Here's How Zscaler (ZS) Affected Fidelity Growth Strategies Fund's Performance

Fidelity Investments, an investment management company, recently released its “Fidelity Growth Strategies Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The Fidelity Growth Strategies Fund is a diversified domestic equity strategy with a focus on mid-cap growth investments. The fund focuses on investing in high-quality companies that demonstrate consistent growth and generate positive free cash flow. The fund’s Retail Class shares returned 22.74% in the second quarter, underperforming the 18.20% return of the benchmark Russell Midcap Growth Index. U.S. mid-cap growth stocks saw strong gains in Q2, bouncing back from a brief decline in early April following President Trump's tariff announcement. In addition, you can check the fund’s top 5 holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Fidelity Growth Strategies Fund highlighted stocks such as Zscaler, Inc. (NASDAQ:ZS). Headquartered in San Jose, California, Zscaler, Inc. (NASDAQ:ZS) is a leading cloud security company. The one-month return of Zscaler, Inc. (NASDAQ:ZS) was 3.47%, and its shares gained 66.89% of their value over the last 52 weeks. On September 25, 2025, Zscaler, Inc. (NASDAQ:ZS) stock closed at $286.66 per share, with a market capitalization of $45.379 billion.

Fidelity Growth Strategies Fund stated the following regarding Zscaler, Inc. (NASDAQ:ZS) in its second quarter 2025 investor letter:

"Effectively not holding Zscaler, Inc. (NASDAQ:ZS) (+58%), which provides a cloud-based internet security platform, also hurt the fund's relative result. On May 29, the company reported strong first-quarter results, including revenue and profitability that outperformed analysts' expectations, while also upwardly revising its full-year guidance. We established a position in the stock just prior to quarter close."

Zscaler, Inc. (NASDAQ:ZS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 60 hedge fund portfolios held Zscaler, Inc. (NASDAQ:ZS) at the end of the second quarter, up from 46 in the previous quarter. Zscaler, Inc.'s (NASDAQ:ZS) fiscal fourth quarter revenue grew 21% year-over-year to $719 million. While we acknowledge the potential of Zscaler, Inc. (NASDAQ:ZS) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Zscaler, Inc. (NASDAQ:ZS) and shared the list of best tech stocks to buy for the long term. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.