Company Overview - Zscaler (ZS) closed at $219.86, with a +1.99% change from the previous day, outperforming the S&P 500's daily gain of 0.06% [1] - Over the past month, Zscaler shares gained 4.07%, contrasting with the Computer and Technology sector's loss of 5.52% and the S&P 500's loss of 4.29% [1] Earnings Expectations - The upcoming earnings release is expected to show an EPS of $0.75, a 14.77% decrease compared to the same quarter last year [2] - Revenue is forecasted to be $666.11 million, indicating a 20.41% growth year-over-year [2] Full-Year Estimates - Full-year Zacks Consensus Estimates predict earnings of $3.06 per share and revenue of $2.65 billion, reflecting year-over-year changes of -4.08% and +22.18%, respectively [3] - Recent revisions to analyst forecasts are crucial as they reflect near-term business trends, with positive changes indicating analyst optimism [3] Valuation Metrics - Zscaler's Forward P/E ratio is 70.56, which is higher than the industry average of 63.04, indicating a premium valuation [6] - The current PEG ratio stands at 5.11, compared to the Security industry's average PEG ratio of 3.2 [6] Industry Context - The Security industry is part of the Computer and Technology sector and holds a Zacks Industry Rank of 160, placing it in the bottom 36% of over 250 industries [7] - The Zacks Industry Rank assesses the performance of industry groups based on the average Zacks Rank of individual stocks, with the top 50% rated industries outperforming the bottom half by a factor of 2 to 1 [7]

Industry Overview - Cybersecurity has transitioned from a back-office concern to a boardroom priority due to the increasing frequency and sophistication of cyberattacks, with global cybercrime costs projected to rise from $9.22 trillion in 2024 to $15.63 trillion by 2029 [1] - The global cybersecurity market is expected to grow from $193.73 billion in 2024 to $562.72 billion by 2032, reflecting a compound annual growth rate (CAGR) of 14.3% [2] - The growth in the cybersecurity market is driven by increasing enterprise IT complexity, rising regulatory scrutiny, and the need for real-time protection of data, identities, and infrastructure [2] Technological Advancements - Artificial intelligence (AI) is revolutionizing the cybersecurity landscape, enabling more efficient detection, prevention, and response to cyber threats [3] - AI can analyze large volumes of data, detect anomalies, and identify potential breaches in real time, providing a proactive approach to security [3] Company Highlights - Companies like Fortinet, Zscaler, Okta, and Qualys are heavily investing in AI-driven security solutions to enhance their capabilities and position themselves for long-term growth in the expanding cybersecurity market [4] - Okta specializes in identity and access management (IAM) and is ramping up its AI capabilities to address the complexities of digital identities [6] - Qualys focuses on vulnerability management and cloud security, integrating advanced AI models into its platforms for faster detection and remediation of security threats [10][11] - Fortinet offers a comprehensive suite of cybersecurity solutions, differentiating itself with high-performance security at lower costs, and has integrated AI-driven analytics into its services [13][14][15] - Zscaler is a pioneer in zero-trust security, enhancing its platform with AI-powered security analytics to improve threat detection and response [16][17][18] Financial Performance - Okta reported 19,650 customers at the end of fiscal Q4 2025, with a 7% year-over-year increase in customers with over $100,000 in Annual Contract Value (ACV) [8] - Qualys' AI-powered platform is expected to drive customer adoption and revenue growth, positioning it well in the market [12] - Fortinet has consistently delivered profitability and strong free cash flow, reflecting its growing market share and demand for AI-enhanced security solutions [15] - Zscaler has maintained robust financial performance with expanding revenues driven by demand for its AI-enhanced offerings [18]

Core Insights - Zscaler's 2025 Phishing Report reveals a significant shift in phishing tactics, with cybercriminals leveraging Generative AI for targeted attacks against critical business functions, emphasizing the need for a Zero Trust + AI defense strategy [2][3] Phishing Trends - Global phishing attempts decreased by 20%, with a nearly 32% drop in the U.S., attributed to improved email authentication standards, yet emerging markets like Brazil, Hong Kong, and the Netherlands are experiencing increased phishing activity [4] - Established markets such as India, Germany, and the UK continue to face persistent phishing threats as attackers adapt to local patterns [4] Attack Methods - Phishing campaigns are increasingly exploiting community platforms like Facebook, Telegram, Steam, and Instagram for brand spoofing, malware distribution, and social engineering attacks, with tech support scams reaching over 159 million hits in 2024 [5][8] - Cybercriminals are utilizing Generative AI to enhance their attacks, creating fake websites and deepfake content to deceive users, particularly targeting sensitive departments like payroll, finance, and HR [6][7] Defensive Strategies - Zscaler's Zero Trust Exchange provides comprehensive protection against evolving phishing threats by securing users, applications, and data throughout the attack chain, highlighting the importance of a proactive, multi-layered defense approach [8][10] - The company emphasizes the necessity of AI-powered defenses to counteract the sophisticated tactics employed by cybercriminals [3][10]

