CrowdStrike Holdings, Inc. (NASDAQ:CRWD) and Zscaler, Inc. (NASDAQ:ZS) are both trying to become something much bigger than the cybersecurity companies they started as. That is what makes this comparison interesting.
CrowdStrike is expanding from endpoint security into identity, cloud security, SIEM, exposure management, and AI security. Zscaler is taking its Zero Trust platform into data security, cloud workloads, AI applications, and autonomous agents. Both believe AI will expand the cybersecurity market rather than simply change it.
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The market, however, is giving CrowdStrike far more credit for getting there.
CrowdStrike trades at about 208x forward earnings, compared with roughly 44x for Zscaler. Those P/E figures should be taken with a grain of salt because net margins remain relatively small for both companies, partly reflecting heavy investment and stock-based compensation. Their underlying businesses are already much more profitable than those headline multiples suggest.
Still, the valuation gap is enormous. The question is whether CrowdStrike is simply executing better or whether investors are paying too much for that execution.
CrowdStrike has the momentum
There is little doubt that CrowdStrike is currently producing the more impressive growth numbers.
Revenue increased 26% year over year to $1.47 billion in its latest quarter, while annual recurring revenue rose more than 25% to $5.84 billion. More strikingly, net new ARR jumped 51%. Management subsequently raised its full-year net new ARR growth expectation to 34%, versus 22.5% when the year began.
That acceleration matters because it is not coming from one product.
CrowdStrike Holdings, Inc.’s customers are increasingly buying multiple pieces of the Falcon platform. About 51% of subscription customers now use at least six modules, while Falcon Flex customers increased their average spending by more than 40% when moving from standard subscriptions.
This is the part of CrowdStrike’s story that may justify some premium. The company is not merely selling more endpoint protection. It is trying to turn its large installed base into a broader security platform.
AI could make that easier. More AI applications mean more identities, data, cloud workloads, and autonomous agents that need protection. CrowdStrike already has a presence across several of those layers, giving it an opportunity to sell additional products into customers who already trust the platform.
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Zscaler is cheaper for a reason, but that doesn’t make it weak
Zscaler’s numbers are less explosive, but they are hardly disappointing.
Revenue and ARR both grew 25% in fiscal 2026. More importantly, net new ARR growth excluding its Red Canary acquisition accelerated from 7% in fiscal 2025 to 17% in the latest quarter. Zscaler also finished the fiscal year with 785 customers generating more than $1 million of ARR.
Its strategy is also becoming broader.
Zscaler, Inc. started with Zero Trust, essentially replacing the traditional corporate network with a system that controls access directly between users and applications. Now it wants to extend that architecture to branches, cloud workloads, data, and AI agents.
There are already signs customers are buying into that broader vision. The company ended fiscal 2026 with more than 950 Zero Trust Everywhere enterprises, up from more than 350 a year earlier. Non-seat-based products, meanwhile, accounted for about 30% of new and upsell ACV during the year.
That could become important. Zscaler does not necessarily need to catch CrowdStrike’s growth rate overnight. It needs to prove that its existing customer relationships can support a much larger platform over time.
The bigger question is what you are paying for
This is where I think the comparison gets difficult.
CrowdStrike is clearly executing better right now. Its growth is accelerating, its platform adoption is deepening, and its customers are spending more. It also generated $377 million of free cash flow in the latest quarter, equal to 26% of revenue.
But at more than 200x forward earnings, investors are not paying for today’s CrowdStrike. They are paying for a much larger company several years from now.
Zscaler has a much lower valuation and a slower growth rate, but its platform is also expanding. Its operating margin reached 24.3% in the latest quarter, while free cash flow for fiscal 2026 was $779 million, or 23% of revenue.
That creates a very different risk-reward setup.
If CrowdStrike can sustain its current acceleration and turn Falcon into the dominant security platform for the AI era, its premium may eventually make sense. But if growth normalizes even moderately, a 208x forward P/E leaves very little room for disappointment.
Zscaler has the opposite problem. Investors are already assuming less. Its challenge is proving that the slowdown was temporary and that Zero Trust can become a broader platform rather than a mature security category.
The verdict
CrowdStrike’s business looks more attractive today. It has stronger momentum and clearer evidence that its platform strategy is working. But CrowdStrike’s 208x forward earnings make it a risky bet for investors.
Zscaler does not need to become the better company to produce the better investment return. It simply needs to close part of the gap between its current valuation and the value investors eventually place on its expanding platform.
At these prices, CrowdStrike needs to keep exceeding expectations. Zscaler mainly needs to stop disappointing them.
Market Sentiment
Hedge fund sentiment toward both CrowdStrike and Zscaler strengthened in the second quarter. According to Insider Monkey’s database, 89 hedge funds held CrowdStrike in Q2, up from 79 in Q1, while the value of those positions jumped from $2.52 billion to $4.54 billion. Zscaler also saw its hedge fund ownership rise, with 52 funds holding the stock in Q2 versus 46 in Q1. The value of those positions increased from $1.01 billion to $1.11 billion. CrowdStrike clearly saw the bigger increase in institutional capital, suggesting hedge funds have become more confident in its growth story despite its much higher valuation.
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This article is originally published at Insider Monkey.
