Group 1 - U.S. cloud companies' stock prices declined in pre-market trading, with Intuit down by 3%, Adobe down by 2.3%, and Zscaler down by 1.6% [1]

Group 1 - Intuit shares declined by 3% [1] - Adobe shares fell by 2.3% [1] - Zscaler shares decreased by 1.6% [1]

Shares of Zscaler (NASDAQ: ZS) rose on Tuesday after the cloud protection specialist debuted a suite of new artificial intelligence (AI)-powered cybersecurity tools. As of 1:05 p.m. EST, Zscaler's stock price was up more than 3%. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks » Image source: Getty Images. Cyber sentinels are struggling to defend against AI threats Companies are racin ...

Core Viewpoint - Zscaler has been experiencing a decline in stock performance, with a -5.9% return over the past month, contrasting with the S&P 500's +0.4% and the Zacks Security industry's -1.5% [2] Earnings Estimate Revisions - Zscaler is projected to report earnings of $0.89 per share for the current quarter, reflecting a +14.1% increase year-over-year, although the Zacks Consensus Estimate has decreased by -0.7% in the last 30 days [5] - For the current fiscal year, the consensus earnings estimate is $3.8, indicating a +15.9% change from the previous year, with a notable increase of +16.7% in the last month [5] - The next fiscal year's consensus earnings estimate stands at $4.37, showing a +15.1% change from the prior year, with a slight increase of +0.1% over the past month [6] - Zscaler holds a Zacks Rank 3 (Hold), indicating a neutral outlook based on earnings estimate revisions [7] Revenue Growth Forecast - The consensus sales estimate for Zscaler is $798 million for the current quarter, representing a year-over-year growth of +23.2% [11] - For the current fiscal year, the sales estimates are $3.29 billion and $3.94 billion, indicating growth rates of +23.1% and +19.7%, respectively [11] Last Reported Results and Surprise History - In the last reported quarter, Zscaler achieved revenues of $788.11 million, a +25.5% increase year-over-year, and an EPS of $0.96 compared to $0.77 a year ago [12] - The company exceeded the Zacks Consensus Estimate for revenues by +1.91% and for EPS by +12.94% [12] - Zscaler has consistently beaten consensus EPS and revenue estimates in the last four quarters [13] Valuation - Zscaler is currently graded F on the Zacks Value Style Score, indicating it is trading at a premium compared to its peers [17]

Core Insights - Zscaler has introduced new AI security innovations aimed at enabling enterprises to securely build, deploy, and govern AI applications while maintaining visibility and control [1][4] Group 1: AI Security Challenges - Many enterprises lack a comprehensive view of their AI applications and services, which limits their understanding of AI exposure and associated risks [2] - Traditional security models are inadequate for the unique behaviors of AI traffic, which can lead to vulnerabilities; Zscaler's ThreatLabz report indicates that most enterprise AI systems could be compromised in just 16 minutes [2] Group 2: New Innovations and Solutions - Zscaler's AI Security Suite provides a detailed inventory and dependency map of AI assets, enabling organizations to adopt AI technologies more securely [3] - The suite addresses enterprise AI security challenges through three core use cases, focusing on visibility, governance, and secure access [4][5] Group 3: Governance and Compliance - Zscaler supports alignment with frameworks like the NIST AI Risk Management Framework and the EU AI Act, enhancing governance for global AI adoption [6] - The company is expanding its defense capabilities with new features such as a secure automation gateway and AI Deception to counter model-based attacks [6] Group 4: AI Asset Management and Security - AI Asset Management provides comprehensive visibility for CISOs and IT teams to detect shadow AI and prioritize risks [7] - Secure Access to AI enables safe use of sanctioned AI services with Zero Trust controls, while Secure AI Infrastructure protects AI development throughout its lifecycle [7]

Core Insights - Rapid AI adoption is creating a significant security gap, necessitating organizations to implement AI security platforms based on Zero Trust principles [1][2][12] AI Adoption Trends - AI usage is expanding across all business functions, with Finance & Insurance accounting for 23% of AI/ML traffic, while Technology and Education sectors saw year-over-year transaction growth of 202% and 184% respectively [4][12] - The number of applications driving AI/ML transactions quadrupled to over 3,400, indicating a rapid increase in complexity and reduced centralized visibility [12] Security Vulnerabilities - 100% of enterprise AI systems tested were found vulnerable to breaches, with critical vulnerabilities identified in an average of 16 minutes, and 90% of systems compromised in under 90 minutes [5][12] - AI/ML activity surged by 91% year-over-year, leading to a total of 18,033 terabytes of data transferred to AI applications, which poses a significant target for cybercriminals [7][9][12] Data Exposure Risks - Unmanaged embedded AI features in enterprise applications are creating critical data exposure risks, as these features often operate without oversight [8][12] - ChatGPT alone was associated with 410 million Data Loss Prevention (DLP) policy violations, highlighting the urgent need for AI governance [10][12] Recommendations for Security - Organizations are advised to adopt an intelligent Zero Trust architecture to mitigate risks associated with AI-driven cyber threats [3][11] - Continuous verification and least-privileged access should be enforced to eliminate attack surfaces, while all traffic, including encrypted data, must be inspected to stop threats in real time [13][11]