Core Insights - Zscaler and Check Point Software are both significant players in the cybersecurity industry, with Zscaler focusing on cloud-based solutions and Check Point transitioning from on-premises to cloud options [1][9] Industry Overview - The cybersecurity market is expected to grow at a CAGR of 12.63%, with a robust CAGR of 9.4% projected from 2025 to 2030, driven by increasing cyberattacks [2] Zscaler Analysis - Zscaler offers a comprehensive range of enterprise network security solutions, including web security, antivirus, and firewalls, and is well-positioned to benefit from the demand for privileged access security [4][5] - The company has seen a significant increase in sales and marketing (S&M) and research and development (R&D) expenses, which have both been in double digits, impacting near-term profitability [6][7] - Zscaler's fiscal 2026 earnings are estimated at $3.08, reflecting a year-over-year decline of 3.5% [7][8] Check Point Analysis - Check Point provides a variety of software and hardware solutions for IT infrastructure security, with a focus on cloud solutions and subscription-based models that ensure stable recurring revenues [9][10][11] - The company reported security subscription revenues of $292.2 million in Q4 2024, marking a 9.9% year-over-year increase, with 2025 earnings projected at $9.95, indicating an 8.6% growth [11][12] Stock Performance and Valuation - Over the past year, Check Point's stock has increased by 28.9%, while Zscaler's shares have returned 9.5% [13] - Check Point trades at a forward sales multiple of 8.28X, significantly lower than the Zacks Security industry's average of 12.53X, while Zscaler trades at 9.91X, making Check Point's valuation more attractive [14] Conclusion - Check Point is gaining traction with its Quantum Force, Harmony Email, and Infinity platforms, while Zscaler faces challenges from rising operational costs and declining profit margins. Check Point holds a Zacks Rank 2 (Buy), making it a stronger investment option compared to Zscaler, which has a Zacks Rank 3 (Hold) [16]

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Core Insights - The Zscaler ThreatLabz 2025 VPN Risk Report highlights the urgent need for organizations to transition from traditional VPNs to a Zero Trust security model due to the increasing vulnerabilities and risks associated with VPN usage [1][4][5] VPN Security Challenges - 56% of enterprises using VPNs cite maintaining security and compliance as their largest challenge [1] - 92% of IT professionals are concerned that unpatched VPN vulnerabilities will lead to ransomware attacks [1][4] - 54% of respondents identify security and compliance risks as the top challenges associated with VPNs [3] Shift to Zero Trust - 81% of organizations plan to implement a Zero Trust strategy within the next year, indicating a significant shift in security architecture [1][5][13] - The report emphasizes that traditional VPNs are inadequate for modern cyber threats, as they expose networks to potential attacks [2][12] Vulnerability Trends - VPN Common Vulnerabilities and Exposures (CVEs) increased by 82.5% from 2020 to 2024, with 60% of these vulnerabilities rated as high or critical [10] - Remote code execution (RCE) vulnerabilities are the most prevalent, posing serious risks to organizations [10] Concerns Over Third-Party Access - 93% of organizations express concerns about backdoor vulnerabilities from third-party VPN connections [7][11] - A notable incident involved a financial services company suffering a data breach due to VPN vulnerabilities, affecting nearly 20,000 clients [11] Recommendations for Organizations - Organizations are encouraged to adopt a Zero Trust framework to minimize attack surfaces, block threats, and enhance data security [13][14] - The report provides best practices for replacing VPN security risks with a robust Zero Trust architecture [14]

Zscaler (ZS) shares soared 3.1% in the last trading session to close at $180.06. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 16.3% loss over the past four weeks.The upswing was likely due to a recovery in the broader stock market after a massive sell-off last week following the announcement of a “reciprocal tariff” by President Donald Trump.This cloud-based information security provider is expected to post quarterly earnings ...

