Zscaler to Post Q4 Earnings: Time to Buy, Sell or Hold the Stock?

Zscaler ZS is scheduled to report its fourth-quarter fiscal 2025 results on Sept. 2, 2025.

Zscaler anticipates revenues between $705 million and $707 million for fourth-quarter fiscal 2025. The Zacks Consensus Estimate for ZS’ fiscal fourth-quarter revenues is pegged at $706.2 million, indicating year-over-year growth of 19.1%.

For the fiscal fourth quarter, the company expects non-GAAP earnings per share in the band of 79-80 cents. The Zacks Consensus Estimate for ZS’ fiscal fourth-quarter earnings is pegged at 80 cents per share, which remained unchanged over the past 60 days, indicating a year-over-year decline of 9%.

Zscaler’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 18.7%.

Earnings Whispers for Zscaler

Our proven model does not conclusively predict an earnings beat for Zscaler this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Though Zscaler currently carries a Zacks Rank #3, it has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Factors to Note for Zscaler’s Q4 Results

Zscaler’s fourth-quarter results are expected to grow on the back of its security and networking solutions, given the persistent expansion of the global security space. Traction in Zero Trust Everywhere, Data Security Everywhere and Agentic Operations are likely to have pushed Zscaler’s annual recurring revenues (ARR) in the to be reported quarter.

Strong momentum with Global 2000 and Fortune 500 customers and $1 million ARR customers driven by the ongoing digital transformation across organizations and the growing popularity of hybrid work is likely to have been a key catalyst in the to-be-reported quarter.

The growing adoption of Software-Defined Wide Area Network (SD-WAN) solutions might have also acted as a driver in the fiscal third quarter. This growth is further supported by research as Future Market Insights anticipates the market size for SD-WAN to reach $80.91 billion by 2034 from $5.36 billion in 2024, witnessing a CAGR of 31.6%.

On the customer retention front, ZS’ existing core products, mainly the Zscaler Internet Access and Zscaler Private Access, have been the driving factors. Other products like Cloud Access Security Broker, Cloud Browser Isolation, Cloud Protection, Zscaler Digital Experience and Cloud Security Posture Management for software-as-a-service applications are also expected to have driven customer acquisition and retention.

Nevertheless, as customers scrutinize large deals more closely, with continued tight IT budgets, Zscaler faces longer deal cycles. Furthermore, Zscaler’s expansion into Agentic Operations, Data Security, and AI-based offerings requires significant customer education and execution discipline, and this might have increased the expenses in the fourth quarter.

ZS Price Performance & Stock Valuation

Zscaler’s shares have gained 55.4% year to date, outperforming the Zacks Security industry’s growth of 11.5%.

Now, let’s look at the value Zscaler offers investors at the current levels. ZS stock is trading at a premium with a forward 12-month P/S of 13.51X compared with the industry’s 12.39X.

Investment Thesis for Zscaler

As the demand for cybersecurity solutions across multiple industries like banking, insurance, healthcare, public sector, pharmaceuticals, telecommunications services and education, Zscaler capitalizes on them, mainly benefiting from the rising demand for cybersecurity solutions due to the slew of data breaches.

However, Zscaler faces intense competition from other established cybersecurity players, including Palo Alto Networks PANW, CyberArk CYBR and CrowdStrike CRWD. Palo Alto Networks and CrowdStrike are heavily investing in Agentic Operations, which tends to be the future of cybersecurity, putting significant pressure on Zscaler to innovate.

Zscaler and CyberArk overlap across Zero Trust Strategy, Identity Threat Detection and Secure Remote Access verticals. Zscaler Internet Access and Private Access face competition from Palo Alto Networks Prisma Access, Prisma SD-WAN, CrowdStrike Falcon Zero Trust, CyberArk Secure Web Sessions and CYBR Identity Security Platform.

To counter this, Zscaler is growing investments to improve sales and marketing (S&M) capabilities and higher research and development (R&D) costs, which might have weighed on the company’s bottom line.

Conclusion: Hold ZS Stock for Now

While Zscaler’s long-term prospects remain bright, the near-term challenges associated with its profit growth warrant caution. Therefore, we believe that it’s prudent to avoid making new investments in the stock for now. For existing shareholders, holding on to Zscaler stock is the best course of action, as the long-term growth drivers are still firmly in place.

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This article originally published on Zacks Investment Research (zacks.com).

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