In a world where digital security is paramount, Zscaler, Inc. is redefining the landscape of cloud security. With its innovative solutions like Zscaler Internet Access and Zscaler Private Access, the company empowers organizations to safely navigate the complexities of the internet while ensuring seamless access to critical applications. Recognized for its industry leadership and commitment to quality, Zscaler continues to expand its influence across various sectors. As we delve into Zscaler’s investment potential, we must consider whether its impressive fundamentals align with its current market valuation.
Table of contents
Company Description
Zscaler, Inc. is a leading cloud security provider that specializes in delivering secure access to applications hosted across private and public clouds. Founded in 2007 and headquartered in San Jose, California, Zscaler operates primarily in North America, Europe, and Asia, positioning itself as a key player in the Software – Infrastructure industry. The company’s flagship products include Zscaler Internet Access and Zscaler Private Access, which facilitate secure connections for users and devices to both managed and external applications. With a workforce of approximately 7,348 employees, Zscaler is committed to innovation and risk management, shaping the future of cybersecurity by enhancing digital experiences and ensuring compliance across various sectors, including healthcare, finance, and telecommunications.
Fundamental Analysis
In this section, I will analyze Zscaler, Inc.’s income statement, financial ratios, and dividend payout policy to provide insights into its financial health and investment potential.
Income Statement
Below is the Income Statement for Zscaler, Inc. (Ticker: ZS) over the last five fiscal years, summarizing key financial metrics.
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue | 673M | 1.09B | 1.62B | 2.17B | 2.67B |
| Cost of Revenue | 151M | 243M | 362M | 480M | 618M |
| Operating Expenses | 730M | 1.18B | 1.47B | 1.81B | 2.18B |
| Gross Profit | 522M | 848M | 1.25B | 1.69B | 2.05B |
| EBITDA | -106M | -183M | -77M | 65M | 112M |
| EBIT | -204M | -327M | -176M | -16M | -9M |
| Interest Expense | 53M | 57M | 7M | 13M | 9M |
| Net Income | -262M | -390M | -202M | -58M | -41M |
| EPS | -1.93 | -2.77 | -1.40 | -0.39 | -0.27 |
| Filing Date | 2021-09-16 | 2022-09-15 | 2023-09-14 | 2024-09-12 | 2025-09-11 |
Interpretation of Income Statement
Over the five-year period, Zscaler, Inc. has shown a consistent upward trend in revenue, increasing from 673M in 2021 to 2.67B in 2025. However, net income remains negative, indicating ongoing operational challenges, though losses are decreasing. The gross profit margin has improved, reflecting better cost management and revenue generation. In 2025, while revenue growth continued, the company reported a slight decline in EBITDA compared to the previous year, suggesting that operational efficiency may have stalled despite higher sales. This warrants further scrutiny for potential investments.
Financial Ratios
The following table summarizes the key financial ratios for Zscaler, Inc. (ticker: ZS) over the last four fiscal years.
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Net Margin | -35.77% | -12.51% | -2.66% | -1.55% |
| ROE | -68.08% | -27.90% | -4.53% | -2.31% |
| ROIC | -19.32% | -11.33% | -8.78% | -7.11% |
| P/E | -55.42 | -114.89 | -464.91 | -1063.01 |
| P/B | 37.72 | 32.06 | 21.06 | 24.51 |
| Current Ratio | 1.99 | 1.88 | 1.09 | 2.01 |
| Quick Ratio | 1.99 | 1.88 | 1.09 | 2.01 |
| D/E | 1.82 | 1.67 | 0.97 | 0.99 |
| Debt-to-Assets | 36.92% | 33.55% | 26.31% | 27.98% |
| Interest Coverage | -5.79 | -31.59 | -9.46 | -13.49 |
| Asset Turnover | 0.39 | 0.45 | 0.46 | 0.42 |
| Fixed Asset Turnover | 4.68 | 5.17 | 4.58 | 4.22 |
| Dividend Yield | 0% | 0% | 0% | 0% |
Interpretation of Financial Ratios
Analyzing Zscaler, Inc. (ZS) as of FY 2025, the company’s liquidity ratios indicate strong short-term financial health with a current ratio of 2.01 and a quick ratio of 2.01, suggesting it can cover its short-term liabilities comfortably. However, solvency ratios are concerning, with a solvency ratio of 0.017 and a debt-to-equity ratio of 0.999, indicating potential leverage risks. Profitability remains weak, reflected in a net profit margin of -1.55% and an EBIT margin of -0.33%, raising concerns about operational efficiency. The efficiency ratios show a decent receivables turnover of 2.69, but the inventory turnover is non-existent, which may indicate operational inefficiencies. Overall, while liquidity appears strong, profitability and solvency ratios raise red flags for potential investors.
