Zscaler is still trading more than 50% below its 2025 peak, but the underlying business ended fiscal 2026 with stronger growth and profitability than the share-price decline might suggest.
The supplied source says fiscal fourth-quarter revenue grew 25% year over year to $898 million.
Non-GAAP operating margin reached a record 24.3%.
Net new annual recurring revenue, excluding the Red Canary acquisition, accelerated to 17% growth from 7% in fiscal 2025.
Those metrics support the idea that the business is improving even while the stock remains under pressure.
AI is becoming a larger part of the thesis.
Zscaler said security-for-AI bookings increased by more than 50% sequentially in the quarter.
Management also said more than 90% of organizations assessed by the company had AI applications or servers exposed to the internet, and more than one third had known exploitable vulnerabilities.
That creates a large security opportunity.
Companies adopting AI agents need to control which data those agents can access, how they interact with internal systems and how quickly suspicious behavior is detected.
Zscaler’s Zero Trust architecture is naturally positioned for that problem because it sits between users, applications and data.
The company also launched Agentic SecOps, combining its own threat data with Red Canary’s incident-response capabilities.
Management expects that product to become more meaningful in the second half of fiscal 2027.
The risk is valuation.
The source uses a scenario where revenue grows 16.4% annually, operating margin reaches 23.7% and the stock trades at 33.3 times earnings.
Under those assumptions, the model estimates a July 2029 share price of $231 from roughly $163 today, implying about 41% total upside.
That is a useful scenario, not a forecast.
The biggest uncertainty is whether growth remains high enough to support a premium multiple.
Zscaler is also restructuring roughly 3% of its workforce while increasing investment in AI and enterprise sales.
That creates a clear execution test: can the company improve efficiency without slowing innovation or go-to-market momentum?
What investors should watch: security-for-AI bookings, annual recurring revenue growth, fiscal 2027 revenue guidance, operating margin, adoption of Agentic SecOps and whether AI-related demand produces larger or more durable enterprise contracts.
BTI’s bottom line: Zscaler’s share-price decline has made the valuation less extreme while operating performance improves. The recovery case is credible, but investors still need proof that AI security can sustain high-teens growth rather than simply become another feature inside the existing platform.