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Zscaler, Inc.
Technology | Software - Infrastructure
⚡ Executive Summary
📊 The Bottom Line
Zscaler is a leader in cloud security, providing cyberthreat protection and data security through its Zero Trust Exchange platform. The company's business model is robust, driven by the accelerating global adoption of cloud services and the critical need for advanced cybersecurity solutions in modern enterprises.
⚖️ Risk vs Reward
At its current price of US$200.01, Zscaler presents a potential upside to analyst targets ranging from US$215 to US$390, with an average of US$317.58. However, the stock trades at a premium valuation compared to some peers, suggesting a balanced risk-reward profile for long-term investors given its growth prospects and market position.
🚀 Why ZS Could Soar
- • Sustained Cloud Adoption and Digital Transformation: The ongoing global shift to cloud computing and digital transformation initiatives will continue to fuel demand for Zscaler's cloud-native security solutions, driving consistent high-teens to low-twenties revenue growth.
- • AI-Powered Product Innovation: Continuous innovation, especially in AI security, strengthens its platform and allows it to capture new market segments and enhance threat detection capabilities.
- • Sticky Subscription Model and Strong Retention: Zscaler's subscription-based revenue model provides predictable, high-margin recurring revenue and creates strong customer retention, supporting long-term value creation.
⚠️ What Could Go Wrong
- • Intense Competition and Pricing Pressure: The highly competitive cloud security market, with aggressive offerings from large players and new entrants, could lead to pricing pressure, impacting Zscaler's margins and market share gains.
- • Macroeconomic Headwinds Impacting IT Spending: A significant global economic slowdown could cause enterprises to defer or reduce cybersecurity investments, directly affecting Zscaler's new bookings and subscription growth.
- • Execution Risk in Sales: Despite recent improvements, challenges in sales force execution or the successful integration and adoption of new products could hamper Zscaler's ability to meet ambitious revenue growth targets.
🏢 Company Overview
💰 How ZS Makes Money
- • Zscaler provides cloud-native cybersecurity solutions, primarily to enterprise customers worldwide, through its Zero Trust Exchange platform.
- • Its core offerings, Zscaler Internet Access (ZIA) and Zscaler Private Access (ZPA), enable secure access to external and internal applications, respectively, following a Zero Trust security model.
- • The company offers comprehensive security products including cyberthreat protection (cloud sandbox, browser isolation), data security (web and email DLP, multi-mode CASB), and security operations (Risk360, vulnerability management).
- • Revenue is predominantly generated from recurring subscription fees for access to its cloud security platform and various security services.
- • Zscaler serves a diverse client base across numerous industries, including financial services, healthcare, manufacturing, and technology.
Revenue Breakdown
Subscription Services
90%
Recurring revenue from access to cloud security platform and features.
Professional Services & Other
10%
Implementation, training, and support services.
🎯 WHY THIS MATTERS
Zscaler's cloud-native, subscription-based model provides scalable and resilient security, generating predictable revenue streams and high customer lifetime value, which is crucial for long-term growth in the evolving threat landscape.
⭐ Competitive Advantage: What Makes ZS Special
1. Cloud-Native Zero Trust Architecture
Zscaler pioneered a cloud-native Zero Trust Exchange platform that securely connects users directly to applications, bypassing traditional network perimeters. This architecture is designed for modern, distributed environments, offering superior performance, scalability, and security compared to legacy perimeter-based solutions. It significantly reduces the attack surface and prevents lateral movement of threats.
2. Extensive Global Network & Data Advantage
Zscaler operates a massive global cloud infrastructure, processing petabytes of traffic daily across hundreds of data centers. This scale allows it to aggregate vast amounts of threat intelligence, detect new attack patterns faster, and continuously improve its security efficacy through machine learning. This network effect creates a powerful data moat that is difficult for competitors to replicate.
3. Integrated Security Platform
Instead of disparate point products, Zscaler offers a unified platform for internet security, private access, data protection, and security operations. This integration simplifies management, reduces complexity for customers, and provides comprehensive protection across various threat vectors. This platform approach makes it more challenging for customers to switch to alternative vendors.
