Track market-moving stories before they get noisy

Key Takeaways Zscaler had more than 700 Zero Trust Everywhere customers, up from over 550 a quarter earlier.ARR rose 25% to $3.5 billion, while remaining performance obligations reached about $6.5 billion at Q3 end.Customers are expanding deployments across user, cloud, branch and data security solutions. Zscaler Inc.’s (ZS - Free Report) Zero Trust Everywhere strategy is becoming an important growth driver as enterprises look to secure users, cloud workloads and branch locations through a single platform. Instead of relying on multiple security products, customers are increasingly adopting Zscaler’s integrated Zero Trust architecture, creating more opportunities for the company to expand revenues from existing accounts.

The adoption trend is gaining momentum. At the end of the third quarter of fiscal 2026, Zscaler had more than 700 Zero Trust Everywhere enterprise customers, up from more than 550 in the previous quarter. These customers use the company’s Zero Trust Users, Zero Trust Cloud and Zero Trust Branch solutions together, reflecting broader platform adoption across organizations.

This strategy is also encouraging larger customer commitments. During the quarter, Zscaler reported annual recurring revenues (ARR) of more than $3.5 billion, up 25% year over year, while remaining performance obligations increased roughly 30% to about $6.5 billion. The company also closed a record number of new annual contract value deals worth more than $1 million during the third quarter.

Customer success stories highlight the opportunity. A healthcare technology company initially sought user security but later expanded its deployment to include Zero Trust Cloud, Zero Trust Branch and multiple data security modules. Existing customers are also increasing spending as they broaden platform adoption.

As cyber threats become more sophisticated and AI workloads continue to grow, enterprises are looking for unified security platforms rather than standalone products. With its expanding Zero Trust Everywhere customer base and strong cross-selling opportunities, Zscaler appears well-positioned to drive sustained revenue growth in the coming years. The Zacks Consensus Estimate for fiscal 2026 and 2027 revenues indicates year-over-year growth of 24.6% and 17.2%, respectively.

How Do Zscaler’s Rivals Compare in Platform Adoption?Cybersecurity companies pursuing a similar platform expansion strategy are Palo Alto Networks, Inc. (PANW - Free Report) and Fortinet, Inc. (FTNT - Free Report) .

Palo Alto Networks has been driving its platformization strategy by encouraging enterprises to replace multiple point products with its integrated security platform. In the third quarter of fiscal 2026, the company generated more than $3 billion in revenues, up 31% year over year, while next-generation security ARR climbed 60% to $8.13 billion. Its broad portfolio across network security, cloud security and security operations enables customers to consolidate vendors, increasing cross-selling opportunities and recurring revenues.

Fortinet is also expanding its unified cybersecurity platform through Secure Networking, Unified SASE and Security Operations solutions. In the first quarter of 2026, the company reported revenues of approximately $1.85 billion, up 20% year over year, while Unified SASE billings rose 23%. Fortinet continues to benefit as enterprises modernize branch security and adopt integrated security architectures.

Zscaler’s Price Performance, Valuation & EstimatesZS shares have plunged 33.3% year to date against the Zacks Security industry’s surge of 73.5%.

Zscaler YTD Price Return Performance
Image Source: Zacks Investment Research

From a valuation standpoint, ZS trades at a forward price-to-sales ratio of 6.24, significantly below the industry’s average of 19.35.

Zscaler Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research

The Zacks Consensus Estimate for Zscaler’s fiscal 2026 and 2027 earnings implies a year-over-year increase of 26.2% and 10.6%, respectively. Estimates for fiscal 2026 and 2027 have been revised upward over the past 60 days.

Image Source: Zacks Investment Research

Zscaler currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Takeaways Zscaler expects fiscal 2026 capex to reach high single digits of revenues as hardware costs rise.Zscaler raised branch appliance prices and is buying equipment early to lock in current prices.Zscaler revenues rose 25% to $850M in fiscal Q3, with annual recurring revenues above $3.5B. Zscaler, Inc. (ZS - Free Report) is facing rising infrastructure costs as demand for artificial intelligence (AI)-powered cybersecurity services increases. Higher prices for memory, storage and processors are expected to raise spending on data center equipment and Zero Trust Branch appliances. However, the company believes its growing scale, pricing actions and operational discipline can help offset these cost pressures over time.

Management expects capital expenditures to reach the high single digits as a percentage of revenues in fiscal 2026 compared with its earlier expectation of the mid-single digits. It also anticipates fiscal 2027 capital expenditures as a percentage of revenues to rise by as much as 200 basis points from the 2026 level because of higher hardware costs. To reduce the impact, Zscaler has already increased prices for its branch appliances and is purchasing equipment early to lock in current prices.

Despite these near-term challenges, the company continues to deliver strong financial performance. In the third quarter of fiscal 2026, revenues increased 25% year over year to $850 million, while annual recurring revenues exceeded $3.5 billion. Remaining performance obligations reached roughly $6.5 billion, providing strong visibility into future revenues.

Profitability also remains healthy. Zscaler’s third-quarter non-GAAP gross margin expanded 40 basis points year over year to 80.7%, while non-GAAP operating margin increased by 140 basis points to 23%. Year to date, the company generated a free cash flow margin of 29%, highlighting its ability to fund growth while maintaining financial discipline.

As its customer base expands and long-term contracts grow, Zscaler's larger revenue scale should help absorb higher infrastructure costs. Continued demand for AI security and Zero Trust solutions could further strengthen its operating leverage over the long run. The Zacks Consensus Estimate for fiscal 2026 is currently pegged at $3.33 billion, indicating a year-over-year increase of approximately 25%.

