In the ever-evolving landscape of cloud security, two players stand out: Cloudflare, Inc. (NET) and Zscaler, Inc. (ZS). Both companies operate within the Software – Infrastructure sector, delivering innovative solutions for businesses seeking to enhance their digital security. Their overlapping market focus and distinct innovation strategies make for a compelling comparison. As we delve into this analysis, I aim to uncover which of these companies presents the more attractive investment opportunity for savvy investors like you.
Table of contents
Company Overview
Cloudflare, Inc. Overview
Cloudflare, Inc. (NYSE: NET) is a leading cloud services provider, dedicated to enhancing the security and performance of internet applications. Founded in 2009 and headquartered in San Francisco, California, Cloudflare offers a comprehensive suite of security solutions, including cloud firewalls, bot management, and DDoS protection. The company targets a diverse clientele across industries such as technology, healthcare, and finance, ensuring secure access to applications hosted on various platforms. With a market cap of approximately $70B and a robust employee base of 4,400, Cloudflare is well-positioned in the rapidly evolving digital landscape.
Zscaler, Inc. Overview
Zscaler, Inc. (NASDAQ: ZS) is a prominent player in the cloud security sector, specializing in secure access to SaaS applications and internal data. Established in 2007 and based in San Jose, California, Zscaler’s offerings include Zscaler Internet Access and Zscaler Private Access, which facilitate secure connections for users and devices. The company also focuses on enhancing digital experiences and workload segmentation to mitigate risks. With a market cap of around $39B and a workforce of 7,348, Zscaler is committed to delivering innovative security solutions to a wide range of industries, including financial services and telecommunications.
Key similarities and differences
Both Cloudflare and Zscaler operate in the cloud security space, providing services that secure applications and enhance performance. However, their business models differ in focus; Cloudflare emphasizes a wider array of performance and reliability solutions, while Zscaler specializes in secure access to external and internal applications.
Income Statement Comparison
In the following table, I present a comparison of the income statements for Cloudflare, Inc. (NET) and Zscaler, Inc. (ZS) for their most recent fiscal years. This will help investors gauge the financial performance and health of these companies.
| Metric | Cloudflare, Inc. (NET) | Zscaler, Inc. (ZS) |
|---|---|---|
| Market Cap | 70.1B | 39.1B |
| Revenue | 1.67B | 2.67B |
| EBITDA | 62M | 112M |
| EBIT | -66M | -8.8M |
| Net Income | -78.8M | -41.5M |
| EPS | -0.23 | -0.27 |
| Fiscal Year | 2024 | 2025 |
Interpretation of Income Statement
Cloudflare, Inc. showed a significant increase in revenue from 1.30B in 2023 to 1.67B in 2024, but it continued to report a net loss of 78.8M, albeit improved from the previous year’s 183.9M loss. Zscaler, on the other hand, experienced robust revenue growth from 2.17B in 2024 to 2.67B in 2025, maintaining a relatively stable EBITDA margin. However, both companies are still operating at a loss, indicating ongoing investment in growth strategies. Overall, while revenue growth is promising, both firms must focus on improving profitability to attract long-term investors.
Financial Ratios Comparison
In this section, I present a comparative analysis of key financial ratios for Cloudflare, Inc. (NET) and Zscaler, Inc. (ZS) based on the most recent available data.
