Zscaler Stock Forecast 2025: Is This Cybersecurity Giant a Buy or Bust?

Zscaler, Inc. has emerged as a powerhouse in the cloud security space, riding the wave of zero trust and SASE adoption. With its stock surging nearly 100% from last year’s lows, investors are buzzing about its growth potential. But with a lofty valuation and market volatility looming, is now the time to dive in? This article breaks down Zscaler’s operations, financials, and stock forecast to guide your investment decisions.

Operations

Zscaler, Inc. is a leading cloud security company headquartered in San Jose, California, specializing in delivering zero trust security solutions through its Zero Trust Exchange platform. The company provides cloud-based services such as Zscaler Internet Access (ZIA) for secure internet and SaaS access, Zscaler Private Access (ZPA) for secure application access, and emerging solutions like Secure Access Service Edge (SASE) and software-defined WAN (SD-WAN).

Zscaler operates globally, serving over 7,700 customers, including large enterprises and government entities, with a focus on replacing traditional VPNs and firewalls with a cloud-native, AI-driven security architecture.

Its platform leverages over 150 data centers worldwide to ensure low-latency, scalable, and secure connectivity, processing over 400 billion transactions daily. Zscaler’s business model emphasizes recurring subscription revenue, with a focus on upselling additional services to existing clients, driving high customer retention and expansion.

Financial Performance and Ratios

Zscaler has demonstrated robust financial growth, particularly in its fiscal Q3 2025 (ended April 30, 2025). Key financial highlights include:

• Revenue: Q3 2025 revenue grew 20% year-over-year (YoY) to approximately $553 million, surpassing analyst expectations. For the full fiscal year 2025, Zscaler raised its revenue guidance to around $2.14 billion, implying 19% growth.
• Profitability: Net income rose 21% YoY, with adjusted operating margins reaching 20% in fiscal 2024, reflecting improving operational efficiency despite ongoing investments. The company is nearing positive GAAP profitability, though it has not yet achieved it.
• Gross Margins: Consistently high at 77.86% over the last twelve months, showcasing strong pricing power and cost efficiency in its cloud-based model.
• Free Cash Flow (FCF): Zscaler’s FCF margin was 22% in Q2 2025, with strong cash flow generation supported by a $2.4 billion cash reserve against $1.1 billion in debt, indicating a healthy balance sheet.
• Net Retention Rate (NRR): Reported at 115% in Q2 2025, reflecting strong customer expansion and retention.
• Valuation Ratios: As of February 2025, Zscaler trades at a forward P/E ratio of 66.92 and a PEG ratio of 4.96, significantly higher than the industry average forward P/E of 23.1, indicating a premium valuation driven by growth expectations.

Despite strong revenue growth, Zscaler’s heavy investments in sales and marketing (S&M) and research and development (R&D)—with non-GAAP S&M expenses up 15.6% and R&D up 31.6% YoY in Q1 2025—have pressured short-term profitability. However, these investments are expected to fuel long-term growth in the expanding SASE and zero trust markets.

Zscaler Inc. Stock Price Performance

Zscaler’s stock (NASDAQ: ZS) has shown resilience despite market volatility. As of February 4, 2025, ZS closed at $203.73, up 1.87% for the day, outperforming the broader market. Over the past month, it declined 7.5%, compared to an 11.4% loss in the Zacks Security industry and a 12.2% drop in the S&P 500.

In Q3 2025, the stock rose over 8% following strong earnings, driven by raised guidance and analyst optimism. Analysts have raised price targets, with Scotiabank increasing to $360 (from $310) and UBS also hiking its target, reflecting confidence in Zscaler’s leadership in SASE and zero trust. The stock is seen as testing resistance levels, with potential for a breakout if it sustains momentum.

Competitive Landscape

Zscaler operates in a highly competitive cybersecurity market, facing rivals such as:

• Palo Alto Networks: A leader in network security with a broad portfolio, including firewalls and SASE solutions, competing directly with Zscaler’s cloud-native offerings.
• CrowdStrike: Focused on endpoint security and threat intelligence, overlapping with Zscaler in AI-driven security solutions.
• Fortinet: Offers hardware-based and cloud security solutions, challenging Zscaler in the SASE and SD-WAN markets.
• Cisco Systems: A legacy player with a growing cloud security presence, competing through its Secure Access portfolio.
• Emerging Players: Smaller vendors and startups offering specialized zero trust or AI-based security solutions pose potential disruption risks.

Zscaler’s competitive edge lies in its cloud-native, zero trust architecture, which eliminates the need for traditional hardware-based solutions, offering scalability and cost efficiency. Its leadership in SASE and partnerships with companies like Red Canary bolster its market position. However, continuous innovation is critical to fend off well-resourced competitors and maintain its premium valuation.