Core Insights - Zscaler, Inc. (ZS) stock has shown significant volatility over the past three months but delivered a 9.2% return, outperforming the broader technology sector and the S&P 500, which declined by 11.9% and 5.4%, respectively [1][4] - The company is experiencing strong demand for its cybersecurity solutions, driven by increasing threats and a shift from legacy network security to cloud-based solutions [5][6] Financial Performance - In Q2 of fiscal 2025, Zscaler achieved a 12-month trailing dollar-based retention rate of 115%, with Remaining Performance Obligations growing 28% year over year [6] - Zscaler had 620 customers with annualized recurring revenues (ARR) exceeding $1 million and 3,291 customers with ARR above $100,000 [6][8] - The Zacks Consensus Estimate for fiscal 2025 revenues suggests a 22.2% year-over-year increase, with EPS revised upward to $3.07 [9][10] Government Sector Expansion - Zscaler is enhancing its GovCloud offerings to comply with government security standards, which will help expand its presence among government agencies [7][8] - The company added one cabinet-level agency client in Q4, bringing its total to 13 out of 15 U.S. cabinet-level agencies [8] AI and Cybersecurity Innovations - Zscaler is leveraging generative AI to enhance its security solutions, partnering with NVIDIA and CrowdStrike to integrate AI technologies [13][14] - The company has deepened its AI capabilities through acquisitions and collaborations, which have driven financial performance in its AI-driven analytics products [15] Valuation Concerns - Zscaler holds a premium valuation, indicated by a Zacks Value Score of F and a Forward 12-month P/S ratio of 10.25X, significantly higher than the sector average of 5.49X [16][19] Investment Recommendation - Despite the premium valuation, Zscaler's strong position in Zero Trust security and AI innovations suggest that holding the stock remains a viable strategy [4][19]

Core Viewpoint - Zscaler's stock price has been on an upward trend over the past six months, driven by market sentiment and other factors, despite a deteriorating short-term outlook and weak leading indicators [1][2][16] Financial Performance - In Q2, Zscaler generated $648 million in revenue, a 23% year-over-year increase, although below the expected 25% growth [12] - The annual recurring revenue (ARR) at the end of the quarter was $2.7 billion, also reflecting a 23% year-over-year growth [12] - The remaining performance obligation (RPO) grew 28% year-over-year to $4.615 billion, while total calculated billings increased 18% to $743 million [12] - The company expects Q3 revenue to be between $665 million and $667 million, representing a year-over-year growth of 20-21% [12] Customer Growth and Retention - Zscaler saw a strong net customer increase in Q2, with the number of customers generating $100,000 in annual revenue growing by 19% and those generating $1 million growing by 28% [14] - The net retention rate improved to 115% in Q2, indicating a recovery in customer retention [14] Market Position and Strategy - Zscaler continues to promote its zero-trust model, questioning the advantages of SD-WAN and most SASE architectures, focusing on reducing attack surfaces and eliminating lateral threat propagation [4] - The upcoming device refresh cycle presents an opportunity for Zscaler to convert customers from traditional architectures [4] - The company is expanding its offerings from user protection to workloads, OT devices, and B2B users [6] Product Development and AI Integration - Zscaler views artificial intelligence as a tailwind for demand and product development, particularly in data security [10] - The company has launched AI analytics solutions, with the ACV of its AI analytics product line nearly doubling year-over-year in Q2 [10] Sales and Operational Efficiency - Zscaler has shifted to a customer-centric sales model, which initially led to sales personnel turnover but is now stabilizing with improved productivity [11] - The company is expected to continue increasing the number of sales representatives, which should support growth in the near term [11] Competitive Landscape - Zscaler faces significant competition in the SASE market, and its ability to leverage the device refresh cycle will be crucial for its architecture and customer perception [1][4] - The company is actively promoting the benefits of its zero-trust approach to attract new customers [4] Challenges and Outlook - Despite the overall improvement in investor confidence towards SaaS companies, Zscaler acknowledges that the environment remains challenging [1] - The demand environment for 2025 appears to be deteriorating, contrasting with expectations for stability or improvement in 2024 [2] - Zscaler's growth rate is slowing, but the company still has substantial long-term growth opportunities [6][19]

Core Insights - Zscaler collaborated with T-Mobile to implement the Zscaler Zero Trust Exchange™ AI-powered cloud security platform, enhancing T-Mobile's cybersecurity infrastructure and reducing reliance on traditional VPNs [1][2][3] Company Overview - Zscaler is a leader in cloud security, providing a platform that protects thousands of customers from cyberattacks and data loss by securely connecting users, devices, and applications globally [4] Deployment Details - T-Mobile's deployment of the Zscaler Zero Trust Exchange took three months and has since improved secure access to applications and the internet, regardless of user location or device [1][3] - The platform operates on the principle of least-privileged access, establishing trust based on user identity and context, which includes location, device, application, and content [3] Security Enhancements - The collaboration aims to enhance T-Mobile's cybersecurity approach, ensuring that only verified and authorized users can access necessary systems, thereby significantly reducing cyber threat risks [2][3] - Zscaler's tools have allowed T-Mobile to retire legacy firewalls and VPNs, promoting more efficient access to applications and information [3] Additional Features - Zscaler offers various services, including Zscaler Internet Access™ (ZIA™) for secure internet access, Zscaler Private Access™ (ZPA™) to replace traditional VPNs, and advanced threat detection technologies [5]