Key Takeaways Zscaler guides Q1 revenues of $772M-$774M and EPS of 85-86 cents ahead of its Nov. 25 report.Growth is driven by Zero Trust, Data Security and momentum with large enterprise customers.Customer scrutiny, tight IT budgets and rising investments may have lifted first-quarter expenses.Zscaler (ZS) is scheduled to report its first-quarter fiscal 2026 results on Nov. 25, 2025.Zscaler anticipates revenues between $772 million and $774 million for first-quarter fiscal 2026. The Zacks Consensus Estimat ...

Core Insights - Palo Alto Networks (PANW) is experiencing significant growth in its Secure Access Service Edge (SASE) business, particularly driven by its Prisma Access Browser, with SASE Annual Recurring Revenue (ARR) increasing by 35% year-over-year in Q4 of fiscal 2025, outpacing the overall market growth rate [1][9] - The Prisma Access Browser is becoming essential for secure access to cloud-based applications, positioning itself as a critical interface for enterprise operations in the AI era [2][3] - Management anticipates sustained long-term demand for SASE solutions, with large enterprises already adopting the Prisma Access Browser at scale [3] SASE Business Growth - SASE ARR for Palo Alto Networks grew 35% year-over-year in Q4, significantly exceeding the market's growth rate [1][9] - Over three million licenses of the Prisma Access Browser were sold in Q4, leading to a total seat count of over six million, which doubled sequentially [1][9] AI and Cloud Integration - The adoption of AI tools in the workplace is driving the need for enhanced browser security, with the Prisma Access Browser expected to become the primary operating system for enterprise applications [2][4] - As AI adoption accelerates, Palo Alto Networks' early investments in browser security may provide a competitive advantage in the evolving network protection landscape [4] Competitive Landscape - Zscaler and Fortinet are key competitors in the SASE market, with Zscaler expanding its browser-based security offerings and Fortinet's SASE ARR growing by 22% year-over-year in Q2 of 2025 [5][6] - Fortinet differentiates itself by providing all core SASE capabilities within a single operating system and offers tailored solutions for large enterprises [6] Financial Performance and Valuation - Palo Alto Networks' shares have increased by 16.5% year-to-date, compared to a 19.4% growth in the Zacks Security industry [7] - The forward price-to-sales ratio for Palo Alto Networks is 13.21X, slightly above the industry average of 13.04X [11] - The Zacks Consensus Estimate for fiscal 2026 total revenues is projected at $10.42 billion, reflecting a year-over-year increase of 13% [4][14]

Group 1 - Investors are showing a bullish stance on Zscaler, with significant options trading activity indicating potential upcoming movements in the stock [1][2] - The overall sentiment among large traders is mixed, with 41% bullish and 33% bearish positions noted in the options trades [2] - Major market movers are focusing on a price range between $245.0 and $320.0 for Zscaler over the last three months [3][4] Group 2 - A detailed analysis of options trading volume and open interest reveals investor interest in Zscaler's options, particularly within the specified strike price range [4] - Recent options activity includes a mix of calls and puts, with notable trades indicating a total of $420,235 in calls and $130,660 in puts [2][10] - Zscaler is a SaaS company specializing in cloud-native cybersecurity solutions, with its offerings divided into Zscaler Internet Access and Zscaler Private Access [11] Group 3 - Current market analysis suggests an average target price of $350.0 for Zscaler, as proposed by industry analysts [13][14] - The stock is currently priced at $305.24, with a trading volume of 850,985 and neutral RSI indicators suggesting a balanced market position [16]