Investment Insight

Although Zscaler has historically operated at a loss, this does not prevent us from assessing its growth potential, even if we cannot precisely determine a price target. Contrary to our typical practice of avoiding unprofitable companies, Zscaler is a compelling exception.

This relatively young company has already established strong and rapidly growing Net operating cash flows, positioning itself as a reliable cash generator. Its impressive Gross margin of 78% underscores its market leadership and operational strength.

Combined with decreasing Administrative and General expenses relative to Gross profit, Zscaler is poised to achieve profitability soon. Market participants share this optimism, as evidenced by the stock’s rapidly rising price.

According to the Investment Scoreboard, Zscaler earns a score of 59, signaling its potential as an investment opportunity, though it remains a high-risk proposition. Investors should exercise caution but recognize the significant upside potential driven by Zscaler’s trajectory toward profitability and its dominant position in the cybersecurity market.

Zscaler Inc. Stock Forecast**

2025–2029 Price Targets: 

Year	MIN Target	MAX Target
2025	–	–
2026	–	–
2027	–	–
2028	–	–
2029	–	–

When to buy and Investment Tips

At the time of writing, the stock price had surged nearly 100% from its local lows reached in September of the previous year. Purchasing now further increases the already elevated risk. Therefore, we do not recommend buying the stock at its current local highs. A correction is highly likely, and any position should be initiated cautiously with a relatively small allocation.

Dividend Policy and Buyback Policy

Zscaler does not pay a dividend, consistent with its growth-oriented strategy, prioritizing reinvestment in R&D, sales, and market expansion over shareholder payouts. The company has not announced any stock buyback programs, focusing instead on organic growth and strategic investments to capture market share in the cybersecurity sector. This approach aligns with its high-growth profile but may disappoint income-focused investors.

Latest News and Impact on Company Value

1. Strong Q3 2025 Earnings (May 2025): Zscaler exceeded revenue and earnings expectations, with 20% YoY revenue growth and a raised full-year outlook, boosting its stock by over 8%. Analysts praised Zscaler’s ability to perform in a tough macro environment, with Jefferies noting it as “the first cyber company to execute well through April.” This reinforces investor confidence in Zscaler’s growth trajectory and supports its high valuation.
2. CFO Transition: The announced retirement of CFO Remo Canessa, effective post-Q3 2025, raised some investor concerns due to his instrumental role in Zscaler’s financial strategy. However, the appointment of Kevin Kluge as the new CFO, with his prior experience at Zscaler, mitigates risks. Investors will monitor the transition closely for continuity in financial discipline.
3. AI and SASE Market Expansion: CEO Jay Chaudhry highlighted growing demand for AI-driven security solutions, positioning Zscaler to capitalize on increasing cyber threats as AI models evolve. This trend enhances Zscaler’s long-term growth potential, particularly in emerging markets like SD-WAN and managed detection and response (MDR).
4. Analyst Upgrades: Recent upgrades from Scotiabank ($360 price target) and UBS reflect optimism about Zscaler’s strategic positioning and execution. These upgrades signal to investors that Zscaler remains a top pick in the cybersecurity sector, potentially driving further stock appreciation.
5. Macro and Tariff Concerns: While Zscaler is less directly impacted by tariffs compared to hardware-focused competitors, broader market volatility from trade policy uncertainty (e.g., Trump’s “Liberation Day” tariffs) could pressure tech valuations. Zscaler’s cloud-based model and global customer base provide some insulation, but investor sentiment may remain cautious.

Impact on Company Value for Investors

The lack of dividends and buybacks may deter income investors, but the company’s reinvestment strategy supports long-term value creation. The CFO transition introduces short-term uncertainty, but Zscaler’s strategic focus on AI and cloud security, coupled with analyst optimism, positions it for continued outperformance.

However, investors should remain mindful of competitive pressures and potential macroeconomic headwinds, such as tariffs or economic slowdowns, which could impact growth stocks broadly. Analysts’ buy ratings (e.g., TD Cowen at $270, Robert W. Baird at $250) and a perceived 36% undervaluation based on discounted cash flow models suggest upside potential, with a fair value estimate around $309.

Conclusion

Zscaler’s leadership in cloud security, robust revenue growth, and AI-driven innovation make it a compelling long-term investment. However, its high valuation and recent stock surge signal caution. Waiting for a price correction and entering with a modest position could balance risk and reward, positioning investors to capitalize on Zscaler’s dominance in the cybersecurity market.

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*Investment analysis involves scrutinizing over 50 different criteria to assess a company's ability to generate shareholder value. This comprehensive approach includes tracking revenue, profit, equity dynamics, dividend payments, cash flow, debt and financial management, stock price trends, bankruptcy risk, F-Score, and more. These metrics are consolidated into a straightforward Investment Scoreboard, which effectively helps predict future stock price movements.
**Use the price forecast to manage the risk of your investments.