Zscaler (ZS) Upgraded to Outperform Amid AI and Zero Trust Growth

Zscaler Inc. (NASDAQ:ZS) ranks among the best AI stocks to buy according to analysts. On December 16, Mizuho upgraded Zscaler Inc. (NASDAQ:ZS) to Outperform, noting valuation support despite ongoing concerns about near-term growth prospects. According to analyst Gregg Moskowitz, Zscaler Inc. (NASDAQ:ZS) shares “have been very weak since reporting a very solid F1Q,” with the decrease attributed to “F2Q net new ARR guidance slightly lower than prior” and the lack of “a specific contribution from the recent Red Canary acquisition.”

Despite significant top-line growth, Zscaler’s gross margins were under pressure due to the rapid adoption of newer products with lower margins. This position demanded higher operating expenses as the company sought market share in high-growth areas such as AI safety and expanding Zero Trust systems.

While the firm keeps pushing for “more transparency from management on ZS’s organic growth this year,” Mizuho is convinced that the company is “very well-positioned within SASE/Zero Trust.” The latest selloff, it believes, significantly reimburses investors for these risks.

Zscaler Inc. (NASDAQ:ZS) is a cloud-based security company that provides cybersecurity solutions by protecting user access to applications and data, regardless of location. It replaces traditional hardware-based security, such as VPNs and firewalls, with its cloud-native Zero Trust Exchange platform, which secures internet access and private applications.

While we acknowledge the potential of 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.

READ NEXT: 10 Best Magic Formula Stocks for 2025 and 10 Best Retirement Stocks to Buy According to Hedge Funds.

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