🎯 WHY THIS MATTERS
These advantages collectively position Zscaler as a leader in the Zero Trust security market, enabling it to offer a more effective, scalable, and simplified security solution for enterprises adopting cloud and hybrid work, thereby driving sustainable growth.
👔 Who's Running The Show
Jagtar Singh Chaudhry
Co-Founder, CEO & Chairman of the Board
Jagtar Singh Chaudhry, 66, co-founded Zscaler in 2007. He is a visionary leader in cybersecurity, having previously founded and led CipherTrust and SecureIT. His deep expertise in network and application security has been instrumental in Zscaler's pioneering of the cloud-native Zero Trust Exchange platform, guiding the company's strategic product development and market leadership.
⚔️ What's The Competition
The cloud security and Zero Trust market is intensely competitive, featuring a mix of established cybersecurity giants adapting their offerings and agile cloud-native startups. Competition stems from product features, performance, integration capabilities, and pricing. Major players often have strong existing customer bases or broader security portfolios.
📊 Market Context
- Total Addressable Market - The global Zero Trust Security market is projected to grow from US$41.72 billion in 2025 to US$102.01 billion by 2031, at a CAGR of 16.07%, driven by remote work and cloud adoption.
- Key Trend - The increasing integration of AI across cybersecurity platforms is the most important trend, enhancing threat detection and automating responses to sophisticated cyberattacks.
Competitor
Description
vs ZS
Palo Alto Networks
A broad cybersecurity platform vendor offering next-generation firewalls, cloud security (Prisma Access), and extended detection and response.
Competes with Zscaler through its cloud-delivered SSE/SASE solutions, often preferred by enterprises with existing Palo Alto Networks deployments due to SecOps coherence.
Netskope
A data-centric Security Service Edge (SSE) platform (SWG/ZTNA/CASB/DLP/DEM) delivered over a large private SASE cloud backbone.
Differentiates with strong data protection, DLP, and CASB capabilities, appealing to data-sensitive organizations.
Fortinet
Offers FortiSASE, extending its security fabric with a cloud SSE/SASE solution. Provides a unified agent and management.
Appeals to organizations with existing Fortinet infrastructure, valuing fabric integration and broad portfolio coverage.
Cisco Systems
A global technology company with a broad networking and security portfolio, including Secure Access (SSE).
Often a strong choice for Cisco-first estates, leveraging existing identity and access management solutions like Duo and ISE.
Market Share - Zero Trust Network Access Market (2025)
Zscaler
32%
Palo Alto Networks
24%
Cisco Systems
18%
Others
26%
📊 Valuation & Analysis
📈 Wall Street Summary
Analyst Rating Distribution - 1 Strong Sell, 12 Hold, 28 Buy, 8 Strong Buy
1
12
28
8
12-Month Price Target Range
Low Target
US$215
+7%
Average Target
US$318
+59%
High Target
US$390
+95%
Closing: US$200.01 (30 Jan 2026)
🚀 The Bull Case - Upside to US$390
1. Sustained Cloud Adoption and Digital Transformation
High Probability
The ongoing global shift to cloud computing and digital transformation initiatives will continue to fuel demand for Zscaler's cloud-native security solutions, driving consistent high-teens to low-twenties revenue growth.
2. Expanding AI Security Offerings
Medium Probability
Zscaler's early moves and continuous innovation in AI security, including new suites for AI asset management and secure access to AI, can open new revenue streams and strengthen its competitive moat.
3. Strong Sales Execution and Customer Retention
Medium Probability
Improved sales force retention, strong pipeline development, and high customer retention rates (exceeding 95% in Zero Trust) can lead to sustained billings growth and expanding deal sizes.
🐻 The Bear Case - Downside to US$215
1. Increased Competition and Pricing Pressure
Medium Probability
The highly competitive cloud security market, with aggressive offerings from large players and startups, could lead to pricing pressure, impacting Zscaler's margins and market share gains.
2. Macroeconomic Downturn Impact on IT Spending
Medium Probability
A significant global economic slowdown could cause enterprises to defer or reduce cybersecurity investments, directly affecting Zscaler's new bookings and subscription growth.
3. Complex Sales Cycles and Integration Challenges
Low Probability
Despite cloud-native advantages, the complexity of enterprise security deployments and potential integration challenges with legacy systems could lengthen sales cycles and hinder adoption, affecting revenue forecasts.
🔮 Final thought: Is this a long term relationship?
Zscaler possesses a durable competitive advantage through its cloud-native Zero Trust architecture and extensive global network, essential for securing modern enterprises. Leadership has demonstrated a clear vision for staying ahead of evolving cyber threats, particularly in AI security. However, the rapidly evolving and competitive cybersecurity landscape presents ongoing challenges. For Zscaler to thrive over a decade, it must continue to innovate faster than competitors, expand its platform effectively, and maintain strong execution to capture a larger share of the growing cloud security market.
📋 Appendix
Financial Performance
Metric
31 Jul 2025
31 Jul 2024
31 Jul 2023
Income Statement
Revenue
US$2.67B
US$2.17B
US$1.62B
Gross Profit
US$2.05B
US$1.69B
US$1.25B
Operating Income
US$-0.13B
US$-0.12B
US$-0.23B
Net Income
US$-0.04B
US$-0.06B
US$-0.20B
EPS (Diluted)
-0.27
-0.39
-1.40
Balance Sheet
Cash & Equivalents
US$2.39B
US$1.42B
US$1.26B
Total Assets
US$6.42B
US$4.70B
US$3.61B
Total Debt
US$1.80B
US$1.24B
US$1.21B
Shareholders' Equity
US$1.80B
US$1.27B
US$0.73B
Key Ratios
Gross Margin
76.9%
78.0%
77.6%
Operating Margin
-4.8%
-5.6%
-14.5%
Return on Equity
-2.31
-4.53
-27.90
Analyst Estimates
Metric
Annual (31 Jul 2026)
Annual (31 Jul 2027)
EPS Estimate
US$3.82
US$4.49
EPS Growth
+16.6%
+17.3%
Revenue Estimate
US$3.3B
US$3.9B
Revenue Growth
+23.3%
+19.8%
Number of Analysts
46
46
Valuation Ratios
| Metric | Value | Description |
|---|---|---|
| Forward P/E | 44.58 | The Forward Price-to-Earnings (P/E) ratio indicates what investors are willing to pay for future earnings, based on estimated earnings per share for the next twelve months. |
| Price/Sales (TTM) | 11.26 | The Price/Sales (TTM) ratio compares a company's market capitalization to its total revenue over the past twelve months, often used for companies with negative earnings or in high-growth phases. |
| Price/Book (MRQ) | 16.09 | The Price/Book (MRQ) ratio compares a company's market value to its book value, reflecting how much investors are willing to pay for each dollar of assets on its balance sheet. |
| EV/EBITDA | -449.17 | Enterprise Value to EBITDA (EV/EBITDA) is a valuation multiple that compares the total value of a company (Enterprise Value) to its earnings before interest, taxes, depreciation, and amortization. A negative value is observed when EBITDA is negative for loss-making companies like Zscaler. |
| Return on Equity (TTM) | -2.41 | Return on Equity (TTM) measures a company's net income as a percentage of shareholders' equity over the trailing twelve months, indicating how efficiently a company is using shareholder investments to generate profits. |
| Operating Margin | -3.88 | Operating Margin measures the profitability of a company's core operations, calculated as operating income divided by revenue, indicating efficiency before interest and taxes. |
Peer Comparison
| Company | Market Cap (B) | P/E Ratio | P/B Ratio | Revenue Growth (%) | Operating Margin (%) |
|---|---|---|---|---|---|
| Zscaler, Inc. (Target) | 31.90 | N/A | 16.09 | 25.5% | -3.9% |
| Palo Alto Networks | 123.35 | 117.20 | 18.10 | 15.3% | 13.3% |
| CrowdStrike | 112.09 | 121.81 | 28.60 | 22.0% | -8.6% |
| Fortinet | 60.43 | 33.30 | 78.40 | 17.0% | 30.3% |
| Sector Average | — | 90.77 | 41.70 | 18.1% | 11.7% |