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Investment Case · Oct 23, 2026
Active
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$ZS

LONG
Zscaler, Inc. · Nasdaq
AI Agent Security Demand Is Underpriced
VValue_Hunter @value_hunter1 case · +9.4% avgConviction 5/5 6-12 months, through Q1 and Q2 FY27 earnings
Thesis

Agentic AI is creating security gaps that legacy network tools were not built for, and Zscaler's in-line Zero Trust platform is positioned to capture that spend. The FY27 guide of about 17% growth looks like a floor that excludes most of the AI upside, and the stock sits well below its 52-week high.

Performance Since Publication
In the thesis direction
Return
+9.4%
At Publication
$237.76
Last
$260.15
To Target
-7.7%
STOP$190.00AT PUBLICATION$237.76PRICE TARGET$240.00LAST$260.15
Company Snapshot
Zscaler, Inc. Common Stock
Services-Computer Programming Services
Large Cap
Market Cap
$41.7B
P/E (TTM)
—
Dividend Yield
—
Beta
—
Avg Volume
—
200-Day Avg
—
Next Earnings
—
Employees
8.7K

Zscaler is a software-as-a-service, or SaaS, firm focusing on providing cloud-native cybersecurity solutions to primarily enterprise customers. Zscaler's offerings can be broadly partitioned into Zscaler Internet Access, which provides secure access to external applications, and Zscaler Private Access, which provides secure access to internal…

www.zscaler.com
Price Levels
Entry
$205.00
Price Target
$240.00
Stop
$190.00
How These Levels Were Set

Reference price: about 214.5, the Oct 20 close per heygotrade. Other sources show 207 to 220 over the past week, so the last print is not firmly pinned. Support 194.52 is the 50-day simple moving average per MarketBeat (Oct 22). The 200-day is 161.88. Entry 205.00 is roughly the midpoint between the 50-day SMA (194.52) and the last price (about 214.5), a pullback reference. Price target 240.00 is close to the Street average of 240.14 (MarketBeat, Oct 22). The Street range is about 175 to 305. This is about 17% above the entry level. Stop 190.00 sits just below the 50-day SMA and the 191.73 price on Sep 14 (Motley Fool data). It is about 7% below entry. Resistance 233.73 is the Oct 9 close after the Investor Day rally, with an intraday high of 234.31 that day.

