Zscaler (ZS) Stock Forecast & Price Target

Zscaler reported a 26% year-over-year revenue increase to $788.1 million, surpassing management's guidance and indicating strong demand for its cloud-native cybersecurity solutions. The company’s annual recurring revenue (ARR) is projected to reach approximately $3.698 billion to $3.718 billion, reflecting a robust growth rate of 22.7% to 23.3% year-over-year, along with a record of 34.5% year-over-year growth in remaining performance obligations (RPO). Additionally, Zscaler's non-GAAP operating margin is maintaining a strong position at approximately 21.7% at the midpoint of projections, underlining the company's operational efficiency and profitability potential moving forward.

Zscaler's recent financial performance has raised concerns, as reflected by an approximate 8% decline in shares following a lack of detailed commentary regarding organic growth and disappointing guidance for fiscal year 2026 in terms of net new annual recurring revenue (NNARR) and operating income, which fell short of consensus expectations. The company's non-GAAP gross margin of 79.9% was slightly below analyst forecasts, and while there was a shift in depreciation strategy intended to benefit future gross margins, historical trends indicate a likely 20% decline in billings during the fiscal third quarter. Additionally, higher-than-expected sales force attrition, coupled with the critical need for increased cloud platform adoption, poses further risks to future growth and profitability, which could adversely impact Zscaler's ability to achieve its medium-term goals.