Zscaler (ZS) has been in focus after reporting non GAAP earnings of $1.08 per share for its fiscal third quarter and issuing revenue guidance that came in above prior expectations for fiscal 2026.

Despite the earnings beat and new partnerships, Zscaler’s recent share price performance has been weak, with a 30 day share price return down 30.21% and year to date share price return down 42.30%, contributing to a 1 year total shareholder return down 59.21%. This points to fading momentum as investors reassess growth and risk.

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After such steep share price declines, alongside strong non GAAP earnings of $1.08 per share and an implied intrinsic discount of about 38%, investors now face the key question: is Zscaler undervalued or is future growth already priced in?

Most Popular Narrative: 44.1% Undervalued

Compared with Zscaler’s last close at $127.27, the most widely followed narrative points to a fair value of about $227.67, implying a sizable valuation gap that hinges on how investors view future zero trust and AI security adoption.

Accelerating customer adoption of Zero Trust Everywhere and Data Security Everywhere solutions, particularly among Global 2000 and Fortune 500 firms, is fueling large upsell deals and higher ARR per customer, which should drive sustained double digit revenue growth and improve net retention rates.

Curious what powers that premium fair value for Zscaler? The narrative leans on compounding revenue, rising margins, and a future earnings multiple usually reserved for market leaders.

Result: Fair Value of $227.67 (UNDERVALUED)

However, there are clear pressure points for Zscaler, including intensifying competition, bundled security offerings from larger cloud providers, and slower organic net new ARR that could challenge this upbeat narrative.

Next Steps

With sentiment on Zscaler clearly split between risks and rewards, this is a moment to move quickly and test the data yourself to see which side you lean toward, then weigh both angles side by side with 3 key rewards and 1 important warning sign

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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.