Wall Street Maintains Bullish Stance on Zscaler’s AI Security Strategy

Zscaler US98980G1022

Despite broader challenges for big tech firms grappling with significant capital expenditures, one cloud security specialist is demonstrating a clear path to profitable expansion. Zscaler recently outlined its strategic position in the AI-driven security market at an investor conference, drawing immediate and positive reinforcement from financial analysts.

The fundamental case for optimism is supported by the company's latest results. Zscaler's most recent quarterly report exceeded market expectations, posting revenue of $788.1 million, a year-over-year increase of 25.5%. Adjusted earnings per share came in at $0.96. Furthermore, the company has raised its full-year outlook, driven in large part by the rapid adoption of its AI security offerings. The annual recurring revenue (ARR) from these AI security contracts has already surpassed the $400 million mark for fiscal year 2026, achieving this milestone ahead of schedule.

Analyst Confidence Amid Institutional Selling

In direct response to a presentation by Chief Financial Officer Kevin Rubin at the Barclays Global Technology Conference, investment bank Freedom Capital Markets reaffirmed its "Buy" rating on Zscaler. The firm established a price target of $320 per share. Analysts cited the accelerating revenue momentum from the "Zero Trust Everywhere" initiative and the fast-paced rollout of AI-powered security solutions as key reasons for their positive assessment.

This upbeat analyst perspective exists alongside recent transparency reports showing activity from major institutional investors. Disclosures from the second quarter of 2025 reveal that some large funds have been taking profits. For instance, Rokos Capital Management reduced its stake in Zscaler by nearly 50% during that period, with similar sales activity noted from other funds. This creates a contrast between near-term profit-taking by some investors and the longer-term growth potential highlighted by research firms.

Valuation and Market Outlook

Currently trading approximately 25% below its 52-week high, Freedom Capital Markets views this price pullback as an attractive entry point for investors. The central challenge for Zscaler will be maintaining its aggressive expansion within the AI security segment without putting excessive pressure on its profit margins.

Market expectations for the company remain elevated. Consensus estimates project revenue growth for the current fiscal year to be in the range of 22.8% to 23.5%. Zscaler's ability to meet these targets while preserving profitability is widely seen as the primary driver for its share price moving forward. The analyst community continues to assign the stock an average rating of "Moderate Buy," with the mean price target suggesting significant upside potential from current trading levels.