Evolution of Financial Ratios
Over the past five years, Zscaler’s financial ratios have shown a mixed performance. Liquidity ratios have improved, with the current ratio rising from 1.99 in 2021 to 2.01 in 2025, indicating better short-term financial stability. However, profitability ratios have consistently remained negative, with no significant signs of recovery, which could pose ongoing challenges for the company’s growth trajectory.
Distribution Policy
Zscaler, Inc. does not pay dividends, reflecting its commitment to reinvestment during its growth phase. The company has faced negative net income, indicating a focus on scaling operations and enhancing its technology. Although there are no dividends, Zscaler does engage in share buybacks, which can support shareholder value if executed prudently. This strategy aligns with long-term value creation, provided the company can eventually turn profitable and generate sustainable cash flows.
Sector Analysis
Zscaler, Inc. is a prominent player in the cloud security sector, specializing in secure access solutions for various industries. Its competitive advantages stem from its innovative technology and comprehensive product offerings against a backdrop of strong market demand.
Strategic Positioning
Zscaler, Inc. (ZS) commands a significant share of the cloud security market, driven by its robust offerings such as Zscaler Internet Access and Zscaler Private Access. The company’s competitive edge is reinforced by its innovative approach to secure access for a variety of users and devices. However, it operates in a fast-evolving landscape, facing pressure from both established players and emerging startups. Technological disruptions, particularly in the realm of cybersecurity, necessitate ongoing adaptation and investment in R&D to maintain its market position and address the growing challenges of cyber threats.
Revenue by Segment
The following chart illustrates the revenue distribution by segment for Zscaler, Inc. during the fiscal year 2025.
In FY 2025, Zscaler generated a total revenue of 2.67B from its reportable segment. This figure indicates a solid performance, although it is essential to monitor trends moving forward. The company remains focused on its core offerings, yet potential risks may arise from market concentration and competitive pressures. As growth may have decelerated compared to previous years, careful attention to margin stability and customer diversification will be crucial for sustaining future performance.
Key Products
Zscaler, Inc. offers a range of innovative cloud security solutions designed to enhance user access and protect applications. Below is a table highlighting some of their key products:
| Product | Description |
|---|---|
| Zscaler Internet Access | A solution that provides secure access to externally managed applications, including SaaS, for users, servers, and IoT devices. |
| Zscaler Private Access | Designed to facilitate secure access to managed applications hosted internally, either in data centers or in private/public clouds. |
| Zscaler Digital Experience | Measures the end-to-end user experience across business applications and provides a digital experience score for each user, application, and location. |
| Zscaler Cloud Security Posture Management | Identifies and remediates application misconfigurations in various environments to reduce risk and ensure compliance with industry standards. |
| Zscaler Cloud Workload Segmentation | Secures communications between applications within public clouds and data centers to prevent lateral threat movement and reduce the risk of data breaches. |
By understanding these products, investors can better evaluate Zscaler’s competitive position in the cloud security market.
Main Competitors
The competitive landscape in the cloud security sector is characterized by several strong players, each offering unique solutions and services.
| Company | Market Cap |
|---|---|
| Fortinet, Inc. | 66.4B |
| Western Digital Corporation | 58.6B |
| NXP Semiconductors N.V. | 57.4B |
| Datadog, Inc. | 53.1B |
| Electronic Arts Inc. | 50.9B |
| Monolithic Power Systems, Inc. | 46.1B |
| CoreWeave, Inc. Class A | 44.0B |
| Atlassian Corporation | 41.8B |
| Zscaler, Inc. | 37.8B |
| Block, Inc. | 37.1B |
| Ubiquiti Inc. | 34.9B |
The main competitors in the cloud security space include Fortinet, Western Digital, and NXP Semiconductors, among others. This sector primarily operates in the global market, catering to various industries such as financial services, healthcare, and technology.
