Core Insights - Brown Advisory Mid-Cap Growth Strategy underperformed the Russell Midcap® Growth Index in Q4 2025 primarily due to stock selection, particularly the absence of Palantir Technologies Inc (PLTR) in its portfolio [1] - The Strategy aims for solid risk-adjusted returns by investing in high-quality companies with market capitalizations between $2 billion and $50 billion [1] Company Focus: Zscaler, Inc. (NASDAQ:ZS) - Zscaler, Inc. is highlighted as a leading cloud security company, with a market capitalization of $24.408 billion and a stock price of $151.80 as of March 23, 2026 [2] - The stock experienced a one-month return of 1.63% but has lost 29.63% over the past 52 weeks [2] - Brown Advisory repurchased Zscaler shares following a selloff related to a large-scale M&A announcement, viewing the deal as strategically sound and an attractive entry point in the SASE security software market [3] Hedge Fund Interest - Zscaler, Inc. was held by 56 hedge fund portfolios at the end of Q4 2025, an increase from 50 in the previous quarter, indicating growing interest among institutional investors [4] - Despite this interest, the company is not listed among the 40 Most Popular Stocks Among Hedge Funds heading into 2026, with a suggestion that certain AI stocks may offer better upside potential [4]

Core Insights - Upwind, a cloud security company based in San Francisco, has raised $430 million since 2022, with backing from notable investors such as Bessemer, Salesforce Ventures, and Greylock [1] - The company has developed a solution utilizing Nvidia AI technology to detect malicious AI prompts with approximately 95% precision, addressing emerging threats in the security landscape [2] Company Overview - Upwind was founded by Amiram Shachar and the team behind Spot.io, positioning itself as a significant player in the cloud security sector [1] - The company integrates LLM threat detection into its platform, converting malicious prompts into actionable security events within the cloud ecosystem [5] Technological Innovation - Upwind's solution employs a three-stage architecture for production environments, achieving high accuracy rates: a lightweight classifier with 99.88% accuracy, semantic threat detection with 94.53% accuracy, and selective LLM validation [3] - The collaboration with Nvidia is essential as it enhances Upwind's capabilities to combat new threats like prompt injection and data exfiltration [2] Financial Metrics - Nvidia, a key partner in Upwind's solution, has a price-to-earnings (P/E) ratio of 35.67, indicating strong investor confidence [4] - Nvidia's financial health is reflected in its low debt-to-equity ratio of 0.073 and a current ratio of 3.91, supporting its collaboration with Upwind [4] Market Trends - The adoption of generative AI is on the rise, with Gartner predicting that over 80% of enterprises will utilize AI APIs, models, or applications this year, highlighting the relevance of Upwind's innovations [2]

Core Thesis - Zscaler, Inc. is viewed positively by analysts, with a current share price of $153.76 and a forward P/E ratio of 40.32, indicating potential for growth in the cloud security sector [1][3] Financial Performance - Zscaler reported FY1Q26 results with revenue of $788 million, reflecting a 26% year-over-year growth, and operating income of $172 million, achieving a 21.8% operating margin, attributed to disciplined expense management and scale benefits [3] - Earnings per share (EPS) reached $0.96, significantly surpassing expectations, while annual recurring revenue (ARR) increased by 26% year-over-year to $3.2 billion, driven by strong demand across key growth areas [4] - Remaining performance obligations (RPO) rose 35% year-over-year to $5.9 billion, with current RPO growing 29%, indicating strong forward visibility for the company [5] Market Reaction and Concerns - Despite strong fundamentals, Zscaler's stock declined post-results due to investor concerns regarding limited disclosure on organic versus inorganic growth following the Red Canary acquisition and fears of slowing momentum in core offerings [6] - Management indicated that the market reaction may have been overdone, as Red Canary contributed approximately $89 million in ARR, with integration progressing smoothly and operational synergies emerging [6] Future Outlook - Zscaler maintained a cautious guidance approach amid a tight IT spending environment but raised its FY2026 ARR, revenue, and EPS outlook modestly, indicating confidence in continued demand for Zero Trust security and AI security solutions [7]

Core Insights - Zscaler Inc. is enhancing its global data sovereignty capabilities through its Zero Trust Exchange platform, with a focus on compliance with local laws while maintaining performance [1][2] - The company is introducing in-region SSL inspection and malware analysis to analyze encrypted traffic locally, preventing data from leaving specific territories [2] - Zscaler's architecture allows customers to maintain ownership of their encryption keys and choose between regional or on-premises log storage, ensuring high availability and business continuity [3] Group 1: Expansion and Capabilities - Zscaler is expanding its dedicated control and logging planes to new regions, including Canada, to support enterprises in complying with local regulations [1] - The platform features private, single-tenant service edges for organizations with specific hardware certification needs, along with dedicated technical teams for regulatory interpretation [2] - The expansion is supported by a 'Collect Once, Certify All' framework to facilitate compliance with regulations such as GDPR and NIS2 [3] Group 2: Company Overview - Zscaler operates as a cloud security company, providing cyberthreat protection and data security products globally [4]

