Zscaler, Inc. (ZS) — Company Research
Last Updated: 22 May 2026
Zscaler, Inc. (NASDAQ: ZS) is the leader in cloud-delivered Zero Trust security. Its Zero Trust Exchange — an in-line cloud platform distributed across more than 160 data centres — connects users, devices and applications securely without routing traffic back through a corporate network, replacing legacy VPNs and firewalls. Fiscal 2025 (year ended 31 July 2025) revenue grew 23% to $2.67 bn, Annual Recurring Revenue passed the $3 bn milestone (+22%), and free cash flow was $726.7 m (a 27% margin). Growth has actually re-accelerated in fiscal 2026: Q2 FY26 (ended 31 January 2026) revenue rose 26% to $815.8 m and ARR grew 25% to $3.36 bn, prompting management to raise full-year ARR guidance. Founder, Chairman and CEO Jay Chaudhry is positioning Zscaler around three pillars — AI Security, Zero Trust Everywhere and Data Security — bolstered by the acquisitions of Red Canary (agentic security operations) and the pending Symmetry Systems deal. Yet the shares trade roughly 50% below their 52-week high, a striking divergence from the underlying fundamentals. The next catalyst is the fiscal third-quarter 2026 earnings release on 26 May 2026. For live pricing see our live charts, upcoming releases on the economic calendar, and discussion on the ChartsView forum.
1. Company Snapshot
| Company | Zscaler, Inc. |
| Ticker | NASDAQ: ZS (Nasdaq-100) |
| Sector / Industry | Technology / Cloud Security (Zero Trust, SSE/SASE) |
| HQ | San Jose, California |
| Chairman, CEO & Founder | Jay Chaudhry (company founded 2007) |
| CFO | Kevin Rubin |
| Founded / IPO | 2007 / IPO March 2018 (Nasdaq) |
| Employees | 7,923 (as of 31 July 2025); ~8,700 by December 2025 |
| Fiscal year end | 31 July (FY2025 ended 31 July 2025) |
| Share price (21 May 2026) | $171.01 |
| 52-week range | $114.63 — $336.99 |
| Market cap (21 May 2026) | ~$27.5 bn (~160.8 m shares × $171.01) |
| Enterprise value | ~$25.7 bn (see Section 6) |
| FY2025 revenue | $2,673.1 m (+23% YoY) |
| FY2025 GAAP net loss | $(41.5) m ($(0.27) diluted EPS) |
| FY2025 non-GAAP net income | $534.8 m ($3.28 diluted EPS) |
| FY2025 ARR | $3,015 m (+22%); $3,359 m at Q2 FY26 (+25%) |
| FY2025 free cash flow | $726.7 m (~27% margin) |
| Dividend | None — Zscaler has never paid a dividend |
| Long-term debt | $1,700.7 m (0% / convertible senior notes due 2028, net carrying value) |
| Website | zscaler.com / ir.zscaler.com |
2. Bull Case vs Bear Case
Bull Case
- Growth re-accelerating: revenue growth rose to 26% in both Q1 and Q2 FY26 (from 21% in Q4 FY25), and ARR grew 25% to $3.36 bn, leading management to raise full-year ARR guidance — unusual for a company at this scale.
- Architectural moat: the in-line, multi-tenant Zero Trust Exchange across 160+ data centres is hard to replicate; competitors bolting cloud services onto legacy appliances struggle to match its scale and latency.
- AI-security tailwind: securing AI and agentic workflows is a natural extension of in-line traffic inspection; AI Guard, AI Guardrails and the Red Canary / Symmetry Systems acquisitions target the fastest-growing part of the market.
- Strong cash generation: FY2025 operating cash flow was $972.5 m (36% of revenue) and free cash flow $726.7 m (27%), with non-GAAP operating margin at an all-time high above 22%.
- Beaten-down valuation: the stock sits ~50% below its 52-week high while fundamentals strengthen, compressing the multiple to ~9× sales and ~38× free cash flow — low by Zscaler's historical standards.
