Zscaler (ZS) held its annual Zenith event last week, and management focused on how AI is changing the rules of the game. Traditional firewall-based security was suitable when all the users, applications, and data were in one place, but this no longer remains a robust method. Users now access applications from all over the world, thanks to improved cloud infrastructure and adoption.
Zscaler sees the emergence of AI as both a threat and an opportunity. Agents and agentic traffic running continuously — making thousands of requests every second — could eventually surpass the number of human users these systems are currently used to. Susquehanna analyst Shyam Patil, who has a $200 price target on ZS stock, noted that this is increasing the urgency for Zero Trust architecture — a security model that requires every user, application, and device to verify itself every time rather than being trusted automatically.
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Analysts remain divided on the significance of the opportunity that Zscaler sits on. Meta Marshall of Morgan Stanley believes that increased board-level scrutiny and internal sales team changes could slow near-term growth for the firm. Marshall has an “Equal Weight” rating on the stock with a $145 price target compared to Patil’s $200 target. The gap in these targets reflects differing views on how quickly Zscaler can turn its AI security opportunity into actual revenue.
About Zscaler Stock
Zscaler is a U.S. cloud security firm that protects businesses from cyber threats by securing users, devices, and applications from any location. The company operates globally, offering Zscaler Internet Access (ZIA), Zscaler Private Access (ZPA), and its Zero Trust Exchange platform to large organizations. Founded in 2007, Zscaler is headquartered in San Jose, California.
ZS stock has faced pressure over the past 12 months with a loss of around 58%. In comparison, the iShares Cybersecurity and Tech ETF (IHAK) has posted a modest gain of approximately 8% during the same period. The downtrend for ZS started in late 2025 and has continued steadily through the year.
www.barchart.com Zscaler Registers 25% YOY Revenue Growth
Zscaler reported its third-quarter fiscal 2026 earnings on May 26. Revenue came in at $850.5 million, marking 25% year-over-year (YOY) growth and beating the analyst consensus of $834 million. Non-GAAP EPS also increased almost 29% YOY to $1.08, beating the consensus estimate of $1 per share. Non-GAAP operating margin was recorded at a record-high of 23%, while annual recurring revenue (ARR) also grew 25%. Zscaler exceeded its guidance numbers in all key metrics. CEO Jay Chaudhry stated that the strong performance in Q3 was due to the increasing need for cybersecurity in the AI era, and that it is also why management remains confident about the company’s long-term success.
For Q4, Zscaler expects revenue between $875 million and $878 million and non-GAAP EPS between $1.08 and $1.09. Gross margin is expected to be approximately 80%, while operating profit is expected between $206 million and $208 million. Full-year fiscal 2026 revenue is also projected at $3.33 billion, reflecting growth of roughly 25%. However, for fiscal 2027, Zscaler expects ARR growth of just 16% to 17%, which would be a significant decline from the firm’s current growth rate and below the analyst consensus of 19% to 20%. Despite a strong Q3, this guidance has caused the price of ZS stock to fall sharply.
With a 58% one-year drop, ZS stock’s valuation already prices in a lot of the negatives. Wall Street consensus estimates now project mid-teens earnings growth over the next three years. The only way to change this is for the company to aggressively position itself to benefit from AI. Otherwise, its legacy business will continue to operate under the shadow of an AI threat, and investors will continue to refuse to value ZS as an AI stock. Zscaler has minimal debt and a strong cash position. Investors would hope the company delivers the right technology as enterprises reconsider cybersecurity needs amid the current uncertain environment.
What Do Analysts Think About Zscaler Stock?
Morgan Stanley decreased its price target for ZS stock from $155 to $145 while maintaining an “Equal Weight” rating. However, strong recent financials and an urgent need for its zero-trust platform caused both Needham and Wedbush to maintain a “Buy” rating and“Outperform” rating on Zscaler, respectively, with price targets of $180 and $220 per share.
Based on 45 analysts with coverage, ZS stock has a consensus “Strong Buy” rating. The mean target price of $191.71 indicates potential upside of 51% from current levels.
www.barchart.com On the date of publication, Jabran Kundi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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