Core Viewpoint - Zscaler, Inc. is identified as a promising AI stock for investment in 2026, with Wells Fargo initiating coverage and setting a price target of $200, citing a favorable entry point despite recent market noise [1][2]. Financial Performance - For fiscal Q2 2026, Zscaler reported a revenue increase of 26% year-over-year, reaching $815.8 million, and an Annual Recurring Revenue (ARR) growth of 25% to $3.359 billion [2]. - The company achieved a non-GAAP EPS of $1.01 and a non-GAAP operating income of $181.0 million, reflecting a 22% margin [2]. - Management raised the full-year fiscal 2026 ARR growth guidance to 24%, indicating strong demand across its growth pillars [2]. Business Model and Market Position - Zscaler operates as an AI-powered cloud security company focused on zero-trust architecture, securing users, workloads, and devices without traditional network perimeter tools [3]. - The company is well-embedded in large enterprises, with significant penetration in the Fortune 500 and Global 2000, suggesting that concerns about market saturation are overstated [1]. Growth Areas - Zscaler's growth pillars include AI Security, Zero Trust Everywhere, and Data Security, which are expected to sustain approximately 20% growth moving forward [1][2].

Core Insights - Akamai Technologies Inc. is a key player in the technology sector, focusing on content delivery network services, cloud security, and web performance solutions, competing with companies like Cloudflare and Amazon Web Services [1] Financial Metrics - The company has a price-to-earnings (P/E) ratio of 32.86, indicating investor confidence in its earnings potential [3] - Akamai's price-to-sales ratio stands at 3.55, reflecting the market's valuation of its revenue [3] - The enterprise value to sales ratio is 4.97, showing how the market values Akamai's total worth relative to its sales [4] - The enterprise value to operating cash flow ratio is 13.76, indicating the company's valuation in relation to its cash flow from operations [4] - The earnings yield is 3.04%, providing insight into the return on investment for shareholders [5] - The debt-to-equity ratio is 1.39, showing the proportion of debt used to finance its assets relative to shareholders' equity [5] - A current ratio of 2.29 indicates a strong ability to cover short-term liabilities with short-term assets, demonstrating financial stability [5] Recent Developments - On March 4, 2026, Sundaram Mani, the Executive Vice President and General Manager of Security at Akamai, sold 5,562 shares at approximately $100.96 each, leaving him with 23,003 shares [1][6] - Akamai presented its strategies and future plans at the 47th Annual Raymond James Institutional Investor Conference, which is significant for engaging with institutional investors and discussing performance and outlook [2][6]

Core Insights - Zscaler Inc. reported FQ2 2026 financial results with revenue of $816 million, a 26% year-over-year increase, surpassing market expectations [1] - The company's Annual Recurring Revenue (ARR) grew by 25% to $3.4 billion, driven by large-scale enterprise deals [1] - The number of customers contributing over $1 million in ARR increased by 18% year-over-year, with the Americas region accounting for 57% of total revenue [1] Business Strategy - Zscaler is positioning itself as a leader in the AI security space, having processed nearly 1 trillion AI transactions in 2025 [2] - The launch of 'AI Protect' aims to manage shadow AI and prevent data leaks or prompt-injection attacks [2] - The company is shifting its business model towards metered, non-seat-based usage, which now represents over 25% of new annual contract value [2] Growth Initiatives - The Z-Flex program allows large enterprises to swap or activate security modules without new procurement cycles, generating over $290 million in contract value this quarter [4] - Strategic acquisitions, including the purchase of SquareX and the integration of Red Canary, are expanding Zscaler's platform capabilities [4] Product Offerings - Zscaler operates as a cloud security company, providing various cyberthreat protection products such as Zscaler Internet Access, Zscaler Private Access, Zero Trust Firewall, Cloud Sandbox, and Zero Trust Browser [5]

