Is ZS a good stock to buy? We came across a bullish thesis on Zscaler, Inc. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on ZS. Zscaler, Inc.’s share was trading at $134.68 as of April 17th. ZS’s forward P/E was 28.99 according to Yahoo Finance.
Zscaler, Inc. (ZS) is a leading cybersecurity platform pioneering the Zero Trust Exchange, replacing legacy perimeter-based firewalls with a cloud-native architecture that secures users, applications, and branch environments. The company continues to demonstrate strong execution, reporting Q2 FY2026 revenue of $816 million, up 26% year-over-year, while annual recurring revenue (ARR) grew 25% to $3.4 billion.
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Despite tougher comparisons moderating organic growth to 7%, Zscaler maintained elite profitability with operating margins expanding to 22.2% and free cash flow margins exceeding 20%, sustaining a “Rule of 60+” profile. Growth is increasingly driven by a shift toward consumption-based pricing, with non-seat-based products contributing over 25% of new ACV and growing above 100%, reflecting rising demand tied to traffic and workload expansion.
Enterprise traction remains robust, with 728 customers generating over $1 million in ARR, supported by initiatives like Z-Flex that extend contract durations and enhance upsell visibility. The company’s Zero Trust architecture continues to differentiate it from firewall-based and bundled SASE competitors, while its “Zero Trust Everywhere” strategy is driving deeper penetration and 2–3x ARR expansion within large customers.
Artificial intelligence is emerging as a powerful tailwind, with the platform processing nearly one trillion AI-related transactions annually and new offerings like AI Protect enabling real-time inspection and policy enforcement. With a strong pipeline, improving sales productivity, and expanding monetization of AI-driven and consumption-based workloads, Zscaler is well positioned to sustain durable growth and long-term cash flow expansion.
Previously, we covered a bullish thesis on Rubrik, Inc. (RBRK) by ElectSamsepi0l in December 2024, which highlighted its leadership in backup and recovery, strong ARR growth post-IPO, and differentiated cyber resilience through cloud-integrated, air-gapped systems. RBRK’s stock price has depreciated by approximately 2.45% since our coverage. Sergey shares a similar view but emphasizes Zscaler’s Zero Trust architecture and AI-driven growth.
