• Zscaler is like Cloudflare, but specifically focused on comprehensive enterprise network and application security from the cloud.
• Think of Zscaler as doing for corporate network security what Zoom did for corporate video conferencing: moving it from cumbersome on-premise solutions to a scalable, cloud-native service.

• Zscaler Internet Access (ZIA): Provides secure access for users and devices to external applications and the internet.
• Zscaler Private Access (ZPA): Enables secure access to internally hosted applications in data centers or clouds.
• Zscaler Digital Experience (ZDX): Monitors and scores end-to-end user experience for business applications.
• Zscaler Cloud Security Posture Management (CSPM): Identifies and remediates misconfigurations in cloud environments to ensure compliance and reduce risk.
• Zscaler Cloud Workload Segmentation (CWS): Secures application-to-application communication within clouds and data centers to prevent lateral threat movement.

Zscaler (ZS) sells its cloud security solutions primarily to other companies (B2B).

Based on the provided background information, specific names of Zscaler's major customer companies are not disclosed. However, the company serves a wide range of industries globally, indicating that its customer base consists of large enterprises and public sector organizations. The industries Zscaler serves include:

• Airlines and transportation
• Conglomerates
• Consumer goods and retail
• Financial services
• Healthcare
• Manufacturing
• Media and communications
• Public sector and education
• Technology
• Telecommunications services

The key risks to Zscaler's business include intense competition, challenges in achieving consistent GAAP profitability, and a high valuation susceptible to growth slowdowns.

1. Intense Competition and Execution Risk: Zscaler operates in a highly competitive cybersecurity market. It faces significant competition from well-established incumbents such as Palo Alto Networks and Cisco, as well as agile challengers like Netskope and CrowdStrike. This intense competition can exert pressure on pricing, influence win rates, and impact Zscaler's ability to maintain or expand its market share.
2. Challenges with GAAP Profitability: Despite demonstrating strong revenue growth, Zscaler has consistently reported net losses since its inception and is expected to continue incurring them in the foreseeable future. While the company shows improving non-GAAP profitability, it faces challenges with negative GAAP net margins. This ongoing path to GAAP profitability requires significant and sustained investment in research and development, as well as sales and marketing, which could further delay achieving positive GAAP earnings if growth decelerates.
3. High Valuation and Sensitivity to Growth Slowdown: Zscaler's stock trades at a premium valuation compared to the broader market, based on its strong growth prospects. This elevated valuation means that the company's stock price is particularly sensitive to any indications of slowing revenue growth or shifts in investor sentiment away from high-growth technology stocks. Any perceived deceleration in growth could lead to a significant correction in its stock price.

Zscaler (ZS) operates in a significant and expanding addressable market for its cloud security solutions. The company's Total Addressable Market (TAM) is estimated to be $96 billion globally. This represents an increase from a previous estimate of $72 billion.

The growth in Zscaler's addressable market is driven by accelerating demand for cloud-native cybersecurity and zero trust architectures. Zscaler's platform addresses three core segments: Users, Workloads, and IoT/OT, all powered by its Zero Trust Exchange.

For its main products, the $72 billion serviceable addressable market (SAM) was previously broken down into approximately $49 billion for users and $23 billion for workloads. Zscaler Internet Access (ZIA) provides secure access to externally managed applications and Internet destinations, while Zscaler Private Access (ZPA) offers secure access to managed applications hosted internally in data centers and private or public clouds.

Here are 3-5 expected drivers of future revenue growth for Zscaler (ZS) over the next 2-3 years:

1. Continued Adoption and Expansion of the Zero Trust Everywhere Platform: Zscaler's core Zero Trust security platform is experiencing strong demand and customer adoption, particularly among large enterprises. The company exceeded its target for enterprises adopting "Zero Trust Everywhere" three quarters early, now securing nearly 40% of the Global 2000 and over 45% of the Fortune 500. This indicates ongoing growth through both new customer acquisition and deeper penetration within its existing significant customer base.
2. Rapid Growth and Innovation in AI Security Solutions: Zscaler is making substantial investments and seeing significant traction in its AI security offerings, including "AI Guard" and "Gen AI security offerings." The Annual Recurring Revenue (ARR) from AI security surpassed its fiscal 2026 target three quarters early, exceeding $400 million, and is projected to surpass $500 million by fiscal year-end. Strategic acquisitions, such as SPLX, are also enhancing Zscaler's AI Security solutions.
3. Acceleration of Data Security Everywhere: This represents another crucial growth pillar for Zscaler. The ARR from Data Security Everywhere has accelerated to approximately $450 million. This growth signifies increasing demand for Zscaler's solutions designed to secure application-to-application communications within public clouds and data centers, preventing lateral threat movement and reducing data breach risks.
4. Success of the Z-Flex Program for Larger, Multi-Year Deals and Platform Expansion: Zscaler's Z-Flex program, which offers flexible licensing options, is demonstrating strong momentum. In Q1 2026, total contract value (TCV) bookings from this program exceeded $175 million, representing over 70% sequential growth. This program facilitates the adoption of multiple modules over time with predictable pricing, encouraging long-term commitments, strengthening customer relationships, and driving broader platform usage.

Capital Allocation Decisions for Zscaler (ZS) (Last 3-5 Years)

Share Repurchases

Share Issuance

Inbound Investments

Outbound Investments

• In February 2026, Zscaler acquired SquareX to extend Zero Trust security into the browser for the AI era.
• In fiscal Q2 2026, Zscaler completed the acquisitions of Red Canary and SPLX, totaling $692.0 million.
• Other notable acquisitions include Avalor in March 2024 (predominantly cash with some equity) to advance AI innovations, Canonic Security in February 2023 (SaaS protection), ShiftRight in September 2022 (cloud security), and Smokescreen in May 2021 (Zero Trust Exchange). Cash from investing activities, which includes acquisitions, reached -$1.5 billion in Q4 2025 and an annual value of -$427.0 million for fiscal year 2025.

Capital Expenditures

• Capital expenditures were $48.16 million in fiscal year 2021, $69.3 million in 2022, $97.2 million in 2023, and $144.6 million in 2024.
• For fiscal year 2025, capital expenditures were approximately $164.3 million. In Q2 2026, capital expenditures were $18.0 million.
• The primary focus of these capital expenditures has been on internal software development, data center build-out, and expanding its data center infrastructure.
• Expected capital expenditures for fiscal year 2026 are projected to be $142.6 million.