Zscaler Inc. (NASDAQ:ZS) ranks among the best AI stocks to buy according to analysts. On December 16, Mizuho upgraded Zscaler Inc. (NASDAQ:ZS) to Outperform, noting valuation support despite ongoing concerns about near-term growth prospects. According to analyst Gregg Moskowitz, Zscaler Inc. (NASDAQ:ZS) shares “have been very weak since reporting a very solid F1Q,” with the decrease attributed to “F2Q net new ARR guidance slightly lower than prior” and the lack of “a specific contribution from the recent R ...

Core Insights - Zscaler, Inc. reported strong first-quarter fiscal 2026 results with non-GAAP earnings of 96 cents per share, exceeding estimates by 12.94% and showing a year-over-year increase of 23.6% driven by higher revenues and effective cost management [1][9] - The company's revenues for the first quarter reached $788.1 million, surpassing the Zacks Consensus Estimate by 1.91% and management's guidance, reflecting a 26% year-over-year growth [2][9] - Zscaler raised its fiscal 2026 revenue guidance to a range of $3.282-$3.301 billion, up from the previous forecast, indicating strong market demand and performance [7] Financial Performance - Non-GAAP gross profit increased by 24.5% year over year to $630 million, while the gross margin contracted by 100 basis points to 80% [5] - Non-GAAP operating income rose to $172 million from $90 million in the previous year, with the operating margin expanding by 100 basis points to 22% [5] - Remaining Performance Obligations (RPO) reached $5.9 billion, a 35% increase year over year, indicating strong future revenue commitments [3][9] Customer Growth - Zscaler added multiple large customers across its offerings, ending the quarter with 698 customers generating $1 million or more in annual recurring revenues (ARR) [4] - The total customer count for ARR exceeding $100,000 reached 3,754 by the end of the first quarter [4] Cash Flow and Balance Sheet - As of October 31, 2025, Zscaler had $3.32 billion in cash and short-term investments, down from $3.57 billion as of July 31, 2025 [6] - The company generated operating cash flow of $448.3 million and free cash flow of $413.3 million during the first quarter [6] Future Guidance - For the second quarter of fiscal 2026, Zscaler projects revenues between $797 million and $799 million, with non-GAAP earnings per share expected between 89 cents and 90 cents [10] - The Zacks Consensus Estimate for second-quarter revenues is $794.38 million, indicating a year-over-year growth of 22.6% [10]

Core Insights - Zscaler, Inc. reported strong financial results for Q1 FY2026, highlighting robust demand for its Zero Trust and AI Security platform, with Annual Recurring Revenue (ARR) exceeding $3.2 billion, growing over 25% year-over-year [3][6][8] - The company emphasizes the integration of recently acquired technologies to enhance its AI Security offerings, addressing emerging security challenges [3][6] Financial Performance - Revenue increased by 26% year-over-year to $788.1 million [6][7] - ARR grew by 26% year-over-year to $3.204 billion [6][7] - Deferred revenue rose by 32% year-over-year to $2.351 billion [6][7] - GAAP net loss was $11.6 million, an improvement from a loss of $12.1 million in the previous year [6][7] - Non-GAAP net income reached $159.5 million, compared to $124.3 million in the same quarter last year [6][7] Operational Highlights - Cash provided by operations was $448.3 million, representing 57% of revenue, up from 53% in the previous year [7][32] - Free cash flow was $413.3 million, or 52% of revenue, compared to 46% in the prior year [7][32] - The company completed acquisitions of Red Canary and SPLXAI for a total of $692 million, aimed at enhancing its AI security capabilities [6][7][14] Market Position and Strategy - Zscaler's Zero Trust Exchange platform is positioned as a leading solution in cloud security, with a focus on protecting enterprises from cyber threats [3][23] - The company launched new innovations in its Zscaler Digital Experience (ZDX) to improve visibility and performance for IT teams [6][7] - Zscaler has surpassed $1 billion in software sales through the AWS Marketplace, indicating strong market traction [14] Future Outlook - For Q2 FY2026, Zscaler expects revenue between $797 million and $799 million, with non-GAAP income from operations projected at $172 million to $174 million [15][10] - The full-year revenue guidance is set between $3.282 billion and $3.301 billion, with non-GAAP net income per share anticipated to be approximately $3.78 to $3.82 [15][10]

