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Live: Will Zscaler Surge After Earnings?

By Joel South · Updated Sep 2, 4:20pm ET · Published Sep 2, 3:10pm ET

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Morgan Stanley Price Target of $320

Morgan Stanley just upgraded Zscaler (ZS) to Overweight with a $320 price target, citing its strong position in Zero Trust and platform expansion strategy. Analysts highlighted the $34B SASE market and said the Red Canary acquisition strengthens AI security and MDR capabilities, giving ZS more competitive depth versus SIEM players. Despite a ~50% YTD decline, the firm sees valuation reset as an upside opportunity if growth and margins hold.

Pre vs. Post Estimate Snapshot

Metric Pre (Consensus) Post (Guidance)
FY26 Revenue $3.21B $3.265–$3.284B
FY26 EPS $3.67 $3.64–$3.68

  • Bullish: Billings strength, ARR >$3B, raised revenue guide.

  • Neutral: EPS guide in line; GAAP losses persist.

  • Bearish: High volatility history makes near-term stock reaction hard to predict.

Comp Comparisons This Earnings Season

Company Revenue Growth Billings Growth EPS vs. Est. Key Takeaways
Zscaler (ZS) +21% YoY ($719M) +32% YoY ($1.20B) $0.89 vs. $0.80 ✅ ARR topped $3B; strong billings acceleration; AI Guard + Red Canary push into SecOps.
CrowdStrike (CRWD) +22% YoY ($1.15B) ~+25% YoY $0.83 vs. $0.83 ⚖️ ARR >$10B run-rate; Falcon Flex + Charlotte AI adoption; stock sold off on pipeline timing.
Palo Alto Networks (PANW) +15% YoY ($2.27B) +17% YoY $1.50 vs. $1.41 ✅ Next-Gen Security ARR hit $4.9B; mix shifting to SASE/Prisma; deal scrutiny weighing on near-term growth.
Fortinet (FTNT) +17% YoY ($1.56B) +12% YoY $0.46 vs. $0.42 ✅ SASE/SecOps momentum offset firewall cycle softness; margins compressed slightly.
Cloudflare (NET) +27% YoY ($509M) +28% YoY $0.20 vs. $0.16 ✅ Strong AI-driven traffic/security demand; enterprise adoption reaccelerating; billings growth back above 25%.

  • Relative Strength: ZS’s 32% billings growth stands out versus peers, suggesting stronger forward demand visibility than CRWD, PANW, and FTNT.

  • Scale: PANW remains the revenue leader, but Zscaler is growing faster on a percentage basis while pushing deeper into AI-driven SecOps.

  • Profitability: CRWD and PANW carry higher absolute profitability, but ZS is scaling margins while keeping FCF at ~24%, which investors like for durability.

  • Market Position: Cloudflare’s faster revenue growth (+27%) shows it’s catching up in smaller enterprise security deals, but ZS is maintaining leadership in Zero Trust Everywhere for large-scale deployments.

What Changed This Quarter

The after-hours reaction once earnings dropped is settling down and the stock is now up 3.8% after-hours. Here are the changes Q/0/Q.

  • ✅ ARR crossed $3B milestone.
  • ✅ Billings growth accelerated to +32% YoY, well ahead of revenue growth.
  • ✅ Red Canary acquisition closed, expanding ZS into AI-driven SecOps.
  • ✅ AI Guardrails launched for public/private apps, signaling early monetization of AI security modules.
  • ⚠️ GAAP losses continued (–$17.6M), though non-GAAP profitability remains strong

Key Operating Highlights

Metric Q4 FY25 YoY Change Why It Matters
ARR $3.02B +22% Crossing $3B milestone demonstrates long-term contract depth.
Billings $1.20B +32% Strong forward indicator of demand strength.
Deferred Revenue $2.47B +30% Provides visibility into future revenue streams.
Free Cash Flow $171.9M +26% Margin 24%, consistent with long-term FCF profile.

Guidance Update

Q1 outlook is right on consensus, but full-year revenue guidance came in slightly higher than the Street, while EPS was reaffirmed around consensus.

Period Metric Guidance Consensus Direction
Q1 FY26 Revenue $772M–$774M ~$772M ⚖️ In Line
EPS (Non-GAAP) $0.85–$0.86 ~$0.86 ⚖️ In Line
FY26 Revenue $3.265B–$3.284B $3.21B 📈 Raised
EPS (Non-GAAP) $3.64–$3.68 $3.67 ⚖️ In Line

Management Commentary

“We had an outstanding Q4, in which we achieved a new milestone of more than $3 billion of Annual Recurring Revenue while achieving our highest ever operating margin for a quarter. We believe Zscaler’s Zero Trust and AI security solutions are imperative in today’s world and are driving robust demand.”
— Jay Chaudhry, Chairman & CEO

Management is leaning on the “Zero Trust Everywhere + AI” narrative to frame growth durability. The margin callout highlights that Zscaler is scaling profitably even as it invests in AI-driven SecOps.

Earnings In and Stock up 8%

Zscaler cleared both revenue and EPS estimates, extending its streak of quarterly beats. Strength came from 32% billings growth and ARR surpassing $3B, suggesting durable demand. Investors will focus on FY26 guidance to judge sustainability after several volatile post-earnings moves.

The stock shot up close to 10% immediately but now sitting at 7.5% after-hours.

Metric Reported Consensus Beat/Miss
Revenue $719.2M (+21% YoY) $707.1M ✅ Beat
EPS (Non-GAAP) $0.89 $0.80 ✅ Beat
ARR $3.02B (+22% YoY) N/A —
Billings $1.20B (+32% YoY) N/A —

How Zscaler Performed After Recent Earnings

Zscaler has delivered four straight EPS beats, but post-earnings trading has been unpredictable, with an average 7 day post earnings over the last year of -.49%.

Quarter EPS Surprise 1-Day Move 7-Day Move 14-Day Move
Q3 2025 +10.78% +9.79% +19.82% +20.04%
Q2 2025 +12.73% +2.91% +0.68% +3.82%
Q1 2025 +22.74% –4.73% –1.14% –1.97%
Q4 2024 +26.96% –18.67% –19.30% –11.84%

Live coverage has ended. The full story is below.

Full Coverage

The story so far

Zscaler (NASDAQ:ZS | ZS Price Prediction) will post Q4 fiscal 2025 results after the bell, following a quarter where its stock surged nearly 20% in the two weeks after earnings. 

 The company has consistently outperformed consensus EPS targets, but management’s pivot toward expanding into AI-driven security and SecOps has also introduced execution questions investors will want answered tonight.

What to Expect When Zscaler Reports

ere are Wall Street’s consensus estimates for Q4 (July 2025 quarter) and beyond:

  • Revenue: $707.1M (+19.3% YoY)
  • EPS (Normalized): $0.80 (vs. $0.88 YoY)

  • FY2025: Revenue $2.66B, EPS $3.19
  • FY2026: Revenue $3.21B, EPS $3.67

Zscaler’s revenue growth remains robust at ~20%, but EPS is expected to decline YoY this quarter as the company invests in new growth vectors.

Key Areas to Watch When Zscaler Reports

  • Zero Trust Everywhere expansion – Customer adoption surged, with Zero Trust branch and Zero Trust cloud deployments driving upsell momentum. ZS ended Q3 with over 210 “Zero Trust Everywhere” enterprises, targeting 390 by FY2026.

  • Data Security Everywhere & GenAI protection – Data security ARR surpassed $350M, and new GenAI data modules were adopted by Fortune 100 and federal clients. AI-related attach rates could be a major growth driver.

  • Z-Flex purchasing program – This new flexible consumption model booked $65M in TCV in Q3, allowing customers to swap modules without new procurement cycles. Scaling its adoption will be closely watched.

  • Agentic AI in SecOps – The Red Canary acquisition (closing in Q4) positions Zscaler to accelerate its entry into managed detection and AI-driven SecOps. Management commentary on integration will be critical.

  • Macro environment and large deals – Management highlighted ongoing scrutiny on big-ticket deals, but ZS has been able to win by emphasizing cost takeouts versus legacy firewalls and networking. Large enterprise pipeline color will matter.

 

 

Contact [email protected] for any questions or corrections.

Joel South

Joel South covers large-cap stocks, dividend investing, and major market trends, with a focus on earnings analysis, valuation, and turning complex data into actionable insights for investors.

He brings more than 15 years of experience as an investor and financial journalist, including 12 years at The Motley Fool, where he served as an investment analyst, Bureau Chief, and later led the Fool.com investing news desk. He has also co-hosted an investing podcast and appeared across TV and radio discussing market trends.

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