| Metric | Cloudflare, Inc. (NET) | Zscaler, Inc. (ZS) |
|---|---|---|
| ROE | -7.53% | -2.31% |
| ROIC | -6.61% | -7.11% |
| P/E | -466.54 | -1063.01 |
| P/B | 35.14 | 24.51 |
| Current Ratio | 2.86 | 2.01 |
| Quick Ratio | 2.86 | 2.01 |
| D/E | 1.40 | 0.99 |
| Debt-to-Assets | 44.32% | 27.98% |
| Interest Coverage | -29.78 | -13.49 |
| Asset Turnover | 0.51 | 0.42 |
| Fixed Asset Turnover | 2.63 | 4.22 |
| Payout ratio | 0% | 0% |
| Dividend yield | 0% | 0% |
Interpretation of Financial Ratios
Both companies exhibit negative Return on Equity (ROE) and Return on Invested Capital (ROIC), indicating operational inefficiencies and challenges in profitability. Cloudflare appears to have a better liquidity position with higher current and quick ratios compared to Zscaler. However, both companies carry significant debt levels, as reflected in their Debt-to-Equity ratios. The interest coverage ratios are concerning, suggesting difficulties in meeting interest obligations, which warrants caution for potential investors.
Dividend and Shareholder Returns
Both Cloudflare, Inc. (NET) and Zscaler, Inc. (ZS) do not pay dividends, reflecting a focus on reinvestment for growth rather than returning cash to shareholders. Their negative net income suggests a high-growth phase, prioritizing R&D and acquisitions. Both companies are also engaged in share buyback programs, which can enhance shareholder value if executed judiciously. However, the absence of dividends may raise concerns about long-term sustainability in value creation for shareholders.
Strategic Positioning
In the cloud security market, Cloudflare, Inc. (NET) and Zscaler, Inc. (ZS) are significant players, each with unique offerings. Cloudflare boasts a market cap of $70.1B, focusing on integrated cloud services and performance solutions. Zscaler follows with a $39.1B market cap, emphasizing secure access and digital experience management. Both face competitive pressure from emerging technologies and established firms, necessitating continuous innovation to maintain their market shares and handle the ongoing threat of technological disruption.
Stock Comparison
In this section, I will evaluate the weekly stock price movements of Cloudflare, Inc. (NET) and Zscaler, Inc. (ZS) over the past year, highlighting key price dynamics and trends that may influence investment decisions.
Trend Analysis
Cloudflare, Inc. (NET) Over the past year, NET has experienced a remarkable price change of +162.47%, indicating a bullish trend. The stock reached a notable high of 253.3 and a low of 67.69. However, in the recent period from September 14 to November 30, 2025, the price has decreased by -9.54%, suggesting a temporary bearish trend. The recent data also shows a standard deviation of 15.78, indicating some volatility. The overall trend is marked by deceleration, which could imply a slowing momentum despite the strong yearly performance.
Zscaler, Inc. (ZS) ZS has also shown a positive price change of +19.87% over the past year, maintaining a bullish trend. The stock recorded a high of 331.14 and a low of 156.78. However, similar to NET, ZS has seen a decline of -11.19% in the recent period from September 14 to November 30, 2025, reflecting a bearish trend. The standard deviation of 21.08 indicates moderate volatility. The trend for ZS is also in a state of deceleration, suggesting a potential slowdown in upward momentum.
In summary, both stocks show strong annual performance but have recently faced downward pressure, warranting caution for potential investors.
Analyst Opinions
Recent analyst recommendations indicate a cautious stance towards Cloudflare, Inc. (NET) with a rating of D+, reflecting concerns over its financial metrics. Analysts suggest holding due to a lack of growth indicators. In contrast, Zscaler, Inc. (ZS) has a slightly better rating of C-, indicating some potential for improvement, although still recommended as a hold by experts. The consensus for both stocks leans towards hold for the current year, emphasizing the importance of risk management amid market uncertainties.
Stock Grades
Here are the latest stock ratings for Cloudflare, Inc. (NET) and Zscaler, Inc. (ZS) from reputable grading companies.