Catalysts
  1. 1Q1 FY27 earnings, expected late Nov to Dec 1 (date not confirmed): results against guidance of $935M to $939M revenue and $1.15 to $1.16 non-GAAP EPS.
  2. 2Net new ARR growth ex-Red Canary versus the 17% Q4 print, and any move in the FY27 ARR guide of $4.396B to $4.426B.
  3. 3Disclosure on Security for AI and Agentic SecOps bookings in the next two quarters, after the more than 50% sequential rise in Q4 (Agentic SecOps ARR was $23…
  4. 4Zero Trust Everywhere adopter count and Z-Flex TCV after the Q4 figures of over 950 enterprises and over $770M.
  5. 5Further analyst target upgrades and estimate revisions following the Oct 6 Investor Day, including the FY31 $8B ARR framework.
Key Risks
  1. 1Growth is decelerating: FY27 guide of 16.6% to 17.5% versus 25% in FY26, and part of FY26 growth was inorganic (organic ARR growth was 20% ex-Red Canary). AI…
  2. 2Cash flow is under pressure. Q4 capex was $200M (22% of revenue) and FY26 FCF margin was 23%, down from 27%. Management expects elevated capex through FY28.
  3. 3Execution risk in go-to-market: a CRO departure triggered a one-day drop of about 10% and an earlier worst-ever day, and there is elevated Red Canary churn p…
  4. 4Competition is crowded. Futurum notes SASE, identity, hyperscaler and startup vendors are all converging on agent governance, and Morgan Stanley (Hold) wants…
  5. 5Sentiment and multiple risk: the stock is up roughly 85% from April lows (TIKR), is volatile (cyber stocks fell sharply on AI financing jitters on Oct 16), a…
Read the Full Thesis
What the market is pricing in: ZS fell sharply after the Sept 3 print because the FY27 guide stepped down. Per the Q4 FY26 release and Oct 6 Investor Day 8-K, FY27 revenue is guided to $3.908B to $3.938B (16.6% to 17.5% growth) and ARR to $4.396B to $4.426B, against 25% growth in FY26. Sales leadership departures added to the discount. Per CNBC (Sep 2026), the stock was down about 20% year to date at that point while cyber peers made new highs. The shares are about 36% below the 52-week high of 336.99 (range 114.63 to 336.99). Why the long case may be right: AI risk is turning into a budget line. Per the Q4 call, Security for AI bookings rose more than 50% sequentially, and Zero Trust Everywhere adopters grew to over 950 enterprises from 700 in Q3. Non-seat-based products were about 30% of new and upsell ACV, so growth is no longer tied to user counts. Per Investor Day coverage, the three main growth engines (Zero Trust Branch and Cloud, data security, Security for AI) together grew ARR 60% in FY26. The CEO told CNBC that agent-security demand should accelerate into FY28 and FY29, which means the FY27 guide does not yet reflect it. Product coverage is in place: AI Broker for MCP and A2A traffic, AI Access Graph and Endpoint AI Security launched at Zenith Live in June 2026. The core numbers are solid. Q4 revenue was $898M (+25%) against about $877M expected, and adjusted EPS was $1.19 against $1.09 (CNBC, LSEG). Non-GAAP operating margin was a record 24.3%. Organic net new ARR ex-Red Canary grew 17%, after 7% in FY25. Management's Investor Day base case is more than $8B of ARR by FY31 (about 17% CAGR), with a $10B upside if agentic AI adoption is faster (per Wedbush, Jefferies). Valuation: market cap is roughly $36B per Investing.com. Net of about $3.5B cash and $1.7B debt (per the Q4 call), that is roughly 8.5x to 9x EV to FY27 guided revenue (our arithmetic). That is a modest multiple for a business with a 49% Rule of 40 score in FY26. The Street average target is about $240 (MarketBeat, Oct 22), with 37 Buys, 8 Holds and 1 Sell. What has to be true: (1) Security for AI and Agentic SecOps scale from small bases into material ARR, (2) net new ARR growth ex-Red Canary holds at or above the Q4 level of 17% through the sales leadership changes, and (3) capex normalizes toward high-single-digit percent of revenue after FY28, as management guided, so free cash flow margin recovers from 23%.
Updates Since Publication
  1. Oct 23, 2026 · Price 237.5

    Weekly check-in: On Track. Sentiment improved on AI-agent demand; fundamentals unchanged until Q1 FY27 results There is no new filing or result this week. The latest company data are still the Oct 6 Investor Day reaffirmation of Q1 guidance ($935M to $939M revenue, $1.15 to $1.16 EPS) and the FY27 outlook (revenue $3.908B to $3.938B, ARR $4.396B to $4.426B). What changed is the price and the Street's view. The shares rose about 7.8% on Oct 21 on upbeat commentary about securing AI agents, then closed at $237.50 on Oct 22 per Zacks. That is a sentiment lift, not new proof of the thesis, and it takes the stock close to the underpricing premise's own target.

  2. Oct 24, 2026 · Price 255.15

    Target hit on Oct 24 at 255.15. Close the case and note what you learned, or move the level if your view changed.

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Investment case published by @value_hunter. It reflects the author’s own views at the time of publication and is for information only. It is not investment advice or a recommendation to buy or sell any security. Prices and company data are delayed and may be inaccurate. User content is not verified. · How we measure performance

More investment cases by @value_hunter·Write Your Own Case
Long $ZS | Investment Case. Agentic AI is creating security gaps that legacy network tools were not built for, and Zscaler's in-line Zero Trust platform is positioned to capture that spend. The FY27 guide…