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- Zero Trust, Full Throttle With This Soaring Cloud Security Star
Zero Trust, Full Throttle With This Soaring Cloud Security Star
Noah Zelvis
August 13, 2025
Zscaler Inc. (NASDAQ: ZS) has already posted a 59% gain over the past year and is up 52% year-to-date.
But with earnings due on September 2 and the stock consolidating just below resistance, the next leg higher may still be in front of us.
The cloud security firm is forming a flat base after a long winning streak and remains actionable above its three-weeks-tight pattern formed in June.
Technical signals are flashing green, while institutional support has strengthened, and analysts continue raising their price targets.
This is a stock building energy into a potential breakout, and the setup may reward investors who act before the next move.
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Strategic Positioning: Built for Zero Trust
Zscaler is a global leader in cloud-native cybersecurity, operating the Zero Trust Exchange platform across more than 160 data centers in 185 countries.
Its solutions are trusted by over 50 million users and help protect enterprise traffic, endpoints, cloud environments, and private applications.
What makes Zscaler unique is its architecture.
It’s not trying to retrofit legacy hardware into the cloud. Instead, the company was designed from the start to enable secure, seamless internet access without traditional VPNs or firewalls.
Its flagship products, Zscaler Internet Access (ZIA) and Zscaler Private Access (ZPA), enable businesses to modernize their security stacks with fast, secure, identity-based access to apps and data from anywhere.
Demand for these solutions continues to grow, especially as hybrid work, distributed teams, and cloud-first strategies become the norm.
Zscaler’s positioning in the Secure Access Service Edge (SASE) market places it at the center of this transformation.
Action: Consider initiating or adding to a position between $260 and $275 ahead of earnings on September 2. Watch for a breakout above $310 as a technical confirmation. |
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Poll: What’s Zscaler’s biggest strength right now? |
Momentum Building Into Earnings
Zscaler has topped expectations in multiple quarters and continues to show resilience, even as growth normalizes from pandemic-era highs.
In its fiscal Q3 earnings release (May 29), revenue rose nearly 28% year-over-year and beat estimates, while billings remained strong.
Wall Street expects more of the same.
Jefferies recently raised its price target to $295 and believes Q4 billings growth could exceed the company’s 21% guidance by another 2 to 3%. Other firms have followed suit:
KeyBanc: Raised to $290, maintains Overweight
Stifel: Raised to $270, maintains Buy
Cantor Fitzgerald: Raised to $250, maintains Overweight
Loop Capital: Raised to $250, maintains Hold
All signs point to continued optimism around Zscaler’s platform expansion and improved sales productivity.
Analyst surveys also show increasing enterprise spending on secure access solutions, which bodes well for Zscaler’s platform going into 2026.
Action: Build a core position while shares are consolidating. Use any dips below $255 as an opportunity to add. |
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Valuation: Premium Supported by Quality
With a market cap above $42 billion and no dividend, Zscaler trades at a premium valuation.
Its forward price-to-sales multiple and price-to-free-cash-flow ratio are well above industry averages.
However, this valuation is supported by best-in-class margins, durable growth, and recurring revenue strength.
Gross margins consistently hover near 78%, and free cash flow margins are improving, which is something multiple analysts have flagged as a potential long-term catalyst.
Management is also investing heavily in platform innovation while keeping operational leverage in mind.
This helps explain why Zscaler ranks first out of 34 cybersecurity stocks tracked by Investor’s Business Daily.
Its Composite Rating and EPS Rating both sit at 98, a rare combo that reflects technical strength, earnings momentum, and solid fundamentals.
Technicals and Institutional Support
ZS is currently forming a flat base with resistance around $309.
Its relative strength line has moved to new highs, and the stock’s Up/Down Volume ratio sits at 2.5, signaling heavy buying volume versus selling.
The Accumulation/Distribution Rating of B further confirms steady institutional accumulation.
These indicators suggest that large funds continue to build positions, even after the stock’s big run. That’s a sign of confidence going into earnings.
The chart also shows tight weekly closes, signaling investor conviction.
If Zscaler can break through the $310 level on volume, it could trigger a new wave of buying interest and attract breakout traders.
Financial Outlook and Key Catalysts
While revenue and EPS growth are slowing versus 2022 and 2023, Zscaler is still growing profitably. EPS grew 159% in fiscal 2023 and 54% in 2024.
Wall Street is modeling 16% growth in 2025 and another 14% in 2026.
Notably, management is guiding for continued top-line expansion, with a goal of 20% revenue growth into next year.
Recent commentary has also emphasized improving sales efficiency, customer retention, and cross-sell traction across the Zero Trust Exchange platform.
The Q4 earnings call on September 2 will be critical. Investors will be watching for:
Updated billings growth
Margin expansion progress
Client wins or updates on large enterprise accounts
Adoption of ZIA, ZPA, and emerging platform modules
Any upside surprise on these metrics could fuel the next move higher.
Action: Add ZS to your earnings watchlist. If the stock breaks $310 after earnings, it could enter a new leg higher. |
Risks to Watch
Despite the bullish setup, Zscaler still faces risks that could cap short-term upside:
Valuation Compression: Any miss or soft guidance could trigger a pullback given the premium valuation.
Competitive Pressure: While Zscaler leads in SASE, it competes with giants like Palo Alto Networks, Cisco, and Fortinet—all of whom are building out similar offerings.
Growth Deceleration: EPS and revenue growth are moderating, which could cool investor enthusiasm if billings or margins miss targets.
Macro Sensitivity: Enterprise IT spending remains uneven and may be impacted by rate policy, political uncertainty, or tightening budgets.
Investors should monitor management commentary closely for signs of platform fatigue, client churn, or pricing pressure.
Final Word: Setup Worth Watching
Zscaler remains one of the top names in next-gen cybersecurity.
Its cloud-native architecture, strong balance sheet, and expanding platform make it a compelling long-term play.
While valuation is rich, the company has repeatedly delivered—and investors are betting it can keep doing so.
With a fresh technical setup forming just weeks ahead of earnings, this is a name worth watching.
If it clears resistance and delivers another solid quarter, ZS could finally punch through and start its next major move.
Action Recap: |
That's our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out.
Best Regards,
—Noah Zelvis
Tech Stock Insider