The Great Repricing Crushed This Cybersecurity Growth Stock. That's a Buying Opportunity.
Key Points
Zscaler’s stock has declined more than 60% from its all-time high.
It still has plenty of room to grow as its cloud-based platform continues to expand.
Zscaler (NASDAQ: ZS) was one of the market's hottest cybersecurity stocks, reaching an all-time high of $368.78 per share on Nov. 19, 2021. But today, it trades at about $139.
Zscaler's stock initially lost its luster as its growth cooled, but macro headwinds -- including rising interest rates and geopolitical conflicts -- further compressed its valuation. Yet after that steep sell-off, Zscaler's stock might be a good contrarian play for patient investors.
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How fast is Zscaler growing?
Zscaler develops "zero trust" tools that treat everyone, including a company's CEO, as a potential threat. Those tools can shield organizations from both internal and external threats while being integrated into larger, more diversified cybersecurity platforms.
Before Zscaler was founded in 2007, many organizations installed their zero-trust services on physical appliances -- which took up space, required on-site maintenance, and were difficult to scale. Zscaler addressed those issues by launching its tools as a cloud-native service that locked its users into sticky subscriptions and didn't require any on-site appliances. It subsequently expanded its ecosystem with additional cloud-based cybersecurity tools and now serves more than 9,400 customers, including 40% of the Forbes Global 2000 companies.
From fiscal 2020 to fiscal 2025 (which ended in July 2025), Zscaler's revenue and adjusted net income grew at CAGRs of 44% and 75%, respectively. However, it still isn't profitable by generally accepted accounting principles (GAAP), mainly due to its stock-based compensation expenses and long streak of ecosystem-expanding acquisitions.
From fiscal 2025 to fiscal 2028, analysts expect Zscaler's revenue to grow at a 21% CAGR. They also expect it to turn profitable on a GAAP basis in the final year.
Its growth is slowing down as its business matures. However, it's still expanding its AI-powered ZDX Copilot platform, deepening its integrations with other cloud-based cybersecurity platforms, and acquiring more companies to widen its moat and increase the stickiness of its platform.
Why is Zscaler's stock worth buying?
At its all-time high in 2021, Zscaler's market cap hit $51.7 billion -- or 47 times the $1.1 billion in revenue it would generate in fiscal 2022. Today, it has a market cap of $22.1 billion -- which is less than 7 times the $3.3 billion in revenue analysts expect it to generate in fiscal 2026.
That reasonable valuation makes Zscaler a solid long-term play on the growing zero-trust market, which Grand View Research expects to expand at a 16.6% CAGR from 2025 to 2030. It isn't a hypergrowth company anymore, but it still has plenty of room to run.
Should you buy stock in Zscaler right now?
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zscaler. The Motley Fool has a disclosure policy.
