AI is creating an uncomfortable new reality for corporate security teams. Companies are deploying thousands of applications, models, devices, and autonomous agents that all need access to sensitive data.
That makes identity and access security more important, not less. After getting cut nearly in half from its highs, this former market darling finally gives you a more reasonable way to play that shift.
Growth Stocks Ahead (Sponsored)
After analyzing thousands of companies, our analysts pinpointed the 5 Stocks Set to Double based on accelerating performance, improving fundamentals, and strong technical signals.
This newly released report explains why these five could be positioned for major moves in the year ahead.
While results aren’t guaranteed, previous reports uncovered gains as high as +175%, +498%, and +673%.
Access the free report before midnight.
See the 5 Stocks Set to Double.
*This free resource is being sent by Zacks. We identify investment resources you may choose to use in making your own decisions. Use of this resource is subject to the Zacks Terms of Service.
*Past performance is no guarantee of future results. Investing involves risk. This material does not constitute investment, legal, accounting, or tax advice. Zacks Investment Research is not a licensed dealer, broker, or investment adviser.
What Just Happened
The stock is recovering from a historic reset
Zscaler, Inc. (NASDAQ: ZS) recently closed around $176.68, nearly 48% below its 52-week high of $336.99.
The damage came largely after fiscal third-quarter earnings. Zscaler actually beat expectations, but cautious guidance and changes within its sales leadership triggered its worst one-day decline since becoming public.
The company guided fiscal Q4 revenue to $875 million to $878 million and gave an early fiscal 2027 outlook calling for 16% to 17% growth in both revenue and annual recurring revenue.
That represents a slowdown from current growth rates, and the market punished the stock accordingly.
But now expectations are much lower while the underlying business continues to expand.
The latest results were stronger than the stock reaction suggested
Fiscal Q3 revenue increased 25% to $850.5 million. Annual recurring revenue also grew 25% to $3.53 billion.
Even excluding the acquired Red Canary business, ARR increased 21%.
Non-GAAP operating income climbed 34% to $195.8 million, pushing the operating margin to a record 23%. Adjusted EPS rose to $1.08 from $0.84 a year earlier.
You are therefore looking at a company growing revenue above 20% while expanding profitability—not a cybersecurity business that suddenly stopped working.
Why Zero Trust Matters
The old security model is becoming obsolete
Traditional corporate security was built around a protected network. Employees logged into that network and gained access to applications and data inside it.
Cloud computing broke that model. Employees now work from anywhere, applications sit across multiple clouds, and data moves constantly between systems.
Zscaler’s Zero Trust Exchange takes a different approach. Instead of automatically trusting someone because they are connected to a corporate network, it verifies each connection between a user, device, workload, or application.
A user gets access only to the specific resource they need rather than the entire network.
That reduces the damage an attacker can cause after compromising one account.
Scale creates an important advantage
Zscaler’s security cloud operates across roughly 160 public exchanges and processes more than 500 billion transactions every day.
That provides a huge amount of security telemetry.
The more traffic the platform sees, the more information it can use to recognize unusual behavior, malware, data leakage, and new attack patterns.
That becomes increasingly useful as AI speeds up both sides of cybersecurity. Attackers can automate vulnerability discovery and phishing. Defenders need automation capable of responding at similar speed.
What's the most reliable signal that a business has true pricing power?
System Turns Bullish (Sponsored)
In 2023, Marc Chaikin's system flashed bearish on an automotive company no one had yet heard of.
The stock crashed 35%. Today, his system rates this company "Very Bullish" and Marc calls it a screaming buy thanks to a new "groundbreaking partnership" with Nvidia that hands this company the keys to the self-driving kingdom on a silver platter.
Get the ticker FREE before it becomes a household name…
*This ad is sent on behalf of Chaikin Analytics, 201 King Of Prussia Rd., Suite 650, Radnor, PA 19087. If you would like to optout from receiving offers from Chaikin Analytics please click here.
AI Is Creating A New Security Problem
AI agents need identities too
The next opportunity goes beyond protecting employees.
Companies are beginning to deploy AI agents that can access applications, retrieve corporate data, execute tasks, and communicate with other software.
Those agents create a new access-control problem.
If an AI agent has excessive permissions—or if an attacker compromises it—the agent could move through corporate systems at machine speed.
Zscaler is expanding Zero Trust to secure these non-human identities. Its AI-security strategy focuses on controlling what models and agents can access, monitoring their behavior, and preventing sensitive information from leaking into unauthorized AI tools.
For you, that means AI is both a threat and a potential growth driver.
The product portfolio is expanding quickly
Zscaler has introduced products including AI Guard, AI Access Graph, AI Broker, and its ZAgent framework.
The company also agreed to acquire Symmetry Systems, whose technology maps relationships between identities, applications, and sensitive data.
That access graph could become especially useful in an agentic-AI world. Before a company can control what an AI agent accesses, it needs to understand how its data, users, applications, and machine identities are connected.
Zscaler is trying to become that control layer.
Elite Trade Club Insider
More Than $243 Million In Proposed Holder Sales Just Hit A 52% Winner
You’re looking at one consumer-services stock after a powerful one-year rally and one casino operator coming off an earnings beat. Elite Trade Club Insider readers are seeing what the headline feeds can blur: major financial sponsors are preparing to move more than $240 million of stock in the first name, while the second company’s president sold the exact shares left over from an option exercise after taxes and exercise costs.
You’re reading the free version. Here’s what we held back.
Every day, insiders and institutions move millions before the market catches on. We surface the data behind those moves before the rest of the market sees it.
A subscription gets you:
The insider buys, options bets, and dark pool moves the free edition can't show you. Unlocked every weekday.
A Sunday Deep Dive that tells you where to look before Monday's bell rings.
The Friday Smart Money Brief: who bought, who sold, where the big options bets landed, and where institutions are hiding volume. Three data layers. One email.
A Monthly Insider Scorecard so you always know whether smart money is buying or selling the market.
Every past Insider edition, unlocked, on elitetrade.club. Go back and see what you missed.
$25/mo or $250/yr. 30-day money back guarantee. Cancel anytime. Founding member pricing: lock in $25/mo before we raise it.
The Platform Strategy Is Working
Bigger customers keep spending more
Zscaler finished Q3 with 4,003 customers generating at least $100,000 of ARR, up 19% year over year.
The number producing more than $1 million in ARR reached 748, up 18%.
That shows the company is not relying only on new customer additions. Existing enterprises are expanding their use of the platform.
Newer products outside Zscaler’s traditional user-based security solutions grew ARR by more than 100% year over year and represented more than 30% of Q3 new annual contract value.
That is important because the next phase of growth needs to come from workloads, branches, data protection, and AI security—not simply adding more employee seats.
Large contract commitments provide visibility
Remaining performance obligations reached approximately $6.46 billion, up about 30% year over year.
That represents revenue already committed under customer contracts but not yet recognized.
For you, RPO provides evidence that demand stretches beyond one quarter. Customers are signing multiyear contracts even while the market worries about slowing cybersecurity spending.
Sector Incentive Stocks (Sponsored)
If your financial advisor isn’t helping you feel confident about your plan, it may be time to explore your options.
A better-fit advisor could help you build a stronger long-term strategy, prepare for market volatility, and avoid common planning mistakes.
SmartAsset’s free matching tool connects you with vetted fiduciary advisors who serve your area and are legally bound to act in your best interest.
Take the matching quiz today.
*This example demonstrates the potential final lifetime portfolio value, accounting for estimated investment returns, tax savings and inflation over different life stages for an individual starting with $500,000 at age 45, through age 77. Under a set of core assumptions, this consumer profile is projected to have a final lifetime portfolio value of approximately $3.24 million if retaining the services of a financial advisor – not accounting for additional savings or portfolio withdrawals – versus a final estimated lifetime portfolio value of $1.56 million without the services of a financial advisor. This example is based on the valuation framework presented in SmartAsset's whitepaper "The Value of a Financial Advisor: What's It Really Worth?" (Nov. 2024). The value of professional financial advice is only an illustrative estimate and varies with each unique client's individual circumstances and portfolio composition. Carefully consider your investment objectives, risk factors, and perform your own due diligence before choosing a financial advisor.
Profitability Is Catching Up
The operating model is scaling
Non-GAAP gross margin remained around 81%, while operating margin reached a record 23%.
Year-to-date revenue grew 26%, and free cash flow margin was approximately 29%.
That combination matters because high-growth software companies eventually need to prove they can convert subscription growth into cash.
Zscaler is doing that.
