Zscaler Inc. (NASDAQ: ZS) witnessed a significant upswing in its stock price following the release of its fourth-quarter fiscal 2025 earnings, before paring back those gains in the pre-market session. With the stock price having moved as much as 10% higher early, ZS is now merely 1.1% higher at $277.62 leading into the open.
The positive results have however triggered a wave of analyst upgrades and price target revisions, signaling renewed confidence in the cloud-based cybersecurity solutions provider.
Zscaler’s Q4 fiscal 2025 performance showcased robust growth across key financial indicators. CEO Jay Chaudhry pointed to the rising demand for Zscaler’s Zero Trust and AI security solutions, highlighting the introduction of AI Guardrails for public and private applications.
- Revenue: $719.23 million, a 21% year-over-year increase.
- Adjusted EPS: $0.89, surpassing analyst expectations of $0.80.
- Deferred Revenue: $2.46 billion, up 30% year-over-year.
- Calculated Billings: $1.2 billion, a 32% rise from the previous year.
- Annual Recurring Revenue (ARR): Approx. $3.02 billion, a 22% year-over-year growth.
- Cash Flow from Operations: $250.6 million.
- Free Cash Flow: $171.9 million.
Analyst Reactions and Price Target Revisions
The strong financial results prompted several analysts to revise their outlook on Zscaler.
- Baird: Raised price target to $345 from $330, maintaining an “Outperform” rating.
- JPMorgan: Increased price target to $351 from $348, keeping an “Overweight” rating.
- KeyBanc: Raised price target to $350 from $345, maintaining an “Overweight” rating.
- UBS: Lowered price target slightly to $350 from $365 but maintained a “Buy” rating.
- Barclays: Increased price target to $320 from $300, maintaining an “Overweight” rating.
- Piper Sandler: Adjusted price target to $280 from $260, maintaining a “Neutral” rating.
The firm suggested that while the ARR guidance appeared conservative due to a change in calculation methodology, the overall outlook remains positive. Piper Sandler acknowledged the strong Q4 performance but expressed caution regarding the 19% organic growth outlook, suggesting it is already reflected in the current valuation.
Bull Case:
- Strong Q4 2025 performance, with revenue up 21% and billings up 32% year-over-year.
- Adjusted EPS of $0.89 surpassed analyst expectations, indicating strong profitability.
- Multiple analysts raised price targets and maintained “Outperform,” “Overweight,” or “Buy” ratings, signaling strong market confidence.
- Growing demand for the company's Zero Trust and AI security solutions positions it well for future growth.
Bear Case:
- Piper Sandler maintained a “Neutral” rating, suggesting the current valuation already reflects the positive outlook.
- The company's ARR guidance was viewed as potentially conservative, which could temper short-term expectations.
- Despite a “Buy” rating, UBS slightly lowered its price target, indicating some mixed sentiment among analysts.
- The stock's high P/E ratio of 150.20 suggests it is priced for perfection, making it vulnerable to any future disappointments.
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