Market Overview - All three major indexes ended lower, with the Dow logging its biggest weekly drop since November, driven by uncertainty over costs and disruptions related to artificial intelligence, revived tariff uncertainties, and geopolitical tensions [1][5] - The S&P 500 lost 30.49 points (0.44%) to close at 6,878.91 points, the Nasdaq Composite fell 204.74 points (0.92%) to 22,673.65, and the Dow Jones Industrial Average decreased by 521.69 points (1.05%) to 48,977.51 [5] Earnings and Corporate Performance - Corporate America is projected to see over a 14% gain in earnings for the fourth quarter, indicating a strong earnings season despite market volatility [2][5] - Financial stocks experienced declines due to concerns over potential losses related to the collapse of UK mortgage provider Market Financial Solutions Ltd, affecting banks like Barclays, Jefferies, and Wells Fargo [5] Sector Performance - Defensive sectors such as consumer staples, healthcare, and utilities outperformed during the session, indicating a risk-off environment where investors are favoring stability over growth [4][5] - Tech shares continued to decline, with concerns over AI impacting chip and software stocks, including Nvidia, which extended its previous drop despite solid earnings [5] Economic Indicators - A hotter-than-expected Producer Price Index reading has reinforced expectations that the U.S. Federal Reserve is unlikely to cut interest rates in the near term [5] - The market is experiencing a shift, with defensive areas gaining strength while cyclical growth sectors lag [5] Company-Specific Developments - Zscaler reported a wider net loss in the second quarter, leading to a significant drop in its stock price [5] - Netflix's stock rose after its decision to exit the competition for Warner Bros Discovery, while Paramount Skydance, the likely buyer, saw its shares close sharply higher [5] - Block's stock surged after announcing it would cut nearly half its workforce to integrate AI into its operations [5] - Dell's shares increased after the company projected that revenue from its AI-optimized servers business would double by fiscal year 2027 and promised to return more cash to shareholders [5]

Core Insights - Zscaler reported strong fiscal Q2 2026 results with a 25% year-over-year growth in annual recurring revenue (ARR) and raised guidance for the remainder of the year [3][5] - The company emphasized the impact of AI adoption on customer demand and security needs, highlighting significant growth in large deals and customer acquisitions [2][4] Financial Performance - Revenue for Q2 reached $816 million, reflecting a 26% year-over-year increase, exceeding guidance [5][18] - Total ARR grew to $3.4 billion, up 25% year-over-year, with net new ARR of $156 million, a 19% increase [2][5] - Non-GAAP gross margin was reported at 80.2%, with operating income of $181 million, up 29% year-over-year [16] Customer and Market Dynamics - The Americas accounted for 57% of revenue, with a 31% year-over-year increase, while EMEA and APJ regions saw revenue growth of 18% and 23% respectively [1] - Zscaler ended the quarter with 728 customers generating over $1 million in ARR, an 18% increase year-over-year [2] Product and Service Innovations - The company is shifting towards metered, non-seat usage solutions, contributing over a quarter of new annual contract value (ACV) in Q2, with ARR from these offerings growing more than 100% year-over-year [12] - Zscaler introduced AI Protect to manage AI assets and prevent data leaks, processing nearly 1 trillion AI transactions in 2025 [4][7] Strategic Acquisitions and Growth Initiatives - Zscaler completed the acquisition of SquareX to enhance its Zero Trust capabilities, focusing on securing access on unmanaged devices [14] - The company raised its ARR guidance for Red Canary to approximately $130 million for FY26, up from previous estimates [19] Future Outlook - For Q3, Zscaler guided revenue between $834 million and $836 million, projecting about 23% year-over-year growth [18] - Full-year fiscal 2026 guidance includes ARR of $3.730 billion to $3.745 billion, indicating about 24% growth [18]

Market Overview - Wall Street's main indexes experienced a decline, with the Nasdaq and S&P 500 on track for their steepest monthly loss since March 2025, driven by AI anxiety and hotter-than-expected inflation data [2] - The broader technology index fell by 1.7%, while financials dropped by 2.1%, indicating significant monthly declines for both sectors [4] Technology Sector - Nvidia's stock decreased by 2.4% after a more than 5% drop in the previous session, reflecting shaky risk sentiment towards AI-related investments [3] - Zscaler's shares plunged by 15% following a report of a wider net loss in the second quarter, contributing to a broader software index loss of 1.9% [8] - Concerns over high valuations and uncertain returns from Big Tech's AI investments have led to increased selling pressure in technology shares [2][5] Financial Sector - Jefferies' stock fell by 9.5% amid reports of potential losses related to the collapse of UK mortgage provider Market Financial Solutions Ltd [4] - UBS downgraded its recommended allocation to US equities to "neutral," citing high valuations and lower sensitivity of US corporate earnings to global growth [7] Defensive Sectors - Investors shifted towards defensive sectors, with consumer staples, utilities, and healthcare each rising by more than 1% [6] Notable Company Movements - Jack Dorsey's Block surged by 13.1% after announcing a significant job cut of over 4,000 positions to integrate AI into operations [10] - Dell's stock climbed by 20.5% after projecting that revenue from its AI-optimized servers business will double by fiscal year 2027 [10] - Netflix's shares increased by 10% as it exited the competition for Warner Bros Discovery, while Paramount Skydance rose by 18% after acquiring valuable TV and film assets [9] Market Statistics - The S&P 500 recorded 37 new 52-week highs and two new lows, while the Nasdaq Composite noted 50 new highs and 86 new lows [11]