Core Viewpoint - Zscaler's recent earnings report shows strong performance with significant revenue and earnings growth, indicating a positive trend leading up to the next earnings release [2][3][9]. Financial Performance - Zscaler reported Q4 fiscal 2025 non-GAAP earnings of 89 cents per share, exceeding estimates by 11.3% and reflecting a year-over-year increase of 23.6% [2]. - Revenues for Q4 reached $719.2 million, surpassing estimates by 1.9% and management's guidance, with a year-over-year growth of 21% [3]. - Calculated billings increased by 32% year over year to $1.2 billion, with the Americas contributing 55% of revenues [4]. Customer Metrics - As of July 31, Zscaler had 664 customers with annualized recurring revenues (ARR) of $1 million or more, and 3,494 customers with ARR exceeding $100,000 [5]. Operating Details - Non-GAAP gross profit rose 18.5% year over year to $570.1 million, while the gross margin contracted to 79.3% [6]. - Non-GAAP operating income increased to $158.9 million, with an operating margin of 22.1% [6]. Balance Sheet & Cash Flow - Zscaler's cash, cash equivalents, and short-term investments totaled $3.57 billion as of July 31, 2025, up from $3.01 billion in April 2025 [7]. - The company generated operating cash flow of $250.6 million and free cash flow of $171.9 million in Q4 [7]. Guidance - For fiscal 2026, Zscaler forecasts revenues between $3.265 billion and $3.284 billion, with non-GAAP earnings per share expected in the range of $3.64 to $3.68 [9]. Industry Context - Zscaler is part of the Zacks Security industry, which has seen positive performance from peers like CrowdStrike, which reported a 21% year-over-year revenue increase [13].

Core Viewpoint - Zscaler Inc. is highlighted as a strong long-term investment opportunity, with analysts at Truist Securities maintaining a 'Buy' rating and a price target of $350, driven by growth in its emerging business segment [1][2]. Group 1: Business Strategy and Growth - The management team emphasized the company's long-term platform strategy, focusing on the Zero Trust Branch Offering [2]. - The Z-Flex licensing model, introduced recently, has become a significant growth driver due to its commitment-based subscription model, contrasting with traditional consumption or enterprise models [2]. - In Q4 of fiscal 2025, the Z-Flex program achieved over $100 million in total contract value bookings, marking a 50% increase quarter-over-quarter [3]. Group 2: Financial Performance - Zscaler reported revenue of $719 million for the quarter, surpassing consensus estimates of $706.95 million, largely attributed to the growth from the Z-Flex program [3]. Group 3: Company Overview - Zscaler Inc. is a cloud-based cybersecurity firm that offers a Zero Trust Exchange platform, which replaces traditional network security with cloud-delivered services, enabling secure internet access and application connectivity for distributed workforces [4].

Core Viewpoint - Zscaler Inc. is highlighted as a top investment opportunity in the cybersecurity sector, with a recent price target increase from Canaccord Genuity reflecting strong market performance and growth potential [1][2]. Company Overview - Zscaler Inc. is a cloud-based cybersecurity firm that provides secure internet and application access through its Zero Trust Exchange platform, offering services such as cloud firewalls, data loss prevention, and zero-trust network access (ZTNA) [4]. Market Opportunity - The company is positioned to capitalize on a serviceable addressable market exceeding $100 billion, driven by increased spending per customer and favorable industry trends [3]. Industry Trends - Zscaler's growth is supported by several industry tailwinds, including cloud migration, security modernization, and the accelerated adoption of Zero Trust principles [3]. Recent Performance - The stock has experienced a significant rally, increasing by 72% year to date, prompting Canaccord Genuity to raise its price target to $340 from $320 [1][2].

