Key Takeaways
Zscaler Inc. (ZS) stock jumped 24.1% over the past month, though it remains 55% below its 52-week high, leading Zacks Investment Research to maintain a "Hold" rating on the cybersecurity firm.
The hold rating stems from a balance of strong performance and near-term risks. While the company's fundamentals are strong, it may perform in line with the broader market in the near term, according to a recent Zacks report.
The stock's rally comfortably outpaced the Zacks Computer and Technology sector's 16.4% gain over the same period. Zscaler's valuation appears attractive with a forward 12-month Price/Sales ratio of 6.41, significantly below peers like CrowdStrike (21.42) and Palo Alto Networks (13.11). In its last reported quarter, Zscaler's revenue grew 26% year-over-year to $816 million.
The hold rating suggests investors should not rush to book profits despite the recent surge. The company’s growth pillars in AI Security, Zero Trust, and Data Security have collectively crossed $1 billion in annual recurring revenue (ARR), a sign of strong future potential.
Zscaler’s financial results highlight healthy enterprise demand. In the second quarter of fiscal 2026, non-GAAP earnings rose nearly 29.5% year-over-year to $1.01 per share, and the company ended the quarter with 728 customers generating more than $1 million in ARR.
The company's focus on artificial intelligence is a primary growth driver. Management expects AI Security ARR to surpass $500 million in fiscal 2026. Its Z-Flex program, which offers flexible pricing for long-term contracts, also gained traction, generating more than $290 million in total contract value bookings in the second quarter, a 65% sequential increase.
The broader cybersecurity sector has regained momentum after a difficult start to 2026. Competitors like Fortinet Inc. and CrowdStrike Holdings, Inc. have also seen sharp appreciation in their share prices, driven by the rising need for advanced security solutions to support enterprise AI adoption.
The current valuation provides a cushion, but continued macroeconomic uncertainty warrants caution. Investors will be watching Zscaler's next earnings report to see if the momentum in its high-growth AI security segment can be sustained.
This article is for informational purposes only and does not constitute investment advice.