Bear Case
- Persistent GAAP losses: despite scale, FY2025 produced a $(41.5) m GAAP net loss, driven by ~$685 m of stock-based compensation, so reported profitability remains negative.
- Severe price weakness: a fall from a 52-week high of $336.99 to ~$171 signals the market is repricing growth/security multiples or worrying about competition, regardless of the operating beats.
- Crowded, well-funded competition: Palo Alto's Prisma Access, Cloudflare, Cisco, Fortinet and Netskope all target SSE/SASE, and Microsoft bundles overlapping capabilities into its enterprise suites.
- Acquisition-led strategy: Red Canary, SPLXAI and Symmetry Systems expand the platform but add integration risk and lift ARR partly inorganically (Q2 FY26 ARR grew 21% excluding Red Canary's $114 m).
- Founder concentration: Jay Chaudhry retains a large ownership and voting stake, creating key-person and governance concentration risk.
3. What Does This Company Actually Do?
Zscaler secures how organisations connect to the internet and to their own applications. Instead of backhauling traffic to a data centre and inspecting it with hardware firewalls, Zscaler routes traffic through its cloud-native Zero Trust Exchange, where it is inspected and policy is enforced in-line, close to the user. The company is effectively a pure-subscription software business; there is no meaningful hardware revenue.
| Segment | Share of revenue | What it is |
|---|---|---|
| Subscription & support | ~100% of revenue | All revenue is cloud subscription to the Zero Trust Exchange, billed annually in advance, plus support — there is negligible hardware revenue |
| Zscaler Internet Access (ZIA) | Largest pillar | Cloud secure web gateway / SSE: inspects outbound internet and SaaS traffic in-line, blocks threats and enforces policy |
| Zscaler Private Access (ZPA) | Second pillar | Zero-trust access to private applications, replacing legacy VPNs |
| Emerging products | Fastest-growing | Digital Experience (ZDX), Data Protection/DLP, AI Security (AI Guard / AI Guardrails) and the Z-SOC / Red Canary agentic security-operations suite |
Zscaler reports revenue as a single subscription line rather than by product, but management frames the business around three growth pillars — AI Security, Zero Trust Everywhere, and Data Security. Annual Recurring Revenue ($3.36 bn at Q2 FY26) is the headline metric for tracking the recurring base.
4. The Business Model
How it makes money: Zscaler sells multi-year subscriptions to the Zero Trust Exchange, billed annually in advance. Customers typically land with ZIA or ZPA and expand into additional modules (data protection, ZDX, AI security), which lifts the dollar-based net retention rate and Annual Recurring Revenue. Calculated billings and remaining performance obligation (RPO of $5.9 bn at Q1 FY26) provide forward visibility, though billings can be lumpy quarter to quarter because of large-deal timing.
Unit economics: FY2025 gross profit was $2,054.9 m, a 76.9% gross margin typical of a scaled cloud platform. Non-GAAP operating margin reached 22% ($580.1 m), but the GAAP operating result was a $(128.5) m loss, with the difference driven mainly by ~$685 m of stock-based compensation and intangible amortisation.
The moat: the advantage is architecture and scale. Operating one of the world's largest in-line security clouds means Zscaler inspects enormous volumes of traffic daily, feeding threat intelligence back into the platform, while the in-line design is difficult for appliance-based vendors to copy. High switching costs, expanding modules and a Rule-of-78 growth-plus-margin profile underpin the model.