Core Insights - CrowdStrike Holdings (CRWD) reported a strong start to fiscal 2026 with a free cash flow (FCF) margin increase to 25% from 23% in the previous quarter, generating $279 million in free cash flow despite incurring $61 million in outage-related expenses [1][10] Financial Performance - The company's revenue grew 20% year over year to $1.1 billion in the fiscal first quarter, driven by the adoption of the Falcon Flex platform, with over 820 customer accounts utilizing this model [2] - CrowdStrike achieved a deal value milestone of $3.2 billion within two years of launching Falcon Flex, reflecting a 31% sequential growth and over six times year-over-year growth [2][10] Strategic Initiatives - A strategic realignment in May 2025 focused on reallocating investments into growth areas such as cloud, identity, exposure management, AI, and Next-Gen Security Information and Event Management, which is expected to enhance platform resilience and add at least 1% to its non-GAAP operating margin target in fiscal 2027 [3] - The company aims to exceed 30% in free cash flow margins by fiscal 2027 if the current pace of platform gains and Flex adoption continues [4] Competitive Landscape - Competitors like Zscaler (ZS) and SentinelOne (S) are also evolving their platforms to meet enterprise security demands, with Zscaler reporting an annual recurring revenue (ARR) of $2.9 billion, up 23% year over year [5][6] - SentinelOne experienced a 24% year-over-year growth in ARR in the first quarter of fiscal 2026, driven by the adoption of its AI-first Singularity platform [7] Valuation Metrics - CrowdStrike's shares have increased by 47.5% year to date, outperforming the security industry's growth of 25.6% [8] - The company trades at a forward price-to-sales ratio of 24.14X, significantly higher than the industry's average of 15.06X [11] - The Zacks Consensus Estimate for CRWD's fiscal 2026 earnings indicates a year-over-year decline of 10.94%, while fiscal 2027 earnings are projected to grow by 34.68% [14]

Core Insights - Palo Alto Networks (PANW) is successfully implementing its platformization strategy, leading to significant customer adoption across its product offerings in network, cloud, and security operations [1][4] - The company added over 90 new platformized deals in Q3 of fiscal 2025, totaling approximately 1,250 platformizations among its top 5,000 accounts [1][10] - Large transactions indicate a willingness among customers to invest in unified platforms, with notable deals including a $90 million contract with a global consulting firm and a $46 million deal with a financial services firm [2][3] Customer Adoption and Growth Potential - Customers utilizing multiple PANW platforms increased by nearly 70% year over year in Q3 [4] - Management aims for platformization to contribute significantly to its $15 billion Next-Gen Security Annual Recurring Revenue (ARR) target by fiscal 2030, with 60-70% expected from platformized customers [4] - Currently, only about 2% of PANW's over 70,000 customers are fully platformized, indicating substantial growth potential [4][10] Competitive Landscape - Competitors like Zscaler and SentinelOne are also enhancing their platforms to meet enterprise security needs [5] - Zscaler reported an ARR of $2.9 billion, growing 23% year over year, with its Zero Trust Exchange platform becoming a key growth driver [6] - SentinelOne achieved a 24% year-over-year growth in ARR, driven by the adoption of its AI-first Singularity platform [7] Financial Performance and Valuation - PANW shares have increased by 12.5% year to date, compared to the security industry's growth of 23.5% [8] - The company trades at a forward price-to-sales ratio of 12.92X, which is lower than the industry's average of 14.85X [12] - The Zacks Consensus Estimate for PANW's fiscal 2025 and 2026 earnings suggests year-over-year growth of 15.1% and 11.2%, respectively, with recent upward revisions in estimates [15]

