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Is ZS a good stock to buy? We came across a bullish thesis on Zscaler, Inc. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on ZS. Zscaler, Inc.'s share was trading at $134.68 as of April 17th. ZS’s forward P/E was 28.99 according to Yahoo Finance.

Zscaler, Inc. (ZS) is a leading cybersecurity platform pioneering the Zero Trust Exchange, replacing legacy perimeter-based firewalls with a cloud-native architecture that secures users, applications, and branch environments. The company continues to demonstrate strong execution, reporting Q2 FY2026 revenue of $816 million, up 26% year-over-year, while annual recurring revenue (ARR) grew 25% to $3.4 billion.

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Despite tougher comparisons moderating organic growth to 7%, Zscaler maintained elite profitability with operating margins expanding to 22.2% and free cash flow margins exceeding 20%, sustaining a “Rule of 60+” profile. Growth is increasingly driven by a shift toward consumption-based pricing, with non-seat-based products contributing over 25% of new ACV and growing above 100%, reflecting rising demand tied to traffic and workload expansion.

Enterprise traction remains robust, with 728 customers generating over $1 million in ARR, supported by initiatives like Z-Flex that extend contract durations and enhance upsell visibility. The company’s Zero Trust architecture continues to differentiate it from firewall-based and bundled SASE competitors, while its “Zero Trust Everywhere” strategy is driving deeper penetration and 2–3x ARR expansion within large customers.

Artificial intelligence is emerging as a powerful tailwind, with the platform processing nearly one trillion AI-related transactions annually and new offerings like AI Protect enabling real-time inspection and policy enforcement. With a strong pipeline, improving sales productivity, and expanding monetization of AI-driven and consumption-based workloads, Zscaler is well positioned to sustain durable growth and long-term cash flow expansion.

Previously, we covered a bullish thesis on Rubrik, Inc. (RBRK) by ElectSamsepi0l in December 2024, which highlighted its leadership in backup and recovery, strong ARR growth post-IPO, and differentiated cyber resilience through cloud-integrated, air-gapped systems. RBRK’s stock price has depreciated by approximately 2.45% since our coverage. Sergey shares a similar view but emphasizes Zscaler’s Zero Trust architecture and AI-driven growth.

Zscaler, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 56 hedge fund portfolios held ZS at the end of the fourth quarter which was 50 in the previous quarter. While we acknowledge the risk and potential of ZS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ZS and that has 10,000% upside potential, check out our report about this cheapest AI stock.

Disclosure: None.