Core Insights - Investors are showing a bullish stance on Zscaler (NASDAQ:ZS), with significant options trades indicating potential upcoming movements in the stock [1][2] - The overall sentiment among large traders is mixed, with 43% bullish and 37% bearish positions noted [2] Trading Activity - A total of 16 uncommon options trades for Zscaler were detected, with 8 puts amounting to $263,616 and 8 calls totaling $580,004 [2] - Major market movers are focusing on a price range between $200.0 and $240.0 for Zscaler over the past three months [3] Volume and Open Interest - Insights into volume and open interest reveal liquidity and interest levels for Zscaler's options, particularly within the $200.0 to $240.0 strike price range over the last month [4] Options Trade Details - Significant options trades include various call and put options with different sentiments and strike prices, indicating diverse investor strategies [7] - For example, a bearish call trade was noted at a strike price of $200.00 with a total trade amount of $210.9K [7] Company Overview - Zscaler is a SaaS firm specializing in cloud-native cybersecurity solutions, primarily serving enterprise customers [8] - The company offers Zscaler Internet Access for secure external application access and Zscaler Private Access for secure internal application access [8] Analyst Ratings - Recent analyst ratings for Zscaler show a consensus target price of $288.75, with various analysts maintaining different ratings and price targets ranging from $260 to $305 [9][10]

Core Insights - Zscaler has delivered significant returns since its IPO in 2018, with a market capitalization of approximately $39 billion, representing a sevenfold increase since going public [3] - The company focuses on cloud security, utilizing a zero trust architecture that eliminates the need for traditional firewalls and VPNs, ensuring secure connections for users and applications [3][10] - Zscaler's growth is attributed to its innovative approach to cybersecurity, which addresses the limitations of legacy security models and adapts to the evolving digital landscape [7][10] Company Overview - Zscaler started with a single product, Zscaler Internet Access, and has since expanded its offerings to include private access and digital experience solutions, catering to a wide range of cloud workloads and devices [2][16] - The company has maintained a strong customer retention rate, with many clients purchasing Zscaler solutions multiple times across different organizations [16] Market Position - The cybersecurity market is experiencing rapid growth, driven by increasing demand for effective security solutions as businesses transition to cloud-based operations [15] - Zscaler's unique value proposition lies in its zero trust model, which treats all users and devices as untrusted, thereby enhancing security in a landscape where traditional methods are becoming obsolete [10][11] Leadership Insights - CEO Jay Chaudhry emphasizes the importance of embracing new technologies like AI while recognizing the potential risks they pose, advocating for a proactive approach to cybersecurity [10][12] - The company aims to continue evolving its product offerings and expanding its market presence, viewing Zscaler not just as a business but as a mission to enhance cybersecurity for enterprises [16][17]

Core Viewpoint - Zscaler is expected to report strong financial results, with anticipated earnings growth and revenue increase, despite recent stock performance lagging behind broader market indices [2][3]. Financial Performance - Analysts expect Zscaler to post earnings of $0.89 per share, marking a year-over-year growth of 14.1% [2]. - The consensus estimate for revenue is $798 million, reflecting a 23.17% increase from the prior-year quarter [2]. - Full-year estimates project earnings of $3.8 per share and revenue of $3.29 billion, representing year-over-year changes of +15.85% and +23.14%, respectively [3]. Analyst Sentiment - Recent changes in analyst estimates for Zscaler indicate a positive outlook for the business [3]. - Over the last 30 days, the Zacks Consensus EPS estimate has increased by 16.67% [5]. Valuation Metrics - Zscaler has a Forward P/E ratio of 54.34, which is higher than the industry average of 51.12, suggesting it is trading at a premium [6]. - The PEG ratio for Zscaler is 2.98, compared to the industry average of 2.66, indicating a higher valuation relative to expected earnings growth [6]. Industry Context - The Security industry, part of the Computer and Technology sector, has a Zacks Industry Rank of 100, placing it in the top 41% of over 250 industries [7]. - Historically, the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [7].

Core Insights - Zscaler, Inc. (ZS) has been positively reviewed previously with a buy rating due to its effective go-to-market (GTM) model and strong customer resonance with its platform [1] - The company has seen increased adoption of its newer products, which adds optionality to its offerings [1] Group 1 - The investment approach discussed includes fundamental investing, technical investing, and momentum investing, highlighting the merits of each strategy [1] - The author aims to use the Seeking Alpha platform to track investment ideas and connect with like-minded investors [1]