5. Financial Health
Four-year fiscal trend (years ended 31 July). Zscaler has never split its stock, so per-share figures are directly comparable across years.
| Fiscal year | Revenue ($m) | YoY % | GAAP EPS | Adjusted EPS | Dividend/share | Total debt (YE) |
|---|---|---|---|---|---|---|
| FY2022 | 1,090.9 | +62.4% | $(2.77) | $0.69 | None | $968.7 m |
| FY2023 | 1,617.0 | +48.1% | $(1.40) | $1.79 | None | $1,134.2 m |
| FY2024 | 2,167.8 | +34.1% | $(0.39) | $2.60 | None | $1,142.3 m |
| FY2025 | 2,673.1 | +23.3% | $(0.27) | $3.28 | None | $1,700.7 m |
"Total debt" is the year-end net carrying value of convertible senior notes. In July 2025 Zscaler issued $1,725 m of 2028 convertible notes and repaid the $1,150 m 2025 notes (cash plus 3.8 m new shares), which is why year-end debt steps up in FY2025. GAAP EPS remains negative because of heavy stock-based compensation; adjusted (non-GAAP) EPS has grown steadily.
Last six quarters plus the FY2025 total — revenue, adjusted (non-GAAP) EPS and GAAP EPS (most recent first):
| Quarter | Revenue | Adjusted EPS | GAAP EPS |
|---|---|---|---|
| Q2 FY2026 (31 Jan 2026) | $815.8 m (+26%) | $1.01 | $(0.21) |
| Q1 FY2026 (31 Oct 2025) | $788.1 m (+26%) | $0.96 | $(0.07) |
| Q4 FY2025 (31 Jul 2025) | $719.2 m (+21%) | $0.89 | $(0.11) |
| Q3 FY2025 (30 Apr 2025) | $678.0 m (+23%) | $0.84 | $(0.03) |
| Q2 FY2025 (31 Jan 2025) | $647.9 m (+23%) | $0.78 | $(0.05) |
| Q1 FY2025 (31 Oct 2024) | $628.0 m (+26%) | $0.77 | $(0.08) |
| FY2025 total | $2,673.1 m (+23%) | $3.28 | $(0.27) |
Cash flow (FY2025): net cash from operations was $972.5 m and capital expenditure (property, equipment and capitalised software) was $245.8 m, giving free cash flow of $726.7 m. Depreciation and amortisation was $104.4 m plus $16.8 m of acquired-intangible amortisation; stock-based compensation was $685.5 m.
Balance sheet (31 January 2026): cash, cash equivalents and short-term investments were $3,512.8 m against $1,700.7 m of convertible senior notes due 2028 (capped calls reduce dilution), leaving the company in a net-cash position. At 31 July 2025 cash and short-term investments stood at $3,572.4 m.
6. Valuation & Market Data
Raw metrics, May 2026. Not opinions on whether the stock is cheap or expensive.
| Metric | Value (as of 21 May 2026) |
|---|---|
| Share price | $171.01 |
| Market cap | ~$27.5 bn (~160.8 m shares × $171.01) |
| Enterprise value | ~$25.7 bn (market cap ~$27.5 bn + convertible notes ~$1.70 bn − cash & short-term investments ~$3.51 bn per 31 Jan 2026 balance sheet) |
| 52-week high | $336.99 |
| 52-week low | $114.63 |
| Trailing P/E (GAAP) | n/m — GAAP net loss (trailing-twelve-month GAAP EPS negative) |
| P/E (forward) | ~47× ($171.01 / FY2026 non-GAAP EPS guidance ~$3.66) |
| P/S (TTM) | ~9× (market cap ~$27.5 bn / ~$3.0 bn TTM revenue) |
| P/FCF | ~38× (market cap ~$27.5 bn / FY2025 FCF $726.7 m; FCF = operating CF $972.5 m − capex $245.8 m) |
| EV/EBITDA (TTM) | n/m on GAAP (GAAP operating loss of $(128.5) m in FY2025); ~37× on a stock-based-comp-adjusted basis (EV ~$25.7 bn / adj. EBITDA ~$0.70 bn = non-GAAP operating income $580.1 m + D&A $121.2 m) |
| Short interest (% of float) | ~7.5% (≈7.7 m shares, MarketBeat, Feb 2026 settlement) |
