Zscaler, Inc. ZS is scheduled to report fourth-quarter fiscal 2026 results on Sept. 3, after market close.
For the fiscal fourth quarter, Zscaler projects total revenues between $875 million and $878 million. The Zacks Consensus Estimate is pegged at $877.1 million, suggesting growth of approximately 22% from the year-ago quarter.
Zscaler anticipates non-GAAP earnings per share between $1.08 and $1.09. The consensus mark for non-GAAP earnings has remained unchanged at $1.09 over the past 60 days, which indicates a 22.5% increase from the year-ago quarter’s level.
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Zscaler’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 11.42%.
Zscaler, Inc. Price and EPS Surprise
Zscaler, Inc. price-eps-surprise | Zscaler, Inc. Quote
What the Zacks Model Unveils for ZS
Our proven model does not conclusively predict an earnings beat for Zscaler this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
ZS currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Factors Likely to Influence Zscaler’s Q4 Results
Zscaler’s fourth-quarter results are expected to benefit from its security and networking solutions, given the rising demand for AI security. Momentum in its Zero Trust Everywhere platform is likely to have driven larger platform deals and customer consolidation in the to-be-reported quarter. In the third quarter of fiscal 2026, the number of Zero Trust Everywhere customers surpassed 700, up from 550 in the previous quarter and 210 in the year-ago quarter.
Strong momentum with Global 2000 and Fortune 500 customers and $1 million ARR customers, driven by the ongoing digital transformation across organizations and the growing popularity of hybrid work, is likely to have been a key catalyst in the to-be-reported quarter. Zscaler’s growing enterprise penetration may also have been a tailwind in the fourth quarter.
Another important growth driver in the to-be-reported quarter may have been its Z-Flex program, which is helping the company secure larger multi-year contracts. Introduced in the third quarter of fiscal 2025, the program generated more than $480 million in total contract value bookings in the third quarter of fiscal 2026, marking a strong 60% sequential increase.
Z-Flex allows customers to adopt multiple products gradually under a predictable pricing structure, making long-term platform adoption easier. This strategy not only increases customer stickiness but also improves revenue visibility.
ZS’ Stock Price Performance & Valuation
Year to date, Zscaler shares have plunged 18.1%, underperforming the Zacks Security industry’s gain of 83.3%. Compared to its peers, ZS stock
has also underperformed other cybersecurity solution providers, including Fortinet, Inc. FTNT, Palo Alto Networks, Inc. PANW and CrowdStrike Holdings, Inc. CRWD. Year to date, shares of Fortinet, Palo Alto Networks and CrowdStrike have soared 109.1%, 101.7% and 86.4%, respectively.
Zscaler YTD Price Return Performance
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Now, let’s look at the value Salesforce offers investors at the current levels. Zscaler stock is trading at a discount with a forward 12-month P/S of 7.54X compared with the industry’s 18.51X.
Zscaler Forward 12-Month P/E Ratio
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ZS stock also trades at a discount relative to Fortinet, Palo Alto Networks and CrowdStrike. At present, Fortinet, Palo Alto Networks and CrowdStrike have P/S multiples of 13.94, 21.75 and 32.97, respectively.
Investment Thesis on Zscaler Stock
Zscaler is benefiting from rising demand for zero trust security as enterprises expand cloud, hybrid work and AI initiatives. Nonetheless, it faces multiple challenges. The major problem is its slowing growth. The company once routinely delivered revenue growth above 40%. This has now fallen to the mid-20% range, and management expects fiscal 2027 revenue growth of only about 16%, with ARR growth of roughly 17%.
At the same time, Zscaler is preparing for higher infrastructure spending. AI workloads require more computing, storage, networking and memory capacity, pushing capital expenditures higher. Management expects fiscal 2026 capital expenditures to reach the high-single-digit percentage of revenues compared with its earlier mid-single-digit expectation. Spending could increase by another 200 basis points in fiscal 2027.
Higher investment can be justified when growth is accelerating. However, when revenue growth is expected to slow, rising costs become a bigger concern.
Conclusion: Stay Away From ZS Stock for Now
Zscaler’s slowing revenue growth remains a major concern despite the demand for zero trust security continuing to grow as enterprises expand cloud, hybrid work and AI initiatives. Rising capital spending requirements due to higher prices for memory, processors, storage and networking equipment are further adding risks to the company’s growth prospects.
Given these challenges, it is prudent to exit Zscaler stock for now. Investors can revisit ZS if the company’s fourth-quarter results signal growth stabilization.
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Zscaler, Inc. (ZS): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).