What’s Next With Zscaler Stock?

September 5th, 2025 by Trefis Team
ZS: Zscaler logo
ZS
Zscaler

Zscaler (NASDAQ:ZS), a leader in cloud security and Zero Trust solutions, has seen its stock rebound sharply in 2025. Shares now trade at $270, up around 50% year-to-date, as optimism grows around AI-driven demand, expanding margins, and the company’s strengthening leadership in enterprise cybersecurity. But investors are asking: could Zscaler double from here, reaching $550 per share? Let’s break down the thesis. But if you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 91% since its inception. Separately, see – ServiceNow Stock To Less than $450?

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Core Thesis: The Path to $550

Revenue Growth & Valuation Reset

Zscaler generated $2.67 billion in revenue in fiscal 2025, up 23% year-over-year, and analysts expect revenues to climb toward $3.3 billion in fiscal 2026. At today’s price, Zscaler trades around 15–16x forward sales, a discount compared to its high-growth peers like CrowdStrike (NASDAQ:CRWD) at 24x and Cloudflare (NYSE:NET) at 38x. If revenues accelerate to $3.3 billion and the P/S multiple even modestly expands to 25–28x, the stock could realistically trade near $550 per share—a doubling from current levels.

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The insight here is simple: Zscaler doesn’t need sky-high multiples to deliver returns. Strong revenue growth plus valuation normalization could power significant upside.

Key Growth Drivers

  • Cloud Security Tailwinds – As enterprises shift to cloud and hybrid models, demand for Zero Trust and secure access solutions is expanding. Zscaler’s integrated platform positions it to capture disproportionate share.
  • Improving Profitability – Adjusted EPS grew 23% in fiscal 2025, with record-high operating margins, while annual recurring revenue (ARR) surpassed $3 billion. Margin expansion is driving toward sustainable profitability.
  • AI-Powered Offerings – New AI-driven security capabilities, enhanced by acquisitions like Red Canary, expand Zscaler’s reach into managed detection and response, boosting long-term growth prospects.
  • Partnerships & Ecosystem – Alliances with hyperscalers and channel partners strengthen Zscaler’s go-to-market reach and customer retention, improving upsell opportunities.
  • Customer Momentum – With net retention of 115% and accelerating large-deal wins, Zscaler continues to deepen penetration in the enterprise segment.

Of Course there are Risks

  • GAAP Losses – Despite improving non-GAAP profitability, GAAP losses persist, which could keep some institutional investors cautious.
  • High Operating Expenses – With operating costs still consuming nearly 60% of revenue, execution on efficiency remains crucial.
  • Valuation Pressure – A forward sales multiple near 16x already bakes in growth; any slowdown in billings could hit the stock hard.
  • Competition – Rivals like Palo Alto Networks, CrowdStrike, and Cloudflare remain aggressive, raising pressure on pricing and innovation.

The Verdict

At $275 per share, Zscaler trades at premium valuations but with stabilizing fundamentals and strong growth visibility. If revenues climb toward $3.3 billion and margins continue to expand, the math supports a share price in the $550 range—a realistic doubling from today’s levels. That said, Zscaler remains a high-risk, high-reward story, tied closely to execution and competitive positioning. For investors with conviction in cloud security and the Zero Trust paradigm, Zscaler offers asymmetric upside. At $275, Zscaler is still in the early innings of a cloud-security boom. At $550, it would mark not just a rally, but a validation that its leadership in Zero Trust can scale profitably.

Investors should be prepared for significant volatility and the potential for substantial losses if market conditions deteriorate or if the company fails to execute on its ambitious growth plans. While the 2x upside potential is mathematically sound based on projected revenues, it requires flawless execution in a rapidly evolving and competitive landscape. Now, we apply a risk assessment framework while constructing the Trefis High Quality (HQ) Portfolio, which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

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