Zscaler (ZS) is back in the spotlight after management outlined higher capital spending plans tied to AI focused cybersecurity demand, along with fresh Gartner recognition and upbeat reseller and analyst commentary.

Zscaler’s share price has been volatile, with a 1 month share price return of 23.89% and a 7 day gain of 8.85% contrasting with a year to date decline of 16.76% and a 1 year total shareholder return decline of 33.23%. Recent AI related announcements and Gartner recognition appear to be feeding into a rebound in momentum from a weaker base.

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After a sharp rebound, but with Zscaler still trading below an internal intrinsic value estimate and the average analyst target, the key issue now is whether recent gains have used up most of the upside or only started to close the gap.

Most Popular Narrative: 4.7% Undervalued

The most followed narrative currently places Zscaler’s fair value at $192.58 compared with a last close of $183.60, which frames today’s rebound as only a partial catch up to that estimate.

Explosive growth in AI/ML traffic and emerging threats is creating new security challenges that Zscaler is rapidly addressing with differentiated AI security and agentic operations products, positioning the company to capture a rising share of incremental cyber budgets and expand recurring ARR over the long term.

Want to see what sits behind that AI security call out? The narrative leans on a specific revenue glide path, margin uplift, and a premium future earnings multiple tied to those assumptions.

Result: Fair Value of $192.58 (UNDERVALUED)

However, Zscaler’s narrative can be challenged if large cloud providers bundle more security into their platforms or if competition and higher costs keep pressure on margins.

Another Angle On Zscaler’s Valuation

The first narrative leans heavily on fair value and analyst targets. Yet Zscaler’s current P/S of 9.4x sits above the US Software industry average of 3.8x and slightly above its own fair ratio of 8.9x. That suggests investors are already paying up. How comfortable are you with that gap?

Next Steps

If the mixed sentiment around Zscaler has you thinking, this is the moment to check the key data points yourself and move quickly. To see how the positives stack up against the downside risks in one place, review the 2 key rewards and 2 important warning signs

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.