Cloudflare, Inc. Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Argus Research | maintain | Buy | 2025-11-10 |
| Citigroup | maintain | Buy | 2025-11-03 |
| Susquehanna | maintain | Neutral | 2025-11-03 |
| RBC Capital | maintain | Outperform | 2025-10-31 |
| Piper Sandler | maintain | Neutral | 2025-10-31 |
| UBS | maintain | Neutral | 2025-10-31 |
| Stifel | maintain | Buy | 2025-10-31 |
| Needham | maintain | Buy | 2025-10-31 |
| Keybanc | maintain | Overweight | 2025-10-31 |
| Citizens | maintain | Market Outperform | 2025-10-31 |
Zscaler, Inc. Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Stifel | maintain | Buy | 2025-11-26 |
| Rosenblatt | maintain | Buy | 2025-11-26 |
| B of A Securities | maintain | Buy | 2025-11-26 |
| Scotiabank | maintain | Sector Outperform | 2025-11-26 |
| Mizuho | maintain | Neutral | 2025-11-26 |
| UBS | maintain | Buy | 2025-11-26 |
| Needham | maintain | Buy | 2025-11-26 |
| Baird | maintain | Outperform | 2025-11-26 |
| BTIG | maintain | Buy | 2025-11-26 |
| Bernstein | maintain | Outperform | 2025-11-26 |
Overall, both companies maintain strong grades with a consensus leaning towards “Buy” from several reputable firms, indicating positive sentiment among analysts. The trend suggests confidence in their continued performance in the market.
Target Prices
The consensus target prices from analysts for Cloudflare, Inc. (NET) and Zscaler, Inc. (ZS) indicate strong growth potential.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Cloudflare, Inc. | 300 | 220 | 256 |
| Zscaler, Inc. | 360 | 264 | 320.64 |
For Cloudflare, the current stock price of 200.13 is significantly below the consensus of 256, suggesting a potential upside. Similarly, Zscaler’s current price of 250.92 is also below its consensus target of 320.64, pointing to a favorable outlook according to analysts.
Strengths and Weaknesses
The following table summarizes the strengths and weaknesses of Cloudflare, Inc. (NET) and Zscaler, Inc. (ZS).
| Criterion | Cloudflare, Inc. (NET) | Zscaler, Inc. (ZS) |
|---|---|---|
| Diversification | Moderate | High |
| Profitability | Negative (-4.72%) | Negative (-1.55%) |
| Innovation | Strong | Strong |
| Global presence | Strong | Strong |
| Market Share | Growing | Growing |
| Debt level | Moderate (44.32%) | Low (27.98%) |
Key takeaways from this analysis indicate that both companies demonstrate strong innovation and global presence. However, they both face profitability challenges, with Cloudflare having a higher debt level than Zscaler, which has a healthier financial leverage profile.
Risk Analysis
In the table below, I analyze the risks associated with Cloudflare, Inc. and Zscaler, Inc. to help you understand their potential vulnerabilities.
| Metric | Cloudflare, Inc. (NET) | Zscaler, Inc. (ZS) |
|---|---|---|
| Market Risk | High | Moderate |
| Regulatory Risk | Moderate | High |
| Operational Risk | High | Moderate |
| Environmental Risk | Low | Low |
| Geopolitical Risk | Moderate | Moderate |
Both companies face significant market and operational risks due to their reliance on cloud services and cybersecurity. Additionally, regulatory challenges are increasing, especially in data privacy and security, which may impact both firms’ operations.
Which one to choose?
When comparing Cloudflare, Inc. (NET) and Zscaler, Inc. (ZS), both companies demonstrate strong growth potential but face unique challenges. Cloudflare has shown a significant price increase of 162.47% over the past year, despite recent volatility. Its financial ratios indicate a concerning net profit margin of -4.7% and a low overall rating of D+, suggesting ongoing profitability issues. Conversely, Zscaler’s stock has increased by 19.87%, with a C- rating, indicating better stability. Its gross profit margin is strong at 76.87%, but it also struggles with a negative net income.
For growth-oriented investors, Zscaler may be the more appealing option due to its more favorable financials and industry standing. However, those prioritizing immediate profitability may find both companies risky, as they contend with competitive pressures and market volatility.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Go further
I encourage you to read the complete analyses of Cloudflare, Inc. and Zscaler, Inc. to enhance your investment decisions:
