Ophir Gottlieb
CEO of CMLviz, Former Options Market Maker
Zscaler's after-hours rally is paying for profit, not growth, and the growth outlook remains weak. It beat every line, but reaffirmed fiscal 2027 ARR growth of 16.6% to 17.4%, the framework that sank the stock 31% in May, implying net new ARR down 13% to 17%; excluding Red Canary, organic net new ARR is roughly flat. Q4 free cash flow margin fell to 7% from 24% as capex nearly tripled, and the flat 23.0-23.5% FY27 margin guide rests on a memory-price assumption. x.comÂ
Zscaler's management is undermining trust in the stock even after a quarter that beat on revenue, EPS, billings and guidance. On the call the CFO offered a 16-17% FY27 guide before FY26 ended and contradicted himself, leaving investors scared. FCF margin guidance fell on higher data center capex, with 2027 capex guided another 200bp of revenue higher. Mythos looks like the real value-add, making cybersecurity names look like resale wrappers around AI LLMs. Very tough for long-term holders. x.com … Show more
Zscaler's enforcement layer looks undervalued, since AI commoditizes tools that produce answers but strengthens tools that enforce decisions. As a cloud proxy every user session must pass through, replacing it means re-architecting traffic, not swapping vendors. It trades at 8.6 times EV/sales on 25% growth, 47% below its 52-week high, with $1.11B of free cash flow and net cash. The case fails if Palo Alto, Netskope or Cisco make enforcement a checkbox in a platform bundle. x.comÂ
Zscaler's forward guide was gross and undercuts management's credibility. CEO Jay Chaudhry claimed that once growth fell below 30%, the company would see operating leverage every year; that promise now looks false. x.comÂ
Zscaler is not cheap at 40x earnings, about double an initial guess of 20x. @StockSavvyShay pulled up the real figure live on air ahead of Zscaler's Thursday report. x.comÂ
Zscaler's AI-era cybersecurity thesis is now showing up in bookings. Q3 beat across every line: ARR crossed $3.5B, up 25% or 21% excluding Red Canary, and non-GAAP operating margin hit a record 23%. AI Protect bookings topped $100M, Data Security ARR passed $500M, and Zero Trust Everywhere customers rose from 550+ to 700+. Partnerships with Anthropic and OpenAI and the planned Symmetry Systems deal for AI agent identity add catalysts; a preliminary 16-17% FY27 outlook sets a credible bar. x.comÂ
Zscaler is now better used as a source of funds, since many cheap companies look better than it. It was attractive when it was cheap and nothing else was. At $150 it would become a great trade and source of funds. x.com x.comÂ
Zscaler likely needs to broaden its product scope, or Palo Alto Networks and CrowdStrike will dominate security through organic growth and acquisitions. Palo Alto grows about 14% organically and mid-20s including acquisitions and, with 4x Zscaler's revenue, commands 10x EV/sales; CrowdStrike, at 2x Zscaler's revenue, gets the same multiple. Scale is being rewarded. x.comÂ
Zscaler's 31% drop is a mispricing, because AI agents multiply endpoints and attack surface, raising demand for the zero-trust security that Zscaler leads. The selloff came the same day Robinhood opened trading to AI agents, so the market is selling a picks-and-shovels name of the AI era while celebrating that era, exactly the setup for +200% trades. x.comÂ
Rubrik, Zscaler and Microsoft look very bearish: their reliance on cheap H-1B labor leaves their P&Ls exposed, and those P&Ls are expected to worsen. x.comÂ