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Zscaler, Inc. ZS stock has experienced significant volatility over the past three months and yet it delivered 9.2% return. Zscaler outperformed the broader technology sector and the S&P 500’s decline of 11.9% and 5.4%, respectively. ZS shares have also outperformed the Zacks Security industry’s return of 2.8% in the past three months.
Zscaler Three-Month Performance Chart
Image Source: Zacks Investment Research
With Zscaler's stock experiencing considerable volatility over the past three months, investors now face a key decision: Should they hold or take profits? Given the company’s market leadership in Zero Trust security and improving financials, holding on to Zscaler remains the best strategy.
Rising Demand for Cybersecurity Solutions Aids Zscaler
Traction in Zscaler’s cybersecurity solutions remains strong, driven by the escalating threats of nation-state cyber warfare, ransomware extortion and rising malware attacks. Furthermore, as enterprises shift from legacy network security to cloud-based solutions, Zscaler’s cloud-native platform gains an edge, offering a more agile and scalable zero-trust security model.
In the second quarter of fiscal 2025, Zscaler achieved a 12-month trailing dollar-based retention rate of 115%, fueled by larger bundle sales and strong upsells. Remaining Performance Obligations. representing committed, non-cancelable future revenue, grew 28% year over year. By the quarter’s end, Zscaler had 620 customers with annualized recurring revenues (ARR) exceeding $1 million, while its customer count for ARR above $100,000 reached 3,291.
Furthermore, Zscaler is rapidly improving its GovCloud offerings to achieve approval from governing bodies. ZS’ compliance with government security standards will aid it in expanding its presence among government agencies. Zscaler has enabled numerous government agencies to leverage AI-powered Cloud Browser Isolation and IPv6 for secure connectivity, popularising its GovCloud solution among its federal clients.
Zscaler’s government-focused offerings enabled it to add one cabinet-level agency client in the fourth quarter, bringing its total to 13 out of 15 U.S. cabinet-level agencies. As more government agencies use Zscaler’s products, the company’s presence in the public sector could expand, providing a stable growth stream.
These factors will contribute to both top and bottom lines. The Zacks Consensus Estimate for fiscal 2025 revenues suggests a 22.2% year-over-year increase. The consensus mark for Zscaler’s fiscal 2025 EPS has been revised upward by a penny to $3.07 in the past seven days, reflecting analysts’ optimism about its earnings capacity.