---|---|
| Palo Alto Networks | PANW.NASDAQ |
| Fortinet | FTNT.NASDAQ |
| Cisco Systems | CSCO.NASDAQ |
| Cloudflare | NET.NYSE |
| CrowdStrike | CRWD.NASDAQ |
| Check Point Software Technologies Ltd. | CHKP.NASDAQ |
| Okta | OKTA.NASDAQ |
| Broadcom | AVGO.NASDAQ |
Private competitors
- Netskope
- Cato Networks
- Versa Networks
- Perimeter 81
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- Further sales growth by displacing legacy VPN solutions in the enterprise segment
- Scaling of AI security products following integration of Red Canary and SPLX
- Expansion in the government sector through Peraton partnership with long-term contract structures
- Operational levers take effect: Path to sustainable profitability with consistent growth
Analysis
Performance Figures of Zscaler Inc
Relative Performance vs Benchmarks
| Period | Zscaler Inc | vs DAX | vs S&P 500 (SPY) |
|---|---|---|---|
| 1M | +15.09% | +15.07% | +14.23% |
| 3M | +8.72% | +7.86% | +2.16% |
| 6M | -31.57% | -30.06% | -41.28% |
| 1Y | -49.11% | -52.88% | -71.37% |
| 3Y | -3.55% | -58.61% | -77.34% |
| 5Y | -33.79% | -94.12% | -121.03% |
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How the company’s key valuation ratios (P/E, P/S, P/B and P/CF) have evolved over time compared to today.
| Period | P/E Ratio | P/S Ratio | P/B Ratio | P/CF Ratio |
|---|---|---|---|---|
| Current | -307.8 | 7.5 | 10.1 | 21.6 |
| 1Y ago | -1,154.1 | 17.6 | 24.8 | 48.4 |
| 3Y ago | -78.3 | 14.3 | 35.1 | 49.2 |
| 5Y ago | -129.4 | 49.7 | 58.7 | 158.3 |
Frequently Asked Questions
Is Zscaler Inc a good investment?
What does Zscaler Inc do?
What are the key metrics for ZS.NASDAQ?
How has Zscaler Inc's stock price performed?
How is ZS.NASDAQ valued?
What are the growth catalysts for Zscaler Inc?
- Further sales growth by displacing legacy VPN solutions in the enterprise segment
- Scaling of AI security products following integration of Red Canary and SPLX
- Expansion in the government sector through Peraton partnership with long-term contract structures
- Operational levers take effect: Path to sustainable profitability with consistent growth
What are the key risks when investing in ZS.NASDAQ?
- Intense competition from large networking and security vendors, combined with pressure from cloud-native SASE and SSE providers, may drive pricing down, slow new customer acquisition, and compress margins.
- Operational and security vulnerabilities present material downside risk. A major cloud outage, inability to scale infrastructure, or a platform breach could trigger significant customer losses, legal exposure, and lasting reputational harm.
- Channel and concentration risk stem from heavy reliance on a small number of large partners—the top five channel partners accounted for roughly 28% of FY2025 revenue. This concentration creates real exposure: if key partners underperform or renegotiate terms, the impact flows directly to the top line.
- Sustained net losses paired with aggressive R&D and sales spending, layered against significant convertible debt obligations (such as the 2028 Notes), create financial and liquidity pressures that could limit strategic flexibility, force refinancing, or trigger equity dilution.
Who are the main competitors of Zscaler Inc?
- Palo Alto Networks (PANW.NASDAQ)
- Fortinet (FTNT.NASDAQ)
- Cisco Systems (CSCO.NASDAQ)
- Cloudflare (NET.NYSE)
- CrowdStrike (CRWD.NASDAQ)
- Check Point Software Technologies Ltd. (CHKP.NASDAQ)
- Okta (OKTA.NASDAQ)
- Broadcom (AVGO.NASDAQ)
When does Zscaler Inc report earnings?
Key Metrics
Valuation Metrics
Profitability Metrics
Growth Metrics
Dividend history
Long-term record of paid dividends (amount per share and dividend yield at the time of payment).
Earnings history & estimates
Historical earnings performance shows how consistently the company meets or exceeds analyst expectations. Forward estimates provide insight into expected profitability and growth trajectory.
Historical earnings performance
Upcoming earnings report
Analyst estimates for upcoming periods
Key financial figures
Selected income statement, balance sheet and cash flow figures. Annual and quarterly, based on reported IFRS/GAAP financials.
| 2025 | 2024 | 2023 | 2022 | 2021 | |
|---|---|---|---|---|---|
| Revenue | 2.67B | 2.17B | 1.62B | 1.09B | 673.10M |
| Operating income (EBIT) | -128.46M | -123.88M | -215.44M | -331.64M | -206.63M |
| Net income | -41.48M | -57.71M | -202.34M | -390.28M | -262.03M |
| Free cash flow | 726.69M | 584.95M | 333.62M | 231.33M | 143.74M |
| Total assets | 6.42B | 4.70B | 3.61B | 2.83B | 2.26B |
| Equity | 1.80B | 1.27B | 725.11M | 573.30M | 528.89M |
| Net debt | -592.45M | -185.12M | -51.66M | 32.51M | 688.71M |
PWP Leeway UG (haftungsbeschränkt)
