Key Takeaways:
- Zscaler stock has dropped around 34% year-to-date and now trades near $146, well below its 52-week high of $337.
- Q2 adjusted EPS came in at $1.01, beating analyst estimates of $0.90, but AI disruption fears triggered a broad software selloff.
- LTM free cash flow margins expanded to around 32%, and the 3-year revenue CAGR is 34.8%.
- ZS stock could rise from $146 to around $218 per share by July 2028, implying around 20% annual returns.
What Happened?
Zscaler, Inc. (ZS) has been one of the hardest-hit software names in 2026. The stock has dropped around 34% year-to-date and now trades near $146. But the selloff tells only part of the story. AI disruption fears, particularly around new models from Anthropic, rattled the entire enterprise cybersecurity sector starting in April.
The business kept delivering. Q2 adjusted EPS came in at $1.01, beating analyst consensus of $0.90, and revenue grew more than 23% over the prior year. LTM free cash flow margins expanded to around 32%. And the company recently named Swamy Kocherlakota as EVP of Agentic AI Security Engineering, signaling a deeper commitment to AI-powered security.
Zscaler operates a cloud native cybersecurity platform built on Zero Trust architecture. Zero Trust means no user or device is automatically trusted inside or outside a company’s network. This approach has become a standard requirement for large enterprises. And Zscaler is the leading pure-play cloud security company executing on this trend at scale.
Here’s why Zscaler stock could still deliver strong returns through 2028 despite near-term AI-driven volatility and competitive pressure.
What the Model Says for ZS Stock
We analyzed the upside potential for Zscaler stock based on its cloud native Zero Trust platform, expanding enterprise customer base, and growing demand for AI-powered security solutions.
Based on estimates of 21% annual revenue growth, 23.5% operating margins, and a normalized P/E multiple of 34.6x, the model projects Zscaler stock could rise from $146 to around $218 per share.
That would be a 49.1% total return, or a 19.7% annualized return over the next 2.2 years.
Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for ZS stock:
1. Revenue Growth: 21%
Zscaler grew revenue by around 23.3% over the last twelve months. The 3-year revenue CAGR was 34.8%, but growth has been moderating as the company’s revenue base expands.
Based on analysts’ consensus estimates, we used 21% annual revenue growth. This reflects continued market share gains in Zero Trust and cloud security. But it also factors in some deceleration from the faster growth rates of prior years.
The forward 2-year consensus revenue CAGR is around 21.9%. So the 21% assumption is tightly aligned with current Wall Street expectations.
2. Operating Margins: 23.5%
32%, and LTM gross margins sit at 76.6%. The company is investing heavily in R&D and sales to capture the enterprise security opportunity.
Based on analysts’ consensus estimates, we used 23.5% operating margins. This reflects a meaningful improvement from current GAAP levels. And it assumes disciplined cost management alongside continued strong revenue growth.
The 76.6% gross margin gives Zscaler a significant runway to expand profitability as the business scales further.
3. Exit P/E Multiple: 34.6x
Zscaler trades at a forward P/E of around 34.6x on adjusted earnings. This is a premium valuation. But it reflects the company’s leadership position in a mission-critical and fast-growing security category.
Based on analysts’ consensus estimates, we maintained a 34.6x exit P/E multiple. This assumes some compression from historical peak levels. But it reflects Zscaler’s durable competitive advantages in cloud native Zero Trust security.
The street’s mean price target of around $224 per share suggests analysts still see meaningful upside from current levels.
Build your own Valuation Model to value any stock (It’s free!) >>>
What Happens If Things Go Better or Worse?
Different scenarios for ZS stock through 2030 show varied outcomes based on revenue growth rates and margin expansion (these are estimates, not guaranteed returns):
- Low Case: Revenue growth slows, and margins expand below plan → around 11% annual returns
- Mid Case: Growth holds near 19% and operating margins expand as modeled → around 16% annual returns
- High Case: AI security demand accelerates, and margins expand faster → around 21% annual returns
Going forward, Zscaler remains a compelling long-term platform in enterprise cybersecurity. The steep year-to-date decline has pushed the stock to levels that look more attractive versus long-run fundamentals. But investors should weigh near-term execution risk against the ongoing AI disruption narrative still affecting software sentiment.
See what analysts think about ZS stock right now (Free with TIKR) >>>
Should You Invest in Zscaler, Inc.?
The only way to really know is to look at the numbers yourself. TIKR gives you free access to the same institutional-quality financial data that professional analysts use to answer exactly that question.
Pull up ZS, and you’ll see years of historical financials, what Wall Street analysts expect for revenue and earnings in the quarters ahead, how valuation multiples have moved over time, and whether price targets are trending up or down.
You can build a free watchlist to track ZS alongside every other stock on your radar. No credit card required. Just the data you need to decide for yourself.
Analyze the stock on TIKR Free→
Looking for New Opportunities?
- See what stock billionaire investors are buying so you can follow the smart money.
- Analyze stocks in as little as 5 minutes with TIKR’s all-in-one, easy-to-use platform.
- The more rocks you overturn… the more opportunities you’ll uncover. Search 100K+ global stocks, global top investor holdings, and more with TIKR.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