| Days to cover | ~4.1 (MarketBeat) |
| Dividend yield | 0% (no dividend) |
7. What Are They Building / What's Coming?
Zscaler's roadmap centres on extending Zero Trust into the AI era. The company has shipped AI Guard and AI Guardrails to let enterprises adopt public and private generative-AI apps safely, and is building out a unified, AI-driven Security Operations Centre. The Red Canary acquisition (closed in Q1 FY26) brought managed detection-and-response and agentic-AI threat management, which Zscaler is fusing with its Data Fabric for Security to offer one of the industry's most comprehensive SOC solutions. In May 2026 it announced the intended acquisition of Symmetry Systems, whose access graph maps how human and non-human identities, applications and data connect — the visibility needed to govern how AI agents interact at scale. Alongside these, Zscaler continues to expand Data Protection, Zscaler Cellular (Zero Trust for IoT/OT via SIM), and its three named growth pillars: AI Security, Zero Trust Everywhere, and Data Security. Management's FY2026 guidance calls for ARR of roughly $3.7 bn (+24%) and revenue of approximately $3.27–$3.28 bn.
8. Competitive Landscape
Zscaler competes in the Security Service Edge (SSE) and broader SASE markets, where Gartner has named it, Netskope, Palo Alto Networks and Fortinet among the leaders. Its closest direct rival is Palo Alto's Prisma Access; Cloudflare, Cisco (Umbrella / Secure Access) and Fortinet (FortiSASE) also compete, while Microsoft bundles overlapping capabilities into its enterprise suites. On revenue share, Zscaler, Cisco and Palo Alto are typically cited as the top three in SASE.
| Peer | Market cap (May 2026) | Key 2025 metric |
|---|---|---|
| Cisco (CSCO) | ~$466 bn | Networking giant; Umbrella / Secure Access; ~$56 bn revenue |
| Palo Alto Networks (PANW) | ~$198 bn | FY2025 revenue $9.22 bn; Prisma Access leads its SASE push |
| CrowdStrike (CRWD) | ~$113 bn | FY2026 revenue $4.81 bn; endpoint/SecOps adjacency |
| Fortinet (FTNT) | ~$92.6 bn | FortiSASE; TTM revenue ~$6.5 bn |
| Cloudflare (NET) | ~$89 bn | 2025 revenue ~$1.9 bn; Zero Trust / SASE challenger |
| Netskope (NTSK) | ~$4.6 bn | Gartner SSE leader; IPO'd 2025 |
9. Leadership and Ownership
Executive leadership:
- Jay Chaudhry — founder, Chairman and CEO since 2007; serial cybersecurity entrepreneur and the architect of the Zero Trust Exchange. He retains a large ownership stake.
- Kevin Rubin — Chief Financial Officer; oversees the company's transition to durable profitability and free cash flow.
Ownership: founder Jay Chaudhry and affiliated entities hold a substantial stake, with the remainder dominated by institutions (Vanguard, BlackRock and other large managers). The founder concentration is both a sign of alignment and a key-person risk.
Recent insider Form 4 transactions:
| Name | Date | Type | Shares | Price | Value | Plan Type |
|---|---|---|---|---|---|---|
| Jay Chaudhry (CEO) | 16 Dec 2025 | Sell | 2,843 | ~$231 | ~$656k | RSU-related / tax |
| Jay Chaudhry (CEO) | 16 Sep 2025 | Sell | 2,865 | ~$280.70 | ~$804k | Tax withholding on RSU vesting |
Recent insider activity has been limited to small, routine sales tied to restricted-stock vesting and tax withholding rather than discretionary selling of large blocks.
10. Risks and Challenges
- GAAP unprofitability (Financial): FY2025 produced a $(41.5) m GAAP net loss; the gap to non-GAAP profit is driven by ~$685 m of recurring stock-based compensation.
- Share-price weakness (Market): the stock trades ~50% below its 52-week high of $336.99, indicating the market is repricing the shares despite operating beats.
- Competition (Competitive): Palo Alto (Prisma Access), Cloudflare, Cisco, Fortinet and Netskope all contest SSE/SASE, and Microsoft bundles overlapping security into its suites.