Core Viewpoint - Market volatility driven by macro uncertainty necessitates a focus on stocks with strong long-term return potential, supported by top Wall Street analysts' recommendations [1][2] Group 1: Nvidia (NVDA) - Nvidia reported market-beating results for Q1 of fiscal 2026, maintaining confidence in AI infrastructure demand despite chip export restrictions [3][4] - JPMorgan analyst Harlan Sur reiterated a buy rating with a price target of $170, noting solid revenue despite a $4.5 billion write-down related to H20 inventory [4][6] - Excluding H20 shipments, data center revenue is projected to grow 16% quarter over quarter, driven by strong customer spending on AI projects [5][6] - Demand for Nvidia's Blackwell platform is strong, expected to exceed supply for several quarters, supported by mega data center deals [6][7] Group 2: Zscaler (ZS) - Zscaler's fiscal Q3 results surpassed expectations, driven by demand for its Zero Trust Exchange platform and AI security needs [8][9] - JPMorgan analyst Brian Essex reaffirmed a buy rating and raised the price target to $292, highlighting the company's raised full-year outlook for revenue and profitability [9][11] - The number of customers with over $1 million in annual recurring revenue increased by 23% year over year, positioning Zscaler to exceed $3 billion in ARR [11][12] - The acquisition of Red Canary is viewed positively, expected to enhance Zscaler's IP and threat intelligence capabilities [12] Group 3: Salesforce (CRM) - Salesforce reported better-than-expected revenue and earnings for Q1 of fiscal 2026 and raised its full-year forecast, alongside an $8 billion acquisition of Informatica [13][14] - TD Cowen analyst Derrick Wood reiterated a buy rating with a price target of $375, noting strong demand signals from the company's renewed focus on sales capacity growth [14][16] - AI adoption is accelerating, with Data Cloud and AI ARR rising over 120% year over year, indicating strong traction for the Agentforce offering [15][16] - Salesforce is increasing its workforce aggressively, signaling positive demand and growing sales pipelines [16][17]

Core Insights - Zscaler reported strong third-quarter fiscal 2025 results, with non-GAAP earnings of 84 cents per share, exceeding the Zacks Consensus Estimate by 12% and reflecting an 18.3% year-over-year increase driven by revenue growth and cost management [1][3] - The company's revenues for the third quarter reached $678 million, surpassing the Zacks Consensus Estimate by 1.8% and management's guidance, marking a 23% year-over-year growth [2][3] - Following the positive results, Zscaler raised its fiscal 2025 guidance, which is expected to positively impact its stock performance [3] Financial Performance - Zscaler's calculated billings increased by 25% year over year to $784.5 million, with the Americas contributing 54% of revenues, EMEA 30%, and Asia Pacific and Japan 16% [4] - The non-GAAP gross profit rose by 20.8% year over year to $544.15 million, while the non-GAAP gross margin contracted by 100 basis points to 80% [7] - Total non-GAAP operating expenses accounted for 58.6% of revenues, increasing by 21% year over year to $397.5 million, resulting in a non-GAAP operating income of $146.7 million [7] Customer Metrics - Zscaler added multiple large customers across its offerings, achieving a net 12-month trailing dollar-based retention rate of 114% [5] - The company had 642 customers with annualized recurring revenues (ARR) of $1 million or more, and 3,363 customers with ARR exceeding $100,000 at the end of the third quarter [6] Balance Sheet and Cash Flow - As of April 30, 2025, Zscaler had $1.99 billion in cash and short-term investments, down from $2.88 billion as of January 31, 2025 [8] - The company generated operating cash flow of $211.1 million and free cash flow of $119.5 million during the third quarter [8] Updated Guidance - Zscaler revised its fiscal 2025 revenue forecast to a range of $2.659-$2.661 billion, up from $2.640-$2.654 billion, indicating a growth of 22.18% from fiscal 2024 [9] - The company expects calculated billings to be in the range of $3.184-$3.189 billion, an increase from the previous guidance [9] - Non-GAAP earnings per share for fiscal 2025 are now projected between $3.18 and $3.19, compared to the previous guidance of $3.04-$3.09 [10]