How Are ZS’ Rivals Managing Rising Infrastructure Costs?Zscaler’s major competitors, including Palo Alto Networks, Inc. (PANW - Free Report) and CrowdStrike Holdings, Inc. (CRWD - Free Report) , are also investing heavily in AI infrastructure to strengthen their cybersecurity capabilities.

Palo Alto Networks is investing heavily in AI, cloud security and platform integration while using its large scale to protect margins. In the third quarter of fiscal 2026, revenues increased 31% year over year to $3 billion, and next-generation security ARR surpassed $8 billion. Palo Alto Networks continues to consolidate multiple security products into one platform, helping spread infrastructure costs across a larger customer base and supporting long-term profitability.

CrowdStrike is also expanding AI-powered capabilities while keeping profitability strong. In the first quarter of fiscal 2027, revenues rose 26% year over year to approximately $1.39 billion, while annual recurring revenues reached about $5.51 billion, up 24%. Its cloud-native Falcon platform reduces the need for on-premise hardware, allowing the company to scale efficiently even as AI workloads increase.

Zscaler’s Price Performance, Valuation & EstimatesZS shares have plunged 33.5% year to date against the Zacks Security industry’s surge of 72.3%.

Zscaler YTD Price Return Performance
Image Source: Zacks Investment Research

From a valuation standpoint, ZS trades at a forward price-to-sales ratio of 6.25, significantly below the industry’s average of 19.33.

Zscaler Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research

The Zacks Consensus Estimate for Zscaler’s fiscal 2026 and 2027 earnings implies year-over-year increases of 26.2% and 10.6%, respectively. Estimates for fiscal 2026 and 2027 have been revised upward over the past 60 days.

Image Source: Zacks Investment Research

Zscaler currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A month has gone by since the last earnings report for Zscaler (ZS - Free Report) . Shares have added about 0.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Zscaler due for a pullback? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for Zscaler, Inc. before we dive into how investors and analysts have reacted as of late.

Zscaler Q3 Earnings Surpass Estimates, Revenues Increase Y/YZscaler posted third-quarter fiscal 2026 non-GAAP earnings of $1.08 per share, up 28.6% year over year. The figure beat the Zacks Consensus Estimate of $1.00 by 8%.

Zscaler’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 8.4%.

Revenues rose 25% year over year to $850.4 million, topping the Zacks Consensus Estimate of $834 million by 1.88% and exceeding management’s guidance of $834-$836 million. The quarter reflected continued demand for the company’s Zero Trust platform, supported by expanding customer commitments.

Zscaler’s Q3 in DetailZscaler’s third-quarter momentum was broad-based geographically. The Americas represented 56% of revenues in the quarter, up approximately 31% year over year, and delivered the strongest growth rate among regions. EMEA accounted for 28% of revenues, up approximately 16%, while Asia Pacific and Japan contributed 16%, rising about 23%.

The company also noted that roughly 46% of its remaining performance obligation was classified as current, underscoring near-term visibility tied to committed, non-cancelable future revenues.

Remaining Performance Obligations (“RPO”), representing Zscaler’s committed non-cancelable future revenues, were $6.5 billion as of April 30, which increased 30% year over year. Current RPO accounted for 46% of the total revenues.

Enterprise traction continued to reflect in the customer mix. Zscaler ended the quarter with 748 customers generating more than $1 million of ARR, an 18% year-over-year increase. Customers generating more than $100,000 of ARR reached 4,003, up 19% from the prior-year period. Total ARR increased 25% year over year to $3.5 billion.

The company mentioned that newer offerings delivered just over 30% of new ACV in the quarter, and the ARR tied to those offerings more than doubled from the year-ago period, supporting broader platform adoption. Management highlighted record $1 million-plus new ACV deals in the quarter, pointing to continued success in securing larger, multi-year engagements and expanding relationships across its Zero Trust Exchange offerings.

Profitability improved as operating discipline offset investment needs. Non-GAAP gross margin was 80.7% compared with 80.3% a year ago, reflecting the company’s high-margin subscription model.

Non-GAAP operating income increased 34% year over year to $195.8 million. The non-GAAP operating margin expanded 140 basis points to 23%, with management citing leverage in sales and marketing as a key contributor.

Zscaler’s Balance Sheet & Cash FlowAs of April 30, 2026, Zscaler had $3.5 billion in cash, cash equivalents and short-term investments compared with $3.5 billion as of Jan. 31, 2026, and $1.7 billion of debt. Management also pointed to higher capital expenditures as a factor in its updated cash flow outlook.

The company generated operating and free cash flows of $198 million and $136 million, respectively, during the fiscal third quarter.

Zscaler's Guidance for FY26For the fourth quarter of fiscal 2026, Zscaler expects revenues of $875-$878 million.

Non-GAAP earnings per share are projected between $1.08 and $1.09.

For fiscal 2026, management forecasts its revenue outlook in the range of $3.3295 billion to $3.3325 billion, reflecting year-over-year growth of 24.6% to 24.7%.

Non-GAAP earnings per share for fiscal 2026 are expected in the band of $4.10-$4.11. 

How Have Estimates Been Moving Since Then?Since the earnings release, investors have witnessed a upward trend in estimates revision.

The consensus estimate has shifted 531.25% due to these changes.

VGM ScoresCurrently, Zscaler has a average Growth Score of C, a score with the same score on the momentum front. However, the stock has a score of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

OutlookEstimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Zscaler has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.