Key Takeaways:
- AI Security Booming: Zscaler’s security-for-AI bookings jumped more than 50% sequentially in fiscal Q4 2026, on top of an already strong prior quarter.
- Price Projection: Based on current execution, ZS stock could reach $231 by July 2029.
- Potential Gains: This target implies a total return of 41% from the current price of $163.
- Annual Return: Investors could see roughly 13% annualized growth over the next 2.9 years.
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Zscaler (ZS) closed fiscal 2026 with a strong Q4. Revenue grew 25% year over year to $898 million, and non-GAAP operating margin hit a record 24.3%.
Net new annual recurring revenue, excluding the Red Canary acquisition, accelerated to 17% growth, up from just 7% in fiscal 2025.
CEO Jay Chaudhry said AI is becoming the biggest tailwind the company has ever seen.
Zscaler’s own risk assessments found that over 90% of organizations had AI applications or servers exposed to the internet, and more than a third had known, exploitable vulnerabilities.
That’s driving urgency at the board level, and companies are turning to Zscaler’s Zero Trust platform to lock things down.
The company also announced a workforce restructuring affecting about 3% of employees, aimed at freeing up resources to invest in AI and new sales hires targeting enterprise accounts. Restructuring charges are estimated at $30 million to $33 million.
ZS trades around $163 today, well off its 2025 highs, even as the underlying business shows accelerating growth.
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What the Model Says for Zscaler Stock
Zscaler sells cloud-based cybersecurity that routes traffic through its platform instead of relying on traditional firewalls.
The company processes more than 750 billion transactions daily, giving it a scale advantage in spotting and blocking threats.
The AI angle cuts two ways for Zscaler.
- First, it helps companies defend against AI-powered attacks, since newer AI models can find software vulnerabilities faster than security teams can patch them.
- Second, it helps companies safely deploy their own AI agents, ensuring those agents only access approved data and systems.
Management noted that 70% of security-for-AI deals this quarter also included Zscaler’s data security products, showing the two businesses reinforce each other.
The company also launched Agentic SecOps, combining its own threat data with Red Canary’s incident-response expertise, aimed at cutting detection-to-remediation times from days to minutes.
Management expects this to start contributing meaningfully in the back half of fiscal 2027.
Using a forecast of 16.4% annual revenue growth and 23.7% operating margins, our model projects the stock could reach $231 by July 2029. This assumes a 33.3x price-to-earnings multiple, in line with Zscaler’s current level but well below its one-year average of 49.5x.
Our Valuation Assumptions
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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 Zscaler stock:
1. Revenue Growth: 16.4%
Zscaler grew revenue 25.4% for the full fiscal year 2026, well above the 16.4% we’re assuming going forward.
Fiscal 2027 guidance calls for 16.6% to 17.5% growth, a deceleration from recent years as the company laps a period of unusually high growth.
We assume growth settles near management’s guidance range, with AI security providing potential upside not yet fully reflected.
2. Operating margins: 23.7%
Trailing twelve-month non-GAAP operating margin sits at 22.9%, above the three-, five-, and ten-year averages, which range from roughly 11% to 22%.
Management guided to an operating margin of approximately 23.7% for fiscal 2027.
We’re using that figure directly, reflecting continued operating leverage as new products like security for AI and Agentic SecOps scale.
3. Exit P/E Multiple: 33.3x
Zscaler currently trades at 33.3x forward earnings, a steep discount to its one-year average of 49.5x and three-year average of 127.8x.
We’re holding the multiple roughly flat rather than assuming a re-rating, since the stock has been volatile and investors likely want to see sustained ARR acceleration before paying a premium again.
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What Happens If Things Go Better or Worse?
Cybersecurity stocks tied to AI adoption can swing meaningfully depending on how fast enterprise spending materializes. Here’s how Zscaler stock might perform under different scenarios through July 2031:
- Low Case: If revenue growth settles at 13.1% and net income margins come in at 20.6%, investors could still see a 35.2% total return, or about 6.4% annually.
- Mid Case: With 14.6% growth and 22.2% margins, we expect a total return of 77.3%, or roughly 12.4% annually.
- High Case: If AI security adoption accelerates faster than expected, pushing revenue growth to 16.0% and margins to 23.5%, returns could reach 126.3% total, or about 18.2% annually.
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The spread between these outcomes largely depends on how quickly Zscaler’s security-for-AI and Agentic SecOps products scale, and whether the recent sales leadership transition and reorganization translate into sustained new-logo growth rather than short-term disruption.
How Much Upside Does Zscaler Stock Have From Here?
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- Operating Margins
- Exit P/E Multiple
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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!
