Zscaler Rallies 16% YTD: Is it the Right Time to Buy the Stock?

After a challenging 2024 that saw Zscaler, Inc. ZS decline 18.5%, the stock rebounded sharply in 2025, soaring 15.7% year to date. This outperformance has left key cybersecurity peers, including Fortinet, Inc. FTNT, Palo Alto Networks, Inc. PANW and Cisco Systems, Inc. CSCO, in the dust. While the broader Zacks Internet – Services industry has declined 0.2%, Zscaler’s strong market positioning and financial execution have fueled renewed investor confidence.YTD Price Return PerformanceImage Source: Zacks Investment ResearchWith cybersecurity spending rising, an unmatched leadership position in zero trust security and a robust financial foundation, Zscaler remains one of the best long-term players in the space. Investors questioning whether to buy now or wait should seize this opportunity, as Zscaler’s growth story is far from over.Zscaler: Undisputed Leader in the Zero Trust MarketZscaler dominates the zero trust cybersecurity space, a market expected to expand at a CAGR of 16.7% through 2032, according to Fortune Business Insights. With cyberattacks becoming more sophisticated and regulatory requirements tightening, enterprises are rapidly adopting Zero Trust solutions to enhance security in cloud-based and hybrid work environments.Zscaler’s Zero Trust Exchange platform is purpose-built for this new security paradigm, allowing enterprises to eliminate outdated, firewall-dependent architectures. Recent innovations — including AI-powered threat detection, Zero Trust SD-WAN and 5G security solutions — strengthen Zscaler’s position as a go-to provider of next-gen security solutions.Additionally, Zscaler’s aggressive acquisition strategy has expanded its capabilities, cementing its dominance in zero trust security. The April 2024 acquisition of Airgap Networks enhances Zero Trust SASE by eliminating firewall-based segmentation, reinforcing Zscaler’s next-gen security model.The March 2024 acquisition of Avalor integrates 150+ pre-built security solutions, enabling proactive threat identification and vulnerability prediction. By expanding network segmentation and AI-driven risk assessment, these acquisitions make Zscaler the most comprehensive Zero Trust security provider, positioning it for sustained enterprise adoption and market share gains.Zscaler’s Resilient Financial Performance Despite ChallengesDespite macroeconomic pressures, Zscaler’s financial results remain impressive. In the first quarter of fiscal 2025, revenues soared 26% year over year to $628 million, with emerging products growing at twice the rate of core offerings. The company achieved a record operating margin of 21% and delivered non-GAAP earnings growth of 40% to 77 cents per share.Zscaler’s growing customer base underscores its strong market positioning. At the end of the first quarter, it had 585 customers generating $1 million or more in annual recurring revenues (ARR), with Fortune 500 and Global 2000 companies comprising a substantial portion. At the end of the first quarter, approximately 45% of the Fortune 500 companies and more than 35% of the Global 2000 companies are using Zscaler’s solutions. Its net dollar retention rate of 114% reflects customer loyalty and upselling potential.Zscaler is poised to benefit from enterprise migration to cloud environments, the increasing adoption of AI-driven cybersecurity and a recovery in IT spending. Its focus on large-scale enterprise deals and innovation pipeline are expected to drive accelerated growth in 2025 and beyond.The Zacks Consensus Estimate for fiscal 2025 and 2026 indicates strong double-digit revenue growth. While the consensus mark for fiscal 2025 earnings per share (EPS) implies a year-over-year decline, the projections for fiscal 2026 indicate double-digit percentage growth.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.The long-term expected EPS growth for Zscaler is currently pegged at 13.5%. Also, the stock surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 29%.Zscaler, Inc. Price, Consensus and EPS Surprise Zscaler, Inc. price-consensus-eps-surprise-chart | Zscaler, Inc. QuoteZscaler Valuation: A Premium Worth PayingZscaler trades at a forward 12-month price-to-sales (P/S) ratio of 11.02, higher than the industry average of 5.61. The stock trades at a premium valuation, but that’s well justified, given its growth trajectory, market leadership and strong execution. Investors often pay up for category leaders, and Zscaler’s position as the dominant force in zero trust security makes it a compelling buy even at the current levels.Forward 12-Month P/S RatioImage Source: Zacks Investment ResearchGiven its growing enterprise customer base, innovative AI-driven security solutions and expanding market opportunity, Zscaler is well worth the premium for those looking for long-term exposure to the cybersecurity sector.Conclusion: Buy Zscaler Stock NowZscaler remains the undisputed leader in the zero trust market, delivering robust revenue growth, expanding enterprise adoption and breakthrough AI-driven security innovations. With IT spending expected to recover and cybersecurity risks rising, Zscaler is well-positioned for a significant long-term upside. With a Zacks Rank #2 (Buy), now is the time to consider adding ZS stock to your portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cisco Systems, Inc. (CSCO): Free Stock Analysis Report Fortinet, Inc. (FTNT): Free Stock Analysis Report Palo Alto Networks, Inc. (PANW): Free Stock Analysis Report Zscaler, Inc. (ZS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks