Zscaler Shares Can Hit a Fresh High Before Year-End

Key Points

• Zscaler's beat-and-raise quarter has led analysts to reaffirm their robust stock price targets.
• The revision trend is leading to the high-end range and forecasts a move to retest record high share price levels.
• Zscaler's cash flow strength and improving balance sheet are why it can move to a new all-time high.

Zscaler’s NASDAQ: ZS share price can hit a fresh high before year-end because the FQ4 results were better than expected, affirming its robust growth outlook.

The stock may move even higher, reaching a fresh all-time high in 2026, because the guidance was the same and likely to be cautious in hindsight. 

Zscalers’ results and guidance are driven by strong demand, which is underpinned by the accelerating application of AI-powered cybersecurity by enterprises globally. This trend is not expected to wane in the coming quarters.

If anything, enterprise spending on AI applications will only accelerate for the foreseeable future as the number grows and businesses increase their dependence on them.

That is good news for Zscaler’s cloud-native, AI-powered cybersecurity and automation platform.

Zscaler’s Wow Quarter Keeps Analysts Happy

Zscaler had an incredible quarter, growing its revenue by 21.3% to sustain a better-than-20% growth pace for another quarter. The growth was driven by the adoption of its zero-trust platform and service penetration, and was much better than the analysts had forecasted.

The $719.23 million in net revenue is 170 bps better than MarketBeat’s reported consensus, leading management to lift its targets for the year. Forward-looking details, including annual recurring revenue, calculated billings, and deferred revenue, were also solid, growing faster than revenue at 22%, 32%, and 30% respectively. 

The margin news is also bullish for the stock price. The company’s revenue strength was compounded by spending discipline, which resulted in strong margins. Adjusted net income grew by 26.7%, outpacing the top-line by 540 basis points, and adjusted earnings were similarly strong.

The cash flow and free cash flow (FCF) margins also improved, perhaps the most significant detail. Cash flow and FCF margins improved by 100 basis points each, driving a 24% increase in FCF to $171.9 million. 

The guidance is the critical detail keeping analysts happy. The company expects its Q4 strength to carry into Q1 and through year’s end, and issued revenue targets well-above the consensus figures. The company expects $772 million at the low end of its range for Q1, compared to the $751 early-September consensus and similar strength for the year.

The only bad news is that the full-year adjusted EPS target is a little weak, but there are mitigating factors. Among them is the accelerated innovation and application of AI by Zscaler for itself and its clients, along with a high probability that the guidance is cautious. 

Analysts Are Leading Zscaler to Record Highs 

Zscaler’s Q4 results and guidance outlook led numerous analysts to reaffirm their recently issued upgrades and price target revisions. As of early September, the consensus is that this stock is a Moderate Buy, verging on a Strong Buy with at least a 10% upside from critical support levels.

Those levels align with the late August/early September lows near $270, which are likely to be strong and unlikely to be broken. The revision trend suggests a move into the high-end range of targets near $380, aligning the market with record highs, is possible.

Zscaler’s cash flow and balance sheet are why the stock will eventually move to a new all-time high. The company produces a robust free cash flow margin and uses it to invest in its growth and maintain a very healthy balance sheet. The highlights at the end of F2025 include increased cash, inventory, receivables, prepaid expenses, current and total assets, offset by a much smaller increase in liabilities. Shareholder equity increased by 41%. 

Another important detail is that the debt structure was improved, extending the company’s minuscule debt load with a longer maturity while maintaining a fortress-like quality. Critical ratios, including the long-term debt to equity and cash and the cash-to-debt, are also healthy. The company is net-cash relative to its long-term debt, and long-term debt is less than one times the equity and about 1.4x the cash.