- Acquisition integration (Operational): Red Canary, SPLXAI and the pending Symmetry Systems deals add capability but also integration risk, and lift ARR partly inorganically.
- Founder concentration (Governance): Jay Chaudhry's large ownership and voting position creates key-person and governance-concentration risk.
- Billings lumpiness (Macro): large enterprise deals can shift between quarters, making calculated billings volatile and sensitive to IT-budget cycles.
11. Recent Developments
- 02 Sep 2025 — FY2025 results. Revenue grew 23% to $2.67 bn, ARR passed $3 bn (+22%), and Zscaler refinanced its debt by issuing $1,725 m of 2028 convertible notes and repaying the 2025 notes.
- 25 Nov 2025 — Q1 FY2026 results. Revenue grew 26% to $788.1 m, ARR rose 26% to $3,204 m, RPO accelerated to $5.9 bn (+35%) and non-GAAP EPS was $0.96; the SPLXAI AI-security acquisition closed in the quarter.
- 26 Feb 2026 — Q2 FY2026 results. Revenue grew 26% to $815.8 m, ARR rose 25% to $3,359 m (21% excluding Red Canary), non-GAAP operating margin hit an all-time high above 22%, and management raised full-year ARR guidance to 24%; non-GAAP EPS was $1.01.
- May 2026 — Symmetry Systems acquisition announced. Zscaler agreed to acquire Symmetry Systems, a pioneer in identity mapping and data access for AI security, to strengthen governance of how AI agents touch data.
12. Key Dates to Watch
- 26 May 2026 — Fiscal third-quarter 2026 earnings (quarter ended 30 April 2026), released after the US market close.
- Expected Sep 2026 — Fiscal fourth-quarter and full-year 2026 results, with initial FY2027 guidance.
- Expected Dec 2026 — Annual meeting of stockholders.
- Expected 2026 — Completion of the Symmetry Systems acquisition and continued Red Canary integration.
Disclaimer: This research is produced by ChartsView for educational and informational purposes only. It does not constitute financial advice or a recommendation to buy or sell any security. All information is sourced from publicly available company filings, press releases, and official data. ChartsView does not use analyst opinions or third-party ratings. Always conduct your own due diligence and consider your personal financial situation before making investment decisions. Past performance is not indicative of future results.
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13. Thesis Verdict
The central thesis. Zscaler is the leader in cloud-delivered Zero Trust security, routing enterprise traffic through its in-line Zero Trust Exchange across 160+ data centres as a pure-subscription business. Fiscal 2025 revenue grew 23% to $2.67bn, Annual Recurring Revenue passed $3bn (+22%) and free cash flow was $726.7m (27% margin); growth re-accelerated to 26% in Q1 and Q2 FY26 with ARR up 25% to $3.36bn, prompting raised guidance. The structural driver is securing AI and agentic workflows, reinforced by the Red Canary and pending Symmetry Systems acquisitions.
What would confirm or break it. An in-line or better Q3 FY26 print on 26 May 2026, continued ARR re-acceleration and a credible path to GAAP profitability would confirm the thesis. It would be invalidated by sustained GAAP losses driven by heavy stock-based compensation, further share-price weakness reflecting a multiple de-rating, or competitive pressure from Palo Alto, Cloudflare, Cisco, Fortinet and Microsoft.
Watchpoints
- ConfirmsQ3 FY2026 earnings (4 days) landing in line with or above management guidance.
- ConfirmsEvidence supporting the "Growth re-accelerating:" thesis continuing to build across subsequent filings.
- InvalidatesMaterialisation of the "GAAP unprofitability (Financial):" risk, or any disclosure that fundamentally alters the capital-return or growth profile stated by management.
Diagnostic grid
Generated by ChartsView research tooling. Thesis strength measures how well the evidence in this report supports the company's stated thesis — it is NOT a buy/sell rating or price target. ChartsView is not authorised by the FCA to provide regulated investment advice. Generated 22 May 2026.