Core Insights - Zscaler is set to report its fourth-quarter fiscal 2025 results on September 2, 2025, with anticipated revenues between $705 million and $707 million, reflecting a year-over-year growth of 19.1% [1][9] - The company expects non-GAAP earnings per share in the range of 79-80 cents, indicating a year-over-year decline of 9% [2][9] - Zscaler has consistently beaten earnings estimates in the past four quarters, with an average surprise of 18.7% [3][9] Revenue and Earnings Expectations - The Zacks Consensus Estimate for Zscaler's fiscal fourth-quarter revenues is $706.2 million [1] - The earnings per share estimate has remained unchanged at 80 cents over the past 60 days [2] Growth Drivers - The expected revenue growth is attributed to Zscaler's security and networking solutions, particularly in the context of the expanding global security market [6] - Strong momentum with Global 2000 and Fortune 500 customers, driven by digital transformation and hybrid work trends, is likely to be a key catalyst [7] - The adoption of Software-Defined Wide Area Network (SD-WAN) solutions is projected to contribute significantly, with the market expected to grow from $5.36 billion in 2024 to $80.91 billion by 2034, at a CAGR of 31.6% [8] Customer Retention and Product Performance - Zscaler's core products, including Zscaler Internet Access and Zscaler Private Access, have been crucial for customer retention [10] - Other offerings such as Cloud Access Security Broker and Cloud Security Posture Management are also expected to enhance customer acquisition [10] Competitive Landscape - Zscaler faces intense competition from established players like Palo Alto Networks, CyberArk, and CrowdStrike, particularly in areas like Agentic Operations and Zero Trust Strategy [16][17] - The company is increasing investments in sales and marketing, as well as research and development, to maintain its competitive edge [18] Stock Performance and Valuation - Zscaler's shares have increased by 55.4% year-to-date, outperforming the Zacks Security industry's growth of 11.5% [12] - The stock is currently trading at a forward 12-month price-to-sales ratio of 13.51X, compared to the industry's 12.39X [13] Long-term Outlook - The demand for cybersecurity solutions across various industries positions Zscaler favorably for long-term growth [15] - However, near-term challenges related to profit growth suggest a cautious approach for new investments, while existing shareholders may consider holding [19]

Core Insights - Fortinet's transition to a subscription-driven business model is driving significant growth in recurring service revenues, with service revenues increasing by 14% year-over-year to $1.08 billion in Q1 2025, representing 70% of total revenues [1][11] - The Unified SASE strategy has reported recurring revenues of $1.15 billion, up 25.7% year-over-year, while Security Operations' recurring revenues surged 30.3% year-over-year to $434.5 million [1][11] - Fortinet is aggressively investing in its SASE and SSE offerings to expand subscription-based revenue streams, with notable traction in large-scale enterprise deals [3] Revenue Growth - Multi-year contracts for services such as FortiGuard, FortiCare, FortiCloud, Unified SASE, and Security Operations are driving revenue growth [2] - The company expects service revenues to reach approximately $4.6 billion in 2025, indicating a year-over-year growth of 13.4% [5] Market Position and Competition - Fortinet faces stiff competition in the enterprise security market from companies like Palo Alto Networks and Zscaler [6] - Palo Alto Networks is expected to deliver recurring revenues between $5.52 billion and $5.57 billion for fiscal 2025, while Zscaler has a customer base of over 8,650 organizations [7][8] Pricing and Future Outlook - Fortinet's scalable, per-user pricing model with multi-year discounts is expected to enhance future recurring revenues [4] - Unified SASE and Security Operations are projected to experience a compound annual growth rate (CAGR) of 24% through 2026 [4][11] Stock Performance and Valuation - Fortinet's shares have risen 13.9% year-to-date, underperforming the Zacks Security industry's growth of 27.1% [9] - The stock is currently trading at a Price/Book ratio of 41.98X, compared to the industry's 25.76X, indicating a lower valuation score [14]

