ZS AI Stock Analysis – Buy, Hold, or Avoid?
Zscaler, Inc. (ZS)
Zscaler (ZS) offers strong long-term growth potential in cloud security, but faces near-term technical and valuation headwinds. While fundamentals and sentiment support the long-term case, current technicals and premium valuation suggest caution for short- and medium-term traders. Investors should align their approach with their risk tolerance and time horizon.
Fundamentals
Zscaler, Inc. (ZS) stands as a leading cloud security company, operating in a rapidly expanding field but facing near-term headwinds. The company has delivered robust revenue growth driven by the secular shift to cloud security, but persistent net losses, rich valuations, and increasing market volatility challenge its investment appeal. Recent market weakness in high-multiple technology stocks underscores potential downside risk despite solid long-term business fundamentals.
Financial Highlights
- Revenue
- Net Income
- Net Margin (%)
Revenue
25.91% YoY
Q4 2025
Net Income
-344.23% YoY
Q4 2025
Net Margin
Q4 2025
Growth Metrics
Revenue Growth YoY
Latest Quarter: Q4 2025
Net Income Growth YoY
Latest Quarter: Q4 2025
Revenue Per Share Growth YoY
Latest Quarter: Q4 2025
EPS Growth YoY
Latest Quarter: Q4 2025
Book Value Per Share Growth YoY
Latest Quarter: Q4 2025
| Q4 2025 | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | |
|---|---|---|---|---|---|---|---|---|
| Revenue | 815.8M | 788.1M | 719.2M | 678.0M | 647.9M | 628.0M | 592.9M | 553.2M |
| Revenue Growth YoY | +25.91% | +25.50% | +21.31% | +22.57% | +23.41% | +26.42% | +30.30% | +32.09% |
| Net Income | -34.3M | -11.6M | -17.6M | -4.1M | -7.7M | -12.1M | -14.9M | 19.1M |
| Net Income Growth YoY | -344.23% | +3.62% | -18.15% | -121.57% | +72.87% | +64.01% | +51.50% | +141.53% |
| EPS | -$0.21 | -$0.07 | -$0.11 | -$0.03 | -$0.05 | -$0.08 | -$0.10 | $0.13 |
| EPS Growth YoY | -317.50% | +11.39% | -10.55% | -120.46% | +73.53% | +65.65% | +52.62% | +140.63% |
Profitability Metrics
Gross Margin
TTM
Operating Margin
TTM
Net Margin
TTM
Return on Equity
TTM
Return on Assets
TTM
| Q4 2025 | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | |
|---|---|---|---|---|---|---|---|---|
| Gross Margin | 76.55% | 76.56% | 76.14% | 77.01% | 77.09% | 77.34% | 77.94% | 78.47% |
| Operating Margin | -6.35% | -4.61% | -4.48% | -3.31% | -5.71% | -5.08% | -4.33% | -0.80% |
| Net Margin | -4.21% | -1.47% | -2.44% | -0.61% | -1.19% | -1.92% | -2.51% | 3.46% |
| Return on Equity (ROE) | -1.56% | -0.59% | -0.98% | -0.23% | -0.48% | -0.84% | -1.17% | 1.75% |
| Return on Assets (ROA) | -0.62% | -0.22% | -0.30% | -0.08% | -0.17% | -0.28% | -0.35% | 0.52% |
Technical Analysis
ZS is currently in a weak and unclear trend environment, with price positioned between its major moving averages and an RSI that shows neutral momentum. The stock is entrenched in a declining phase according to stage analysis, suggesting downside pressure dominates at present. Traders should exercise caution as the technical indicators do not present a clear bullish setup and the overall momentum remains subdued.
