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.com 

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.com 

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.com 

Zscaler should sell off on its guide for 9.5% organic ARR growth in fiscal 2027. That makes it a slow-moving software company with excellent dollar-based net retention but a withering growth engine, not an AI winner. x.com 

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.com 

Zscaler looks like the better cybersecurity buy for the next three years because its valuation has diverged sharply from CrowdStrike's. Zscaler trades at 5.7x next-twelve-month revenue with 17-18% expected annual growth, versus CrowdStrike at 31.1x revenue and 150x earnings with 21-22% growth, probably the biggest gap ever between them. A 25% CAGR over 3-5 years is hard to model for CrowdStrike at that price. Zscaler has been beaten up for good reasons. x.com  x.com 

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.com 

Cybersecurity is a great AI play, but some valuations are getting absolutely ridiculous, and great companies are not great stocks at any price. CrowdStrike trades at 186x forward earnings and 40x sales, Cloudflare at 209x and 43x, Palo Alto Networks at 87x and 21x, and Rubrik at 327x and 11.5x. x.com 

Zscaler stands to benefit as AI's growth raises security needs, a point Elon Musk and Dario Amodei just emphasized, making large pullbacks in the sector a buying opportunity. Q2 revenue was $898M, up 25% year over year, ARR reached $3.77B, AI security bookings rose 50% sequentially, the Z-Flex program reached $770M in quarterly contract value, and non-GAAP operating margin hit a record 24.3%. x.com 

Security software is arguably more of an AI bubble than semiconductors. Firms are bid up to nosebleed multiples on moderate AI-related revenue acceleration while facing medium- to long-term risks from Microsoft, Google and the AI labs and a 10-year Treasury yield above 5%. Their forward P/Es rest on non-GAAP earnings that exclude large stock compensation. A reversal could come from results missing high buy-side bars, security share gains by Microsoft or Google, or AI lab security launches. x.com  … Show more