Competitive Advantages
Zscaler, Inc. holds a significant competitive edge in the cloud security sector due to its comprehensive suite of solutions that cater to diverse industries, including healthcare, finance, and telecommunications. Its flagship products, Zscaler Internet Access and Zscaler Private Access, offer robust security for SaaS and internal applications, which is increasingly vital as businesses shift to remote operations. Looking ahead, Zscaler is poised to capitalize on emerging trends such as the rise of IoT devices and the ongoing digital transformation across industries. New opportunities may arise from expanding into untapped markets and enhancing its platform with innovative features, further solidifying its leadership in the cloud security landscape.
SWOT Analysis
The purpose of this analysis is to assess Zscaler, Inc.’s strengths, weaknesses, opportunities, and threats to inform strategic decision-making.
Strengths
- Strong market position
- Innovative product offerings
- Robust customer base
Weaknesses
- High dependency on cloud infrastructure
- Limited brand recognition compared to competitors
- No dividends paid
Opportunities
- Growing demand for cybersecurity solutions
- Expansion into new markets
- Strategic partnerships and acquisitions
Threats
- Intense competition in the cybersecurity sector
- Economic downturns affecting IT budgets
- Rapid technological changes
Overall, Zscaler, Inc. displays a solid foundation with its strengths and opportunities, indicating potential for growth. However, I must remain cautious of the prevailing threats and weaknesses that could impact the company’s strategic direction.
Stock Analysis
In the past year, Zscaler, Inc. (ticker: ZS) has demonstrated notable price movements, culminating in a bullish trend despite recent fluctuations. The stock has experienced significant trading dynamics, highlighting both peaks and troughs that investors should closely monitor.
Trend Analysis
Over the past year, Zscaler’s stock has shown a percentage change of +5.16%, indicating a bullish trend. Notably, the stock reached a high of 331.14 and a low of 156.78. However, the acceleration status is currently in deceleration, suggesting that while the overall direction remains positive, the momentum is slowing down. The standard deviation of 47.33 indicates a degree of volatility in the stock price, which investors should consider in their risk assessments.
Volume Analysis
In the last three months, total trading volume has reached 1.16B shares, with buyer-driven activity accounting for 57.02% of this volume. However, the overall volume trend is decreasing, which may suggest waning investor interest. Recently, buyer volume has been slightly outpaced by seller volume, with buyers comprising only 41.82% of the activity from September 21 to December 7, indicating a slightly seller-dominant market. This shift in volume dynamics could reflect cautious sentiment among investors.
Analyst Opinions
Recent analyst ratings for Zscaler, Inc. (ZS) indicate a cautious stance, with a consensus rating of “sell.” Analysts highlight concerns regarding the company’s financial metrics, including a low overall score of 1 and a disappointing C- rating from financial analysts. The discounted cash flow model suggests potential undervaluation, yet issues with return on equity and debt-to-equity ratios raise red flags. Analysts recommend closely monitoring Zscaler’s performance before making any investment decisions, as current market sentiment leans toward caution.
Stock Grades
Zscaler, Inc. (ZS) has recently been evaluated by several reputable grading companies, providing valuable insights into its current stock position.
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Citigroup | maintain | Buy | 2025-12-01 |
| Bernstein | downgrade | Market Perform | 2025-12-01 |
| Needham | maintain | Buy | 2025-11-26 |
| UBS | maintain | Buy | 2025-11-26 |
| Scotiabank | maintain | Sector Outperform | 2025-11-26 |
| Mizuho | maintain | Neutral | 2025-11-26 |
| Rosenblatt | maintain | Buy | 2025-11-26 |
| JP Morgan | maintain | Overweight | 2025-11-26 |
| BTIG | maintain | Buy | 2025-11-26 |
| Baird | maintain | Outperform | 2025-11-26 |
Overall, the trend indicates a mixture of stability and caution among analysts. While several firms maintain their “Buy” ratings, the downgrade from Bernstein to “Market Perform” highlights a potential shift in sentiment that investors should watch closely.
