The case for & against
Bull & Bear analysis
Bearish
Zscaler, Inc. (NASDAQ: ZS) is a leading player in the cybersecurity industry, specializing in cloud-based security solutions that enable secure access to applications and data through a zero trust architecture. The company serves a substantial clientele, including nearly 40% of the Global 2000 and over 45% of Fortune 500 companies. It is positioned to capitalize on the ongoing shift towards digital transformation, particularly with the increasing demand for robust cyber defense mechanisms amid the rise of artificial intelligence (AI) technologies.
Bull says
- ↑ARR grew 25% YoY to $3.5B, underscoring subscription strength
- ↑AI security ARR set to surpass $500M by fiscal year-end
- ↑Non-GAAP operating margin hit a record 23% in Q3 2026
- ↑Free cash flow margin reached 29% YTD, fueling reinvestment
- ↑RPO of $6.5B signals strong future revenue visibility
- ↑Moderate Buy consensus with $216 average target reflects analyst confidence
Bear says
- ↓Negative earnings yield indicates potential stretched valuation
- ↓High leverage risk may constrain financial flexibility in downturns
- ↓Elevated volatility poses erratic stock performance risks
- ↓Sales leadership turnover could disrupt near-term bookings
- ↓New logo growth expected to slow into fiscal 2027
- ↓Tightening IT budgets may curb enterprise cybersecurity spend
Investment themes with ZS
Cybersecurity↑ +0.50%
Solutions securing IT infrastructure and sensitive data
AVGO · CRWD · PANW
Earnings Call · Q4 2025 · Mgmt. Guidance
Updated 09-04-2026neutral
Transcript signals
Bull points
- For example, you may have zero trust the users, and if you don't have data security, you could add data security on top of that.
- So we have done deals where customers are moving to embrace data security and cloud and branch.
- To give you a little bit of quantitative idea, only 30% of our data security customers have more than three or more modules, and only 10% have four or more modules. That means that quite a few customers who have bought inline DLP but have the opportunity to do seven additional modules.
Bear points
- We are guiding for single-digit net new ARR growth in fiscal 26 on an organic basis.
- If we are serious about zero security, we need to go in zero trust all the way.
- Our gross margin this quarter is lower than our historical target of 80% due to a one-time deployment of a large private cloud in a government customer's data center, which included a hardware component that carries lower gross margins.
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