Why Is Zscaler Stock Going Up?
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Shares of Zscaler (ZS) rose 7.8% on Wednesday, October 21, 2026, outpacing a 0.6% gain for the S&P 500. Benzinga reported that shares climbed that day after DA Davidson began covering Zscaler with a Neutral rating and a $215 price target. The stock had closed about where that target sat the day before, only to finish Wednesday about 8% above it. So what are buyers getting from Zscaler’s business at the higher price?
Buyers Pay A Premium For Zscaler’s Growth
At the October 21 close, Zscaler stock traded at 11.2 times its sales over the past twelve months, compared with 3.1 times for the S&P 500. The stock was far cheaper on that measure at the end of June. At that time, shares traded at 6.8 times the same sales, marking the lowest multiple at any quarter end since fiscal 2018.
That price pays for growth. Zscaler increased its revenue by 25.4% to $3.35 billion in fiscal 2026, the twelve months to July 31, 2026. Management said on its September 3, 2026, earnings call that the results reflected increasing adoption of its Zero Trust platform. Buyers are not paying for a profit yet, however. Zscaler reported a net loss for fiscal 2026, so its price-to-earnings ratio is not meaningful.
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Zscaler Is Close To Breaking Even
Zscaler’s loss is now small. The company posted an operating loss equal to 0.4% of revenue in fiscal Q4 2026, the three months to July 31. That is down from 4.3% in the same quarter a year earlier. For the full fiscal year, the operating loss settled at 3.6% of revenue, the smallest twelve-month loss relative to revenue at any quarter end since fiscal 2018.
The business also brings in cash alongside that reported loss. Zscaler generated $779 million in free cash flow for fiscal 2026, or 23.2% of revenue. That figure represents the cash left over after spending on equipment and on software Zscaler builds for its own use. Management expects capital spending to stay elevated in fiscal 2027 because components, especially memory, cost more.
Zscaler Expects Slower Growth In Fiscal 2027
The growth buyers are paying for is set to slow, according to management’s own forecast. On the September 3 call, executives guided for fiscal 2027 revenue of $3.908 billion to $3.938 billion, representing growth of 16.6% to 17.5%. That pace is slower than the 25% Zscaler reported for fiscal 2026. Furthermore, part of that 25% came from buying Red Canary: without it, revenue grew 20%.
Management provided that forecast on September 3, before the October 21 gain. Revenue growth against that guide is the number to watch when Zscaler next reports, expected in November 2026.
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