Is Zscaler, Inc. (ZS) A Good Stock To Buy Now?

Is ZS a good stock to buy? We came across a bullish thesis on Zscaler, Inc. on Outperforming the Market’s Substack by Simple Investing. In this article, we will summarize the bulls’ thesis on ZS. Zscaler, Inc.’s share was trading at $153.76 as of March 13th. ZS’s forward P/E was 40.32 according to Yahoo Finance.

Zscaler, Inc. operates as a cloud security company worldwide. ZS reported strong FY1Q26 results, delivering a broad-based earnings beat despite a negative market reaction following the announcement. The company generated revenue of $788 million, representing 26% year-over-year growth and modestly exceeding consensus expectations, while operating income reached $172 million with a 21.8% operating margin. The margin expansion reflected disciplined expense management and scale benefits even as the company continued investing in growth initiatives.

Read More: 15 AI Stocks That Are Quietly Making Investors Rich Read More: Undervalued AI Stock Poised For Massive Gains: 10000% Upside Potential

Earnings per share came in at $0.96, significantly ahead of expectations. Annual recurring revenue (ARR) increased 26% year over year to $3.2 billion, driven by strong demand across the company’s three key growth pillars, which collectively added $189 million in quarterly net new ARR.

While this figure included the contribution from the recently acquired Red Canary, management indicated that organic ARR growth would have remained around 22%, consistent with the prior quarter. Remaining performance obligations also strengthened, with RPO rising 35% year over year to $5.9 billion and current RPO growing 29%, reinforcing the company’s forward visibility.

Despite these strong fundamentals, the stock declined after the results due to investor concerns about limited disclosure on organic versus inorganic growth following the Red Canary acquisition and fears of slowing momentum in the company’s core ZIA and ZPA offerings. However, additional management commentary suggested the market reaction was likely overdone, as Red Canary contributed roughly $89 million in ARR and integration is progressing smoothly with operational synergies emerging across go-to-market and support functions.

Looking ahead, Zscaler maintained a cautious guidance approach amid a tight IT spending environment, but still raised its FY2026 ARR, revenue, and EPS outlook modestly. With continued demand for Zero Trust security and rapidly growing interest in AI security solutions, Zscaler remains well positioned for sustained growth while continuing to outperform key efficiency benchmarks such as the Rule of 40.

Previously, we covered a bullish thesis on Rubrik, Inc. (RBRK) by ElectSamsepi0l in December 2024, which highlighted the company’s leadership in cloud-integrated backup and recovery solutions, strong partnerships with cybersecurity firms, and rapid ARR growth surpassing $1 billion following its IPO. RBRK’s stock price has been flat since our coverage. Simple Investing shares a similar view but emphasizes Zscaler, Inc.’s strong earnings performance and accelerating demand for Zero Trust and AI security solutions.

Zscaler, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 56 hedge fund portfolios held ZS at the end of the fourth quarter which was 50 in the previous quarter. While we acknowledge the risk and potential of ZS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ZS and that has 10,000% upside potential, check out our report about this cheapest AI stock.

Disclosure: None.