Zscaler: When security becomes a growth driver
Scores at time of recommendation (December 6, 2025)
5-year stock timeline
As of 2026-03-25, Zscaler (ZS) trades at 139.41.
Major events
Zscaler accelerated product and capability expansion in 2020, notably acquiring Edgewise to strengthen zero‑trust application security as demand for cloud‑native security surged during the pandemic. The company posted very strong top‑line growth through FY2021 (above ~50% year‑over‑year), which underpinned the stock's early rally and high valuation. From 2024 into early 2026, the story oscillated between beats and guidance debates—management repeatedly beat revenue and EPS expectations and raised ARR/growth guidance, including a raised FY26 ARR outlook in February 2026, even as investors flagged billings and growth sustainability at times.
Investor narrative
In 2020–2021, Zscaler was framed as a pandemic‑era hypergrowth SASE/SSE leader as customers rushed to cloud security. The 2022 market rotation away from richly valued growth names recast Zscaler as a valuation‑sensitive name, with investors demanding steadier billings and margin evidence. By 2024 into early 2026, the narrative shifted to a more mixed view—credible operational progress and improved margins, but recurring volatility led to debates over re‑rating versus a potential value trap if revenue acceleration slowed.
Technical phases
A sustained rally from 2020–2021 was accompanied by strong quarterly beats and multiple upward re‑ratings as growth accelerated. The 2022–2023 period saw a large drawdown during the growth‑to‑value rotation, followed by an extended sideways to choppy range while investors digested slowing billings and guidance. A multi‑quarter recovery and several earnings‑driven breakouts in 2024–2025 were punctuated by post‑earnings selloffs and valuation debates, with the stock moving from 2025 highs into a pronounced decline to 139.41 by late March 2026.
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 a competitive cloud-native secure access market where it faces both entrenched platform vendors and nimble cloud-native specialists. The combination of incumbents consolidating their offerings and rivals—both public and private—innovating rapidly creates persistent pressure on pricing, margins, and the company's ability to differentiate its product.
- Intense competition from established platform vendors—Palo Alto Networks, Fortinet, Cisco—alongside cloud-native specialists creates meaningful pressure on both pricing and market share.
- Competitors like Netskope and Cato are consolidating SASE/SSE capabilities and rolling out products aggressively, which could push Fortinet toward higher R&D and go-to-market spending and potentially compress margins.
- The company's growth narrative hinges on subscription ARR and renewal rates, which means reported results swing noticeably with churn and how well it executes with large enterprise accounts.
- Regulatory requirements around data privacy and cross-border compliance pose real risks. A significant breach or outage could erode customer trust quickly enough to materially impact both new sales and retention [10].
Competitive landscape
Zscaler operates in the crowded SASE and Zero Trust space alongside formidable competitors—Palo Alto Networks, CrowdStrike, Fortinet, Cisco, Cloudflare, and Netskope among them. The real pressures come from several directions: competitors willing to undercut on price and bundle aggressively, the operational challenge of scaling its cloud infrastructure and keeping its product roadmap credible, the sprawling compliance burden across different regulatory regimes, and the simple fact that enterprise IT budgets tighten when economic confidence wavers, which tends to squeeze both growth and margins.
| Company | Ticker |
|---|---|
| Palo Alto Networks | PANW.NASDAQ |
| CrowdStrike | CRWD.NASDAQ |
| Fortinet | FTNT.NASDAQ |
| Cisco Systems | CSCO.NASDAQ |
| Cloudflare | NET.NYSE |
| Netskope | NTSK.NASDAQ |
Private competitors
- Cato Networks
- Forcepoint
- Dope.security
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Start Free TrialCatalysts
- 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 | -5.58% | +0.39% | -0.59% |
| 3M | -37.63% | -32.23% | -33.26% |
| 6M | -54.07% | -49.10% | -51.80% |
| 1Y | -30.23% | -33.01% | -47.49% |
| 3Y | +20.08% | -28.15% | -45.00% |
| 5Y | -20.19% | -73.54% | -94.01% |
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Start Free TrialHistorical valuation trends
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 | -331.2 | 7.5 | 10.2 | 20.1 |
| 1Y ago | -1,967.7 | 12.6 | 19.0 | 34.3 |
| 3Y ago | -52.2 | 12.5 | 32.0 | 42.4 |
| 5Y ago | -121.1 | 43.2 | 46.1 | 169.9 |
Frequently Asked Questions
Is Zscaler a good investment?
What does Zscaler do?
What are the key metrics for ZS.NASDAQ?
How has Zscaler's stock price performed?
How is ZS.NASDAQ valued?
What are the growth catalysts for Zscaler?
- 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 established platform vendors—Palo Alto Networks, Fortinet, Cisco—alongside cloud-native specialists creates meaningful pressure on both pricing and market share.
- Competitors like Netskope and Cato are consolidating SASE/SSE capabilities and rolling out products aggressively, which could push Fortinet toward higher R&D and go-to-market spending and potentially compress margins.
- The company's growth narrative hinges on subscription ARR and renewal rates, which means reported results swing noticeably with churn and how well it executes with large enterprise accounts.
- Regulatory requirements around data privacy and cross-border compliance pose real risks. A significant breach or outage could erode customer trust quickly enough to materially impact both new sales and retention [web:10].
Who are the main competitors of Zscaler?
- Palo Alto Networks (PANW.NASDAQ)
- CrowdStrike (CRWD.NASDAQ)
- Fortinet (FTNT.NASDAQ)
- Cisco Systems (CSCO.NASDAQ)
- Cloudflare (NET.NYSE)
- Netskope (NTSK.NASDAQ)
When does Zscaler 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 |
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