No extreme reading
Mixed signals
Range-bound market
Watching for cross
Key Technical Values
Price with Moving Averages
50-day, 150-day and 200-day simple moving averages
Relative Strength Index
Momentum oscillator measuring speed and magnitude of price changes
RSI (14)
Earnings
Zscaler, Inc. (ZS) stands as a leading cloud security company, operating in a rapidly expanding field but facing near-term headwinds. The company has delivered robust revenue growth driven by the secular shift to cloud security, but persistent net losses, rich valuations, and increasing market volatility challenge its investment appeal. Recent market weakness in high-multiple technology stocks underscores potential downside risk despite solid long-term business fundamentals.
Latest Earnings
Q4 2025 Earnings (Jan 31, 2026)
Earnings Per Share (EPS)
Actual
$1.01
Estimated
$0.89
Surprise
+$0.12
Surprise %
+12.98%
Revenue
Actual
$815.75M
Estimated
$798.33M
Surprise
+$17.42M
Surprise %
+2.18%
Historical Earnings
| Q4 2025 | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | |
|---|---|---|---|---|---|---|---|---|
| Earnings Per Share | ||||||||
| EPS (Actual) | $1.01 | $0.96 | $0.89 | $0.84 | $0.78 | $0.77 | $0.88 | $0.88 |
| EPS (Estimated) | $0.89 | $0.86 | $0.80 | $0.75 | $0.69 | $0.63 | $0.70 | $0.66 |
| EPS Surprise | +$0.12 | +$0.10 | +$0.09 | +$0.09 | +$0.09 | +$0.14 | +$0.18 | +$0.22 |
| % Diff | +13.0% | +12.1% | +11.2% | +11.7% | +13.5% | +22.2% | +25.0% | +33.9% |
| Revenue | ||||||||
| Revenue (Actual) | $815.75M | $788.11M | $719.23M | $678.03M | $647.9M | $627.96M | $592.87M | $553.2M |
| Revenue (Estimated) | $798.33M | $773.28M | $706.94M | $666.46M | $634.38M | $605.51M | $567.46M | $536.12M |
| Revenue Surprise | +$17.42M | +$14.83M | +$12.28M | +$11.58M | +$13.52M | +$22.44M | +$25.4M | +$17.08M |
| % Diff | +2.2% | +1.9% | +1.7% | +1.7% | +2.1% | +3.7% | +4.5% | +3.2% |
Valuation
Zscaler's valuation metrics reveal a high premium consistent with its industry-leading growth but reflect challenges in profitability and earnings stability. Despite a mixed technical outlook, the stock benefits from strong analyst support with price targets indicating significant upside potential. However, the high multiples suggest that current pricing relies heavily on sustained growth and execution risks.
Valuation Metrics
Price to Earnings
TTM
Price to Sales
TTM
Price to Book
TTM
Enterprise Value to EBITDA
TTM
Enterprise Value to Revenue
TTM
| Q4 2025 | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | |
|---|---|---|---|---|---|---|---|---|
| Price to Earnings | -232.70 | -1130.38 | -635.58 | -2123.38 | -1007.65 | -572.17 | -450.80 | 339.77 |
| Price to Sales | 39.15 | 66.64 | 62.13 | 51.67 | 48.05 | 43.92 | 45.25 | 46.98 |
| Price to Book | 14.54 | 26.49 | 24.84 | 19.41 | 19.37 | 19.31 | 21.06 | 23.78 |
| Enterprise Value to EBITDA | 1124.87 | 1513.07 | 1270.87 | 879.11 | 2114.54 | 1124.31 | 1156.99 | 586.13 |
| Enterprise Value to Revenue | 39.96 | 67.27 | 61.31 | 50.55 | 47.25 | 43.42 | 44.94 | 46.94 |
Sentiment & Analyst Ratings
Zscaler (ZS) sentiment is cautiously optimistic amid ongoing earnings strength and strategic wins like the Google Cloud Partner award. Analysts show a moderate buy consensus but recent price target reductions and share weakness reflect some market uncertainty. Retail investor sentiment remains very positive, buoyed by strong quarterly results and growth potential in the cybersecurity AI space.