Core Viewpoint - Zscaler, Inc. is a leading player in the cybersecurity sector, but its high price-to-sales (P/S) multiple of 15.56X raises concerns about its valuation amid slowing growth rates [1][6]. Financial Performance - In Q3 FY25, Zscaler reported a year-over-year revenue growth of 22.6%, a decline from the 30% range in FY24 and 40% in FY23 [3][4]. - The revenue growth forecast for FY25 is expected to be around 22.7%, indicating a continued slowdown [4]. - The Zacks Consensus Estimate for Zscaler's FY25 earnings suggests a year-over-year decline of 0.31% [7]. Competitive Landscape - Zscaler faces increasing competition from established cybersecurity firms such as Palo Alto Networks, CyberArk, and CrowdStrike, which are investing heavily in innovative cybersecurity solutions [5][6]. - The company must maintain high spending on R&D to stay competitive and innovate in the market [5][6]. Growth Initiatives - Zscaler's New Growth Categories, which include Zero Trust Everywhere and Agentic Operations, reached approximately $1 billion in annual recurring revenues (ARR) [10]. - The company has successfully implemented its Zero Trust Exchange, gaining over 210 adoptions and achieving 60% quarter-over-quarter growth in Q3 FY25 [9]. - Zscaler's total ARR reached $2.9 billion in Q3 FY25 [10]. Strategic Partnerships and Innovations - Zscaler has launched new solutions like Asset Exposure Management and partnered with SAP to integrate its services within SAP's RISE framework [11]. - The company is enhancing its offerings with AI technologies through partnerships with NVIDIA and CrowdStrike [12]. Government Sector Expansion - Zscaler is expanding its GovCloud solutions and has enabled numerous government agencies to utilize its products, serving 14 out of 15 U.S. cabinet-level agencies [14][15]. - The inclusion in Amazon Web Services' Internet Control Message Protocol enhances Zscaler's accessibility to U.S. federal agencies [15]. Market Performance - Zscaler's share price has surged 74% year-to-date, outperforming the Zacks Security Industry and its peers [16].

Core Insights - Zscaler, Inc. (ZS) shares have increased by 46% over the past three months, significantly outperforming the Zacks Security industry's return of 10.7% and its peers like CyberArk Software, Palo Alto Networks, and CrowdStrike [1][7] Company Growth and Developments - Zscaler has launched the Asset Exposure Management solution to improve asset risk management and partnered with SAP to integrate its Zero Trust Network Access service within SAP's RISE framework, facilitating cloud migrations and compliance with regulations [2] - The company has expanded its capabilities through the acquisition of Red Canary, enhancing its Managed Detection and Response solutions to address rising cyber threats [3] - Zscaler is integrating artificial intelligence into its products by partnering with NVIDIA and CrowdStrike, enhancing its Zero Trust Security model with advanced AI technologies [4] Financial Performance - In Q3 of fiscal 2025, Zscaler achieved a 12-month trailing dollar-based retention rate of 114%, driven by larger bundle sales and robust upsells [5] - Remaining Performance Obligations increased by 30% year-over-year, with 642 customers generating $1 million or more in annual recurring revenues (ARR) and 3,363 customers with ARR exceeding $100,000 [8] Government Sector Expansion - Zscaler is enhancing its GovCloud solutions to comply with government security standards, serving 14 out of 15 U.S. cabinet-level agencies, which could provide a stable growth stream [9][10] Competitive Landscape - Zscaler faces intense competition from established cybersecurity players like Palo Alto Networks, CyberArk, and CrowdStrike, particularly in its Internet Access and Private Access offerings [11] - The company is investing heavily in sales and marketing to broaden its capabilities, which may impact near-term profitability [12] Earnings Outlook - Zscaler expects non-GAAP earnings per share for fiscal 2025 to be in the range of $3.18-$3.19, with the Zacks Consensus Estimate at $3.06, reflecting a 4% year-over-year decline [13] Valuation Concerns - Zscaler holds a premium valuation with a Forward 12-month P/S ratio of 13.92X, significantly higher than the sector average of 5.54X, indicating potential valuation concerns [15] Investment Recommendation - Despite challenges related to rising costs and premium valuation, Zscaler's investments in AI, innovative cybersecurity capabilities, and strong customer retention make the stock worth holding for now [16]

