Zscaler (ZS) Upgraded to Outperform Amid AI and Zero Trust Growth

Core Viewpoint - Zscaler Inc. is considered one of the top AI stocks to buy, with an upgrade to Outperform by Mizuho, highlighting valuation support despite concerns over near-term growth prospects [1] Group 1: Company Performance - Zscaler's shares have experienced weakness following a solid first fiscal quarter, attributed to slightly lower guidance for net new Annual Recurring Revenue (ARR) in the second fiscal quarter and the absence of a specific contribution from the recent Red Canary acquisition [1] - Despite significant top-line growth, Zscaler's gross margins are under pressure due to the rapid adoption of newer products with lower margins, necessitating higher operating expenses as the company aims to capture market share in high-growth areas like AI safety and expanding Zero Trust systems [2] Group 2: Market Position and Strategy - Mizuho emphasizes the need for more transparency from management regarding Zscaler's organic growth this year, but remains confident that the company is well-positioned within the Secure Access Service Edge (SASE) and Zero Trust markets [3] - Zscaler operates as a cloud-based security company, providing cybersecurity solutions that protect user access to applications and data regardless of location, replacing traditional hardware-based security with its cloud-native Zero Trust Exchange platform [4]