Zscaler, Inc.’s ZS Z-Flex offering is emerging as an important growth lever, helping the cybersecurity company deepen customer relationships while making it easier for enterprises to expand across its platform. The momentum was particularly strong in the fourth quarter of fiscal 2026.
In the fourth quarter, Z-Flex generated more than $770 million in total contract value (TCV), up more than 60% sequentially. For the full fiscal 2026, TCV exceeded $1.7 billion. Z-Flex offering gives customers multi-year commitments while allowing them to activate or swap modules without starting a new procurement process. This flexibility can shorten sales cycles and create more opportunities for upselling.
The results suggest that customers are responding well. Z-Flex customers recorded an average ARR (annual recurring revenues) uplift of nearly 30% in fiscal 2026. Zscaler’s fourth-quarter revenues increased 24.9% year over year to $898.2 million, while ARR rose 25% to $3.77 billion. Non-seat-based metered solutions, which include offerings beyond traditional user-based security, accounted for about 30% of new and upsell ACV in the fourth quarter and full-fiscal 2026, with related ARR growing more than 100%.
The key question is whether Z-Flex can keep driving adoption as Zscaler enters a slower-growth fiscal 2027. The company expects full-year revenue growth of 16.6%-17.5%. Still, rising platform adoption, larger customer deals and strong Z-Flex momentum provide reasons for optimism. If Zscaler can use flexible contracts to expand customer spending, Z-Flex could become an important support for growth while improving long-term revenue visibility.
PANW and CRWD: ZS’ Rivals Focus on Flexible Platforms
Zscaler is not alone in using security platforms to expand customer spending. The company’s major competitors, Palo Alto Networks, Inc. PANW and CrowdStrike Holdings, Inc. CRWD, are also focusing on platform strategies to boost customer adoption.
Palo Alto Networks’ platformization strategy is translating into larger commitments, supported by expanding next-generation security ARR and RPO. PANW’s security platforms simplify security infrastructure for organizations by eliminating the need for multiple, stand-alone security appliances and software products.
This reduces the total cost of ownership, giving Palo Alto Networks a competitive edge and boosting customer adoption. In the third quarter of fiscal 2026, next-generation security ARR rose 60% year over year to $8.13 billion, and total RPO increased 36% to $18.4 billion, showing larger commitments across the platform.
Similar to Zscaler, CrowdStrike is also focusing on a flexible platform, Falcon Flex. By letting customers commit upfront and draw down spending across products over time, Falcon Flex is becoming a larger driver of platform consolidation.
In the second quarter of fiscal 2027, CrowdStrike added more than 935 Flex accounts, more than the prior three quarters combined, and Flex ending ARR exceeded $2.29 billion, up 101% year over year. Customers converting from standard subscriptions to Flex generated more than 40% average ending ARR uplift.
For Zscaler, the challenge is to make Z-Flex’s flexibility a clear advantage as rivals use platform-based models to drive adoption and larger customer commitments.
Zscaler’s Price Performance, Valuation & Estimates
ZS shares have plunged 24.9% year to date, while the Zacks Security industry has surged 71.6%.
Zscaler YTD Price Return Performance
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From a valuation standpoint, ZS trades at a forward price-to-sales ratio of 6.96, significantly below the industry’s average of 17.11.
Zscaler Forward 12-Month P/S Ratio
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The Zacks Consensus Estimate for Zscaler’s fiscal 2027 and 2028 earnings implies a year-over-year increase of 7.1% and 16.4%, respectively. Estimates for fiscal 2027 have been revised downward over the past 60 days, while fiscal 2028 estimates have been lowered in the past 30 days.
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Zscaler currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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