Management expects full-year non-GAAP operating income of $755 million to $757 million, representing roughly 30% growth, with adjusted EPS of $4.10 to $4.11.
At $176.68, that puts the stock at roughly 43 times expected fiscal 2026 adjusted earnings.
That is still a premium—but it looks considerably different from buying near $337.
Why The Stock Has A Case
The expectations reset was severe
The market reacted to 16% to 17% expected fiscal 2027 growth as if the long-term story had broken.
Slower growth deserves a lower valuation. But Zscaler still has more than $3.5 billion of ARR, an expanding product portfolio, 80%-plus gross margins, and increasing operating leverage.
You do not need the company to return immediately to 25% growth for the stock to work.
If fiscal 2027 growth lands toward the high end of guidance and AI-security products gain traction, sentiment can improve considerably.
Industry positioning remains strong
Zscaler was recently named a Leader in Gartner’s 2026 Magic Quadrants for both Security Service Edge and SASE Platforms.
That does not guarantee future growth, but it reinforces the company’s position in two of enterprise cybersecurity’s most important categories.
The next earnings report arrives September 3, giving you several weeks before the next major fundamental checkpoint.
What Could Trip It Up
Growth really is slowing
Fiscal 2027 revenue growth of 16% to 17% would be a meaningful decline from fiscal 2026’s roughly 25% pace.
If growth slips below that range, the valuation will become harder to defend.
Competition is intense
Palo Alto Networks, Cloudflare, Netskope, Microsoft, and other security companies are competing for the same enterprise budgets.
Customers increasingly want consolidated platforms, which can favor Zscaler—but it also gives large competitors more reason to bundle competing products aggressively.
Sales execution needs to stabilize
Two senior sales leaders departed near the end of Q3. Management replaced one quickly and was working to fill the other position.
You need to see evidence that the transition does not disrupt large enterprise deals.
Red Canary complicates the growth picture
Red Canary contributed $127 million of ARR in Q3. Its managed detection and response business also carries higher churn than Zscaler’s core platform.
That means headline ARR growth currently looks slightly stronger than the underlying organic trend.
My Take
Buy on pullbacks. Zscaler still has one of the strongest positions in Zero Trust security, and AI agents create another major access-control problem its platform is designed to solve. Revenue and ARR remain above 20% growth, large customers continue expanding, and profitability is improving rapidly.
The key risk is that the slowdown becomes more severe than management expects. At roughly 43 times adjusted fiscal 2026 earnings, you are still paying for quality. I would use weakness to build the position rather than chase sharp rallies ahead of September earnings.
Action Recap
🔐 Looking to buy? Buy on pullbacks. The valuation reset gives you a much better entry into a still-growing security platform.
📈 Already own it? Keep holding while ARR growth remains healthy, operating margins expand, and newer security products keep gaining share.
⚠️ Main risk to respect: If fiscal 2027 growth falls materially below 16% to 17%, the valuation could compress again.
You Read This Far. Here's Where the Real Work Lives.
We run three live portfolios on Autopilot, and everything about them is public: every position, every allocation, every trade, visible the moment it happens.
We keep our own money in each one, because analysis you won't fund yourself is just content.
THE UNBREAKABLE STACK
Our growth book: durable software and cybersecurity names built to compound quietly for years.
THE HORMUZ PREMIUM
Our energy thesis: built for how that sector actually pays, over quarters, not headlines.
THE SQUEEZE
The defensive sleeve: staples and steady compounders, boring on purpose, built for the nights you'd rather sleep than watch futures.
And here's the part that makes it effortless: Autopilot does the trading for you. Connect the brokerage you already use (Robinhood, Schwab, Fidelity, and more) and every move we make gets mirrored in your own account automatically.
Your money never leaves your brokerage. It stays in your account, under your control, and you can override any trade or disconnect anytime. Autopilot even rebalances automatically when allocations drift, and you get a notification every time something happens.
No watching tickers. No timing entries. No fat-finger mistakes at market open. You pick the portfolio, we do the work, your account follows along.
Pick the one that fits your risk level, or run all three:
Live portfolios, real positions, our own capital at stake. Your funds stay in your own brokerage account. Past performance doesn't guarantee future results.
That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.
Best Regards,
— Adam Garcia
Elite Trade Club
Click here to get our daily newsletter straight to your cell for free.
P.S. Just like this newsletter, it's 100% free*, and you can stop at any time by replying STOP.
