Key Stats for Zscaler Stock
- Current Price: $184.60
- Target Price (Mid): ~$362
- Street Target: ~$224
- Potential Total Return: ~96%
- Annualized IRR: ~17% / year
- Earnings Reaction: ~-17% after hours (May 27, 2026)
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A Record Quarter. A Sharp Selloff.
Zscaler, Inc. (ZS) just posted its strongest operating quarter on record. Revenue grew 25% year-over-year to $850.5 million, ahead of the $835.7 million consensus tracked by TIKR. Adjusted EPS of $1.08 beat the $1.01 estimate. Non-GAAP operating margin hit a record 23%, up 140 basis points year-over-year. Annual recurring revenue (ARR), meaning the annualized value of all active subscriptions, grew 25% to $3.525 billion.
Then the stock fell roughly 17% in after-hours trading, per Benzinga.
Two disclosures at the end of the earnings call did the damage. Two sales leaders under Chief Revenue Officer Mike Rich had departed at the close of Q3. And management issued an early look at fiscal 2027, projecting ARR and revenue growth of 16% to 17%, down sharply from the current 25% pace. Both items overshadowed the record results.
What the Sales Departure Actually Means
CFO Kevin Rubin was direct on the call: “We recognize when leaders of this nature change that it can have some disruptive nature to those organizations. So I’m just taking a prudent approach.”
CEO Jay Chaudhry clarified that one internal replacement has already been appointed and a second search is in progress. The disruption risk is real when sales leaders exit; deals in flight can slow. Zscaler’s own Q4 guidance reflects caution: revenue of $875 million to $878 million implies approximately 22% year-over-year growth, a step down from Q3’s 25%.
But the customer commitment data pushes back against the panic. Zscaler posted its sixth consecutive quarter of sales productivity growth. Z-Flex, the company’s multi-year commitment program that lets enterprise customers activate or swap modules without restarting a procurement cycle, generated just over $480 million in total contract value (TCV) in Q3 alone, up more than 60% quarter-over-quarter. Zscaler has delivered over $1 billion in Z-Flex TCV over the past 12 months at an average four-year term.
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The AI Tailwind Is Showing Up in the Numbers
The part of the Zscaler story the market is discounting today is the AI security opportunity. Frontier AI models like Mythos, capable of finding software vulnerabilities at machine speed, are expanding the attack surface problem for every enterprise. Chaudhry said on the call: “Frontier models are multiplying unremediated vulnerabilities by as much as 10x, and even more powerful models that are currently being developed will undoubtedly make it worse.” The defenses Zscaler has sold for over a decade, hiding applications from attackers and eliminating lateral movement, are exactly what enterprises are now scrambling to deploy.
The product metrics inside Q3 validate this. Data Security ARR crossed $500 million, up over 30% year-over-year. Zero Trust Branch ARR approximately tripled year-over-year. AI Protect, Zscaler’s suite for discovering and governing AI asset usage, launched in January 2026, has crossed $100 million in bookings over the trailing twelve months. Zero Trust Everywhere enterprises, customers that have deployed Zscaler across users, branches, and cloud workloads, grew from over 550 in Q2 to more than 700 in Q3.
On May 21, Zscaler announced its intent to acquire Symmetry Systems, a startup whose “access graph” technology maps how identities, applications, and AI agents interact with enterprise data across cloud and on-premises environments. The ARR contribution is immaterial, but the fit is precise: as enterprises deploy AI agents at scale, the security question shifts to which agent accessed which data, under what permissions, and when. Zscaler is also partnering with Anthropic on Project Glasswing and with OpenAI as part of its Daybreak program to proactively harden its own systems using frontier models.
Where the Valuation Stands
Before earnings, ZS had already fallen over 45% from its 52-week high of $336.99, with the stock hitting a low of $114.63 on April 10, 2026, a maximum drawdown of 64.89% per TIKR. The stock had recovered roughly 61% off that April low before last night’s report. After-hours selling resets much of that recovery.
At $184.60, ZS trades at 7.44x NTM total enterprise value to revenue and 27.21x NTM EV/EBITDA (enterprise value to earnings before interest, taxes, depreciation, and amortization), per TIKR’s Competitors page. For context, CrowdStrike (CRWD) trades at 28.20x NTM EV/revenue and 95.79x NTM EV/EBITDA. Fortinet (FTNT) trades at 11.95x NTM EV/revenue and 32.83x NTM EV/EBITDA. Zscaler’s current multiple is closer to a mature enterprise software company than to a platform running 25% ARR growth with a record operating margin.
Of the 47 analyst ratings tracked by TIKR, 31 are Buys, 8 are Outperforms, and 8 are Holds. No analyst carries an Underperform or Sell. The mean price target is around $224.
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TIKR Advanced Model Analysis
- Current Price: $184.60
- Target Price (Mid): ~$362
- Potential Total Return: ~96%
- Annualized IRR: ~17% / year
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The TIKR mid-case model assumes a revenue CAGR of around 19% through fiscal year 2030. The two primary growth drivers are continued Zero Trust Branch and Zero Trust Cloud adoption as enterprises replace legacy firewall architectures, and the Data Security platform, already past $500 million in ARR and growing faster than the core business. The margin driver is operating leverage on sales and marketing, already demonstrated across six consecutive quarters of productivity gains. The model targets a net income margin of around 21% by 7/31/30, supported by an 80%+ gross margin structure.
The upside path: AI demand accelerates new logo growth, and FY27 proves to be a digestion quarter rather than a structural step-down. The downside path: sales execution stumbles under new leadership, organic ARR growth settles into the mid-teens for multiple quarters, and the FY27 guide becomes a ceiling rather than a floor.
On free cash flow: FY26 FCF margin guidance was cut to 22.8%–23.3% from a prior 26.5%–27%, as rising memory and processor costs pull CapEx forward from FY27 into Q4 FY26. Rubin noted that CapEx as a percentage of revenue could increase by up to 200 basis points in FY27 versus FY26 levels. LTM free cash flow stands at approximately $1.02 billion per TIKR. The CapEx pressure is real but reflects investment in the same AI infrastructure underpinning the long-term revenue case.
Conclusion
The thesis resolves at Q4 FY26 earnings, due in approximately three months. Watch organic net new ARR growth, excluding the Red Canary contribution. Management’s Q4 guidance implies around 9.5% organic net new ARR growth, which Rubin noted would still represent an acceleration over the prior-year quarter. If that holds and both sales roles are filled by the August call, the disruption narrative loses its teeth. If organic ARR misses and new leadership remains unsettled, the FY27 guide of 16% to 17% becomes harder to defend as a floor.
The AI tailwind Chaudhry described is not hypothetical. It is already in the data security ARR, AI Protect bookings, and Zero Trust Branch growth figures. Whether that story is worth owning at $184.60 depends on one question: is the sales disruption a one-quarter storm or the start of something more persistent?
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Should You Invest in Zscaler?
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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!
