Zscaler (ZS) Stock Forecast & Price Target

Zscaler demonstrated strong financial performance with a 26% year-over-year revenue increase to $788.1 million, surpassing management's guidance and indicating robust market demand for its cloud-native cybersecurity solutions. The firm's Annual Recurring Revenue (ARR) is projected to grow between $3.698 billion and $3.718 billion, reflecting a year-over-year increase of 22.7% to 23.3%, and highlighting Zscaler's capability to expand its sales capacity while enhancing its product offerings. Additionally, the company reported a 34.5% year-over-year increase in Remaining Performance Obligations (RPO) for the fifth consecutive quarter, suggesting sustained long-term revenue visibility and customer retention.

Zscaler's stock is facing a negative outlook primarily due to disappointing guidance for fiscal year 2026, with non-GAAP operating income projections falling below consensus estimates and a lack of detailed commentary on growth metrics, particularly with respect to Red Canary. Additionally, the company's non-GAAP gross margin of 79.9% missed the market expectation of 80.1%, reflecting a strategic shift toward prioritizing product speed to market over immediate margin optimization, which could impact long-term profitability. Moreover, concerns regarding higher-than-expected sales force attrition may further disrupt operations, coupled with historical trends suggesting a concerning average 20% decline in billings during the fiscal third quarters, undermining confidence in Zscaler's growth trajectory.