Key Points
Zscaler, Inc. (ZS) ended sharply lower, sliding from a previous close of $289.73 to $256.16. The intraday move was down 11.59%, declining $33.57 as sellers pressed their advantage throughout the session. The drop reset the stock to levels last seen several weeks ago and reversed a portion of its recent upswing, reflecting a swift shift in risk appetite toward higher-growth cybersecurity names.
Trading ran on above-average volume, underscoring conviction behind the move and suggesting active repositioning by institutions and short-term traders alike. At $256.16, ZS now sits 24% below its 52-week high of $336.99 set on 11/03/2025, placing the shares well off peak momentum. The magnitude of the decline pushed the stock through near-term trading ranges, leaving intermediate resistance likely to form in the upper-$260s to low-$270s as the market reassesses valuation and growth assumptions for the Information Technology leader.
In recent sessions, the stock had shown choppy action typical of high-beta Software and Services peers, with intraday swings amplified by shifting sentiment around growth durability, rates, and risk premiums. Today’s decisive move fits a broader pattern in cybersecurity, where premium multiples leave little room for disappointment. With sector peers also rated at the weaker end of the Weiss Ratings scale, the group remains sensitive to any sign of deceleration or guidance that merely meets lofty expectations. Traders will watch whether ZS stabilizes in the mid-$250s as participants digest the latest fundamentals and recalibrate price targets and positioning.
Why Zscaler, Inc. Price is Moving
Zscaler, Inc. (ZS) closed at $256.16, giving the company a market cap of $45.86 billion. The shares trade between a 52-week low-to-high range that tops out at $336.99, with today’s level placing the stock 24% below that peak. On fundamentals, trailing twelve-month EPS stands at $-0.27, signaling negative GAAP profitability. Trading volume was above average during the selloff, pointing to broad participation in the move as investors reassessed risk and growth expectations in the Software and Services industry.
The latest quarterly revenue trajectory coming into this print showed steady expansion: $678.03 million for the quarter ended 04/30/2025 rising to $719.23 million for the quarter ended 07/31/2025, a sequential increase of 6.1%. That momentum set the stage for Zscaler’s November 24, 2025 update, where management delivered an earnings beat and raised full-year guidance. Specifically, Q1 FY2026 adjusted EPS of $0.96 topped the $0.86 consensus by $0.10, and revenue of $788.1 million exceeded the $773.26 million forecast. The company also lifted full-year FY2026 revenue to $3.28–$3.30 billion and adjusted EPS to $3.78–$3.82, in both cases ahead of Street expectations.
Despite those strong results, shares fell in a classic “sell the news” reaction, reflecting sky-high expectations and sensitivity to any sign of slowing. Zscaler’s Q2 guidance—revenue of $797–$799 million versus $796.1 million consensus and adjusted EPS of $0.89–$0.90—was only modestly above expectations and implied a deceleration in momentum. Management highlighted $3.2 billion in annual recurring revenue growing 25% year over year and strategic acquisitions of Red Canary and SPLXAI for $692 million to expand AI security capabilities. Still, the incremental lift was not enough to sustain premium valuation in a risk-off tape, prompting the reassessment seen in ZS today.
What is the Zscaler, Inc. Rating - Should I Sell or Buy?
Weiss Ratings assigns ZS a D rating. Current recommendation is Sell.
The rating is built on five indices: the Weak Growth Index points to expansion that is not translating into durable profitability despite 21.31% revenue growth; the Very Weak Efficiency Index reflects poor returns on capital consistent with a -1.55% profit margin; the Excellent Solvency Index indicates a solid balance sheet to meet obligations; the Fair Total Return Index suggests average risk-adjusted performance versus benchmarks; and the Fair Volatility Index shows price swings that are notable but not extreme for the group. A deeply negative -1,066.75 P/E ratio underscores that GAAP earnings remain in the red, aligning with the weaker efficiency assessment.
Relative to peers in Information Technology’s Software and Services space, ZS sits alongside other high-growth cybersecurity names that face similar ratings headwinds. Sector peers include CRWD (D), SNOW (D-), and NET (D-), highlighting that the group’s risk/reward profiles skew weaker at present despite strong top-line narratives.
In our view, the D rating synthesizes solid growth with persistent profitability and efficiency shortfalls, as well as only fair risk-adjusted returns. Even with robust guidance and recurring revenue scale, the negative margin profile and very weak efficiency weigh heavily on the overall risk/reward balance. Within the Weiss Ratings framework, these detractors outweigh the positives from solvency and recent total return, leaving ZS categorized as a weaker opportunity relative to alternatives with more consistent earnings power and better efficiency at current valuations.
About Zscaler, Inc.
Zscaler, Inc. operates within the Information Technology sector and the Software and Services industry, providing cloud-native security that helps organizations securely connect users, devices, and workloads to applications. Founded in 2007, the company pioneered a Zero Trust approach that shifts security from network-based perimeter defenses to identity- and context-aware access controls delivered through a globally distributed cloud platform. Zscaler’s architecture is designed to reduce attack surface, minimize lateral movement, and improve security posture as enterprises modernize infrastructure and adopt distributed work.
Core offerings center on the Zscaler Zero Trust Exchange, a multi-tenant, cloud-delivered platform that inspects traffic inline and enforces policy close to users and workloads. Key product suites include Zscaler Internet Access (ZIA) for secure access to the internet and SaaS, Zscaler Private Access (ZPA) for zero trust access to private apps, and Zscaler Digital Experience (ZDX) for monitoring and optimizing user-to-app connectivity. The portfolio extends to data protection with advanced DLP, CASB, and inline encryption controls that help customers identify, classify, and safeguard sensitive information across cloud and endpoint environments.
Zscaler serves large enterprises and public-sector organizations undergoing digital transformation, hybrid work adoption, and cloud migration. Its cloud-native scale, proxy-based inspection, and integrated security stack distinguish it from legacy appliance-centric models, enabling consistent policy enforcement across users and locations. The company competes on secure access service edge (SASE) and security service edge (SSE) capabilities, emphasizing reduced complexity, improved user experience, and lower total cost of ownership through consolidation. Strategic focus areas include identity-driven security, application segmentation, and deep analytics to help customers reduce risk and modernize security operations as threats evolve.
Investor Outlook
With a D (Sell) rating and very weak efficiency metrics, investors should watch whether ZS can sustain margin progress while maintaining growth, alongside sector risk sentiment for high-multiple cybersecurity names. Stabilization near the mid-$250s and any improvement in profitability would be key signals for the Weiss model.
See full rankings of all D-rated Information Technology stocks inside the Weiss Stock Screener.