Analyst Recommendations
Risk Assessment
Zscaler demonstrates a solid balance sheet with healthy liquidity and moderate leverage, supported by strong recurring revenue growth. However, it faces elevated business risks due to intensifying competition in cybersecurity, execution challenges amid rapid AI integration, and macroeconomic uncertainties. While liquidity metrics are stable and improving, concerns around execution and market acceptance of new AI-driven products add caution for investors.
Liquidity & Solvency
Current Ratio
Latest Quarter: Q4 2025
Quick Ratio
Latest Quarter: Q4 2025
Debt-to-Equity
Latest Quarter: Q4 2025
Debt-to-Assets
Latest Quarter: Q4 2025
| Q4 2025 | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | |
|---|---|---|---|---|---|---|---|---|
| Liquidity Metrics | ||||||||
| Current Ratio | 1.90 | 1.82 | 2.01 | 1.24 | 1.20 | 1.15 | 1.09 | 1.75 |
| Quick Ratio | 1.90 | 1.82 | 2.01 | 1.24 | 1.20 | 1.15 | 1.09 | 1.75 |
| Solvency Metrics | ||||||||
| Debt-to-Equity | 0.85 | 0.93 | 1.00 | 0.68 | 0.77 | 0.87 | 0.97 | 1.13 |
| Debt-to-Assets | 0.28 | 0.28 | 0.28 | 0.23 | 0.25 | 0.26 | 0.26 | 0.29 |
Liquidity Assessment
Current Ratio: 1.90(Strong)
Quick Ratio: 1.90(Strong)
The company has strong liquidity with sufficient short-term assets to cover liabilities.
Solvency Assessment
Debt-to-Equity: 0.85(Moderate)
Debt-to-Assets: 0.28(Low)
The company maintains a balanced capital structure with manageable debt levels.
Frequently Asked Questions about ZS
AI Answers: Common Questions About ZS
Get AI-powered answers to the questions investors ask most about Zscaler, Inc.
ZS is not an ideal buy for short-term traders due to weak technicals and a high valuation (P/E -353.79, price at $152.13, well below the $336.99 52-week high). However, long-term investors seeking exposure to cloud security growth may consider accumulating on dips, as recurring revenue and industry leadership provide a solid foundation.
If you are a short-term trader, consider reducing exposure due to the current Stage 4 decline and lack of bullish technical signals. Long-term holders can maintain positions if comfortable with volatility, as fundamentals remain strong and sentiment is supportive.
The biggest risks are ongoing net losses (negative EPS, P/E -353.79), high valuation multiples (P/S, EV/EBITDA far above sector), and execution risk in a competitive, rapidly evolving AI-driven cybersecurity market. Moderate leverage (debt/equity ~0.85) and sector volatility add to the risk profile.
Analyst price targets average around $260, while technical resistance sits at $213–$230 (150/200-day SMAs); support is near $115 (52-week low). Near-term upside is limited unless the stock breaks above $145–$150 with volume, while downside risk remains toward $115 if weakness persists.
ZS is currently overvalued with a negative P/E (-353.79), high price-to-sales, and EV/EBITDA multiples well above peers. The premium is justified only if high growth and margin expansion continue; any slowdown could lead to a sharp re-rating.
Fundamentally, ZS is strong on growth (30%+ YoY revenue), gross margins (75–80%), and recurring revenue, but lacks profitability and has negative operating margins. The balance sheet is solid with a current ratio near 1.9 and moderate leverage.
Technical analysis is bearish: the stock is in a Stage 4 decline, with a death cross (50-day SMA below 200-day SMA), neutral RSI (~61), and no clear breakout. Key support is at $115, resistance at $213–$230; wait for a confirmed reversal before new entries.
Key catalysts include upcoming earnings (Q2 FY2026), product launches (especially AI-driven security modules), and major partnership announcements. Macro factors like sector re-rating, interest rates, and cybersecurity spending trends also matter.
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