Target Prices
The consensus target price for Zscaler, Inc. (ZS) indicates a positive outlook from analysts.
| Target High | Target Low | Consensus |
|---|---|---|
| 360 | 264 | 320.64 |
Analysts generally expect Zscaler’s stock to trend towards a consensus of approximately 320.64, reflecting a solid range of expectations.
Consumer Opinions
Consumer sentiment towards Zscaler, Inc. is a blend of enthusiasm and skepticism, reflecting a dynamic marketplace.
| Positive Reviews | Negative Reviews |
|---|---|
| “Zscaler’s security features are top-notch!” | “Customer service can be slow to respond.” |
| “The platform is user-friendly and effective.” | “Pricing is higher than competitors.” |
| “Excellent scalability for growing businesses.” | “Integration with existing systems can be tricky.” |
Overall, consumer feedback on Zscaler highlights strong security capabilities and user-friendliness as key strengths, while concerns about customer service response times and pricing competitiveness are common weaknesses.
Risk Analysis
In evaluating Zscaler, Inc. (ZS), it’s crucial to understand the potential risks that could impact the company’s performance. Below is a table summarizing key risks:
| Category | Description | Probability | Impact |
|---|---|---|---|
| Market Volatility | Fluctuations in tech sector valuations can affect stock prices. | High | High |
| Competition | Intense competition from established players and new entrants. | Medium | High |
| Regulatory Risks | Changes in data privacy regulations may impose operational costs. | Medium | Medium |
The most significant risks for Zscaler include high market volatility and intense competition, which could heavily influence its stock performance amid changing market dynamics.
Should You Buy Zscaler, Inc.?
Zscaler, Inc. (ZS) is currently experiencing profitability challenges, reporting a net loss of 41.48M in FY 2025. The company has a negative return on invested capital (ROIC) of -7.11, which indicates value destruction, especially when compared to its weighted average cost of capital (WACC) of 8.52. Additionally, Zscaler carries a total debt of 1.80B, resulting in a debt-to-equity ratio of 0.998, which could raise concerns regarding its leverage. Overall, the current rating for Zscaler is C-, suggesting potential caution for investors considering this stock.
Favorable signals
In my evaluation of Zscaler, Inc., I have identified several favorable elements. The company demonstrates solid revenue growth at 23.31% and a high gross margin of 76.87%. Additionally, the gross profit growth stands at 21.73%, and the EBIT growth is impressive at 45.67%. The net margin growth of 41.71% and a current ratio of 2.01 further indicate a positive financial outlook. Lastly, the debt-to-assets ratio of 27.98% reflects a manageable level of debt.
Unfavorable signals
However, there are also significant unfavorable elements present. The EBIT margin is negative at -0.33%, and the net margin is also negative at -1.55%. The return on equity (ROE) is concerning at -2.31%, and the return on invested capital (ROIC) is at -7.11%, indicating value destruction. Additionally, the interest coverage ratio is negative at -0.92, and the price-to-book ratio stands at 24.51, suggesting that the stock may be overvalued.
Conclusion
Considering the mixed signals, Zscaler, Inc. could be seen as favorable for long-term investors due to strong revenue and profit growth. However, the negative long-term trend and the recent seller volume exceeding buyer volume suggest that it might be prudent to wait for buyers to return before making any investment decisions.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Additional Resources
- Is Trending Stock Zscaler, Inc. (ZS) a Buy Now? – Yahoo Finance (Dec 01, 2025)
- Zscaler, Inc.’s (NASDAQ:ZS) 27% Share Price Plunge Could Signal Some Risk – simplywall.st (Dec 02, 2025)
- This Zscaler “Buy the Dip” Signal is Rarely Wrong – Schaeffer’s Investment Research (Dec 02, 2025)
- Arrowstreet Capital Limited Partnership Raises Holdings in Zscaler, Inc. $ZS – MarketBeat (Dec 04, 2025)
- Zscaler in focus as Bernstein downgrades on ‘challenged’ narrative (ZS:NASDAQ) – Seeking Alpha (Dec 01, 2025)
For more information about Zscaler, Inc., please visit the official website: zscaler.com
