Zscaler, Inc. (ZS)
OvervaluedFundamental
38
Price
$199.42
Market Cap
$35.00B
Part 1 · What the company is worth
Overview
Zscaler sells a cloud security service that inspects and secures internet and private application traffic for large organizations, in place of the on-premises hardware and VPNs that used to do the job. Instead of building a perimeter around a company's own data centre, all traffic is routed through Zscaler's cloud, where policies decide what a user, device or application is allowed to reach. It serves close to half of the Fortune 500 and roughly 40% of the Forbes Global 2000.
How it makes money
Revenue comes almost entirely from subscriptions, typically sold as multi-year contracts covering a number of users or devices across a growing family of Zero Trust products bundled into pricing tiers. Existing customers are the main growth engine: once onboarded, Zscaler sells additional modules — data protection, AI security, digital experience monitoring — into the same account, so revenue expands with usage and product adoption even before a new customer is signed.
Competitive moat
Switching costs · NarrowOnce an enterprise routes its internet and private application traffic through Zscaler's cloud and retires its old hardware and VPN appliances, ripping it back out is operationally risky and slow, which supports high renewal rates. That said, the market still includes deeply entrenched appliance-based incumbents, and the company itself flags that habits built around legacy spending can slow how fast new customers move to its architecture.
What drives demand
Moderately cyclicalCybersecurity is one of the more resilient corners of IT spending because a breach is costly and boards treat it as a mandatory budget line, but Zscaler is still selling multi-year contracts to enterprises whose overall technology budgets can tighten in a downturn, and net losses mean the business has less room to absorb a slowdown in new bookings than an already profitable peer.
Key risks
- Still unprofitable, with large convertible debt — Zscaler has an accumulated deficit exceeding $1.1 billion and $1.725 billion of convertible notes due in 2028, meaning a slowdown in growth would test its ability to keep funding operations and refinance that debt.
- Growth relies on renewals and upsell — Most revenue growth now comes from existing customers renewing and buying additional modules rather than from new customer contracts, so a dip in renewal rates would show up in results quickly.
- Competing against entrenched appliance vendors — Established security vendors with large installed bases of on-premises hardware and deep customer relationships can slow enterprise adoption of Zscaler's cloud-only architecture even where it is technically superior.
- Operational complexity in international markets — A large share of revenue comes from outside the US, adding exposure to local regulation, data-residency rules and operational complexity in markets such as India where the company has significant operations.
Customer concentration
No end customer accounted for more than 10% of revenue in fiscal 2025, 2024 or 2023, so the exposure is to a broad enterprise IT spending cycle rather than to any single account.
The case for
Buyers argue that once an enterprise has rerouted its traffic through Zscaler's cloud and retired legacy hardware, switching back is disruptive enough to support durable renewal rates, and that cross-selling new Zero Trust modules into the existing customer base can keep growth strong even without adding many new logos.
The case against
Sellers worry that Zscaler is still unprofitable with over a billion dollars in convertible debt coming due, that entrenched appliance-based vendors can slow how fast enterprises adopt its architecture, and that growth increasingly depends on selling more to the same customers rather than expanding the customer base itself.
Written by the editors, published on August 18, 2026
Direct competitors
Who this company fights with for the same customers
No editorial profile for this company yet
No competitor list for this company yet.
Balance Sheet & Liquidity
Revenue
$3.35B
Trailing 12 months (through 7/31/2026)
Net Income
$-63M
Trailing 12 months (through 7/31/2026)
Free Cash Flow
$852M
Total Equity
$2.60B
Total Liabilities
$5.27B
Current Ratio
1.70
Interest Coverage
11.30
Debt/EBITDA
122.27
Earnings Per Share
Revenue & Net Income
Free Cash Flow
Income Breakdown
Historical statement
Margins over time
Debt over time
How heavy the debt is
Growth grid
Growth — Revenue
Fair Value Estimation
Fair Value
$164.01
Current Price
$199.42
Margin of Safety
-21.6%
Fair Value Range
$113.86 - $214.15
Spread across the valuation methods used, not a statistically calibrated confidence interval.
Estimation Methods
Valuation Metrics
P/E Ratio
-
ROE
-2.4%
P/B Ratio
12.51
P/FCF
38.15
Gross Margin
76.8%
ROIC
-2.1%
Profitability Radar
Value Creation (Economic Moat)
ROIC
-2.1%
WACC
8.8%
ROIC − WACC
-10.9 pp
ROIC is below the cost of capital — the company is destroying value for every dollar invested.
Fundamental Analysis Criteria
Passed (10)
- EPS shows upward trend
- Price CAGR 23.66%
- Gross Margin 76.8%
- Debt/Equity ratio
- Positive Free Cash Flow
- Current Ratio
- Interest Coverage
- Revenue Growth 5Y 37.9%
- Analyst Consensus 79% Buy
- Earnings Surprise avg 7.0%
Failed (13)
- ROIC -2.1%
- P/FCF 38.15
- P/B Ratio 12.51
- Operating Margin -4.0%
- CapEx intensity
- Debt/EBITDA
- Return on Tangible Assets
- Low reliance on intangibles
- DCF valuation (Overvalued)
- ROE -2.8%
- Share Dilution 5.5%
- Net Margin Trend -1.9% vs -1.6%
- Piotroski F-Score 4/9
Unavailable (4)
- Dividend Payout NaN%
- Price below Graham Number
- PEG Ratio (need PE > 0 and growth > 0)
- Earnings Quality (OCF/Net Income)
Piotroski F-Score
Mixed signals: some areas need attention
Earnings Quality
Low quality: investigate accounting
Share Dilution
Issuing new shares, diluting ownership
Institutional Holdings
Governance
Executive Team
| Name | Title | Age |
|---|---|---|
| Mr. Jagtar Singh Chaudhry | Co-Founder, CEO & Chairman of the Board | 66 |
| Mr. Mike Rich | Chief Revenue Officer & President of Global Sales | 58 |
| Mr. Kevin Rubin | Chief Financial Officer | 50 |
| Mr. Adam Geller | Chief Product Officer | 49 |
| Mr. K. Kailash | Founder & Chief Architect | - |
| Ms. Kimberly Anderson Watkins CFA | SVP of Investor Relations & Strategic Finance | - |
| Mr. Robert S. Schlossman J.D. | Chief Legal Officer & Secretary | 57 |
| Ms. Natalia Wodecki | Global Public Relations Director | - |
| Mr. Sunil Frida | Chief Marketing Officer | - |
| Mr. Brendan Castle | Chief People Officer | - |
Audit Risk
1
Board Risk
8
Compensation Risk
6
Shareholder Rights Risk
8
Part 2 · The price and when to enter
This part won't tell you whether the company is worth owning: it helps you choose when to buy it, once the fundamentals have convinced you. Inside: technical analysis, potential, historical drawdowns, gamma exposure.
Documents
- View document
Annual Report (10-K)
A yearly overview of the business, its financial results, and the risks it faces.
Filed on 2026-09-03
- View document
Quarterly Report (10-Q)
A snapshot of financial performance for the most recent three-month period.
Filed on 2026-05-26
- View document
Current Report (8-K)
An announcement of a major event, such as a leadership change or big news.
Filed on 2026-09-24
via SEC EDGAR
Income History
via SEC EDGAR
Latest News
Recent headlines for ZS, sourced from Markets Gazette.
- 14d agoPOSITIVEThis is the only cybersecurity stock that can post big gains, according to one analyst
Zscaler's stock has lagged the cybersecurity sector's performance year-to-date, but one analyst suggests it's poised for significant gains. The company's unique position within the cybersecurity landscape, particularly its cloud-native security platform, is highlighted as a key differentiator. Despite missing the broader sector rally, the analyst believes Zscaler's specific technological advantages and market strategy are set to drive substantial future growth. Investors are watching closely to see if Zscaler can capitalize on its potential and deliver the anticipated upside, potentially marking a turning point for the stock.
- 5/31/2026NEGATIVEZscaler, AutoZone, And Regencell Are Among Top 10 Large-Cap Losers Last Week (May 25-May 29): Are The Others In Your Portfolio?
Zscaler Inc. was among the top 10 large-cap stock losers for the week of May 25-May 29, alongside AutoZone and PDD Holdings. The decline was attributed to factors including weak company guidance and downward revisions in analyst price targets. Declining energy prices also contributed to the broader market sentiment affecting these stocks. Investors are advised to monitor Zscaler's upcoming earnings reports and management commentary for signs of a potential turnaround or further headwinds.
- 5/28/2026NEGATIVEZscaler CEO: Anthropic's Mythos Has Added 'Fuel to the Fire'
Zscaler's CEO, Jay Chaudry, commented on the cybersecurity landscape, mentioning Anthropic's Mythos as adding 'fuel to the fire.' However, this positive sentiment is overshadowed by the company's recent weak fourth-quarter revenue forecast, which fell below expectations. Furthermore, Evercore analysts downgraded the stock, citing a slowdown in net new customer acquisition. These factors suggest potential headwinds for Zscaler, despite the CEO's broader commentary on industry trends.
- 5/27/2026NEGATIVEZscaler’s stock sees record drop after investors are blindsided by a disappointing outlook
Zscaler Inc. experienced a significant market reaction, with its stock plummeting over 31% following the release of a disappointing revenue outlook. This sharp decline indicates that investors were caught off guard by the company's forward-looking guidance, which failed to meet expectations. The cybersecurity firm's downbeat forecast suggests potential headwinds or a slowdown in growth, raising concerns about future performance and profitability. This event highlights the sensitivity of tech stocks to growth projections and could lead to a reassessment of the company's valuation by the market.
- 5/26/2026NEUTRALZscaler Reports Q3 2026 Results: Full Earnings Call Transcript
Zscaler Inc. has released its Q3 2026 earnings call transcript. While the transcript itself is informational, it does not contain specific financial results, forward-looking guidance, or immediate performance metrics that would allow for a definitive positive or negative signal. Investors will need to review the detailed transcript for specific operational updates, management commentary on market conditions, and any subtle indicators of future performance. The full earnings call details are crucial for a comprehensive understanding of the company's current standing and future prospects.
- 5/26/2026NEGATIVEZscaler Stock Tumbles On Q3 Earnings: Key Details From The Report
Zscaler Inc. (NASDAQ:ZS) is set to report its third-quarter fiscal 2026 earnings after market close on Tuesday, May 26, 2026. While the company has a history of strong performance in cybersecurity, the market's reaction to this upcoming report is crucial for investors. The stock's performance hinges on key metrics such as revenue growth, billings, and future guidance, especially in the context of evolving cybersecurity threats and competitive pressures. Any deviation from analyst expectations could lead to significant price movements.
via Markets Gazette