Core Viewpoint - Zscaler is expected to report third-quarter fiscal 2025 results with anticipated revenues of $665 million to $667 million, reflecting a year-over-year growth of 20.4% [1]. Revenue and Earnings Estimates - The Zacks Consensus Estimate for Zscaler's fiscal third-quarter revenues is $666.1 million [1]. - Non-GAAP earnings per share are expected to be between 75-76 cents, with the Zacks Consensus Estimate at 75 cents, indicating a year-over-year decline of 14.8% [2]. - Revenue estimates from Channel Partners and Direct Customers are projected at $588 million and $77.4 million, respectively, with a remaining performance obligation of approximately $4.65 billion [10]. Market and Product Insights - Sustained demand for Zscaler's security and networking solutions is anticipated, driven by the expansion of the global security space and the adoption of its Zero Trust Exchange [7]. - The growing adoption of Software-Defined Wide Area Network (SD-WAN) solutions is expected to be a primary driver, with the market projected to reach $80.91 billion by 2034, growing at a CAGR of 31.6% [8]. - Zscaler's existing core products, including Zscaler Internet Access and Zscaler Private Access, are contributing to customer retention, while new features in its Zero Trust Exchange are aiding product portfolio expansion [9]. Competitive Position and Financial Performance - Zscaler's shares have increased by 40.9% year-to-date, outperforming the Zacks Security industry's growth of 16.9% [12]. - The stock is trading at a forward 12-month P/S of 12.79X, which is lower than the industry's 14.21X, indicating potential undervaluation [13]. Strategic Initiatives and Challenges - The company is investing in sales and marketing capabilities and increasing research and development costs to address longer deal cycles due to tighter IT budgets [11]. - Zscaler faces intense competition from established players like Palo Alto Networks and CrowdStrike, necessitating continuous investment in broadening its capabilities [18][19]. Long-term Outlook - The demand for cybersecurity solutions is rising due to increasing data breaches, and Zscaler's strong presence across various verticals provides stability against macroeconomic headwinds [16][17]. - Despite the long-term growth prospects, near-term challenges related to profit growth suggest a cautious approach for new investments [20].

Core Viewpoint - Cybersecurity providers are expected to remain resilient amid market volatility caused by tariffs, as cybercriminal activities continue unabated. Investors are encouraged to consider four leading cybersecurity stocks this month [1]. Group 1: Palo Alto Networks - Palo Alto Networks is transitioning from a next-generation firewall provider to a comprehensive cybersecurity platform, implementing a "platformization" strategy to consolidate customers onto three main platforms [3]. - The strategy has resulted in 1,150 of its top 5,000 customers adopting one of its platforms, with a target of 2,500 to 3,500 by fiscal year 2030. Growth is also seen in its Cortex threat detection and response solution and Prisma Cloud [4]. - Although the platformization strategy temporarily slowed growth, it is expected to yield long-term benefits for investors [5]. Group 2: CrowdStrike - CrowdStrike is positioned to benefit from companies consolidating their cybersecurity needs onto a single platform, being a leader in endpoint security [6]. - The company offers a comprehensive suite of cybersecurity solutions, with 67% of customers deploying five or more modules and 21% using eight or more [8]. - With the impact of a previous IT outage behind it, CrowdStrike is expected to see growth accelerate, making it an attractive investment opportunity [9]. Group 3: Zscaler - Zscaler is a leader in zero-trust security, emphasizing continuous verification of users and devices for secure access [10]. - The company has successfully upsold its zero-trust systems and reported a 40% increase in annual contract value for its data security products, with overall revenue growing 23% year over year [12]. - Zscaler's strong net dollar retention rate of 115% indicates robust growth within its existing customer base, positioning it well for future success [12]. Group 4: SentinelOne - SentinelOne is a rapidly growing endpoint cybersecurity company with a low forward price-to-sales multiple of 6.6, despite achieving 29% revenue growth last quarter [13]. - The partnership with Lenovo, the world's largest enterprise PC vendor, to ship computers with SentinelOne's Singularity Platform is a significant opportunity [14]. - The company is also successfully upselling its Purple AI, which enhances security operations through hyper-automation, indicating a promising future [15][16].