Zscaler Inc. (NASDAQ:ZS) reaffirmed its first-quarter and fiscal 2027 guidance at its investor day, sending shares 5% higher. The company did not raise its outlook, while some analysts had described expectations as “muted.” The key question now is what investors are paying for. The stock’s strong reaction is only part of the story. There’s another signal investors may want to see before drawing conclusions.
ZS ranked #7 on our list of 10 Best Cybersecurity Stocks to Buy in 2026. See which six cybersecurity stocks ranked ahead of Zscaler?
Muted Expectations, Steady Guidance
Zscaler guided for first-quarter revenue of $935 million to $939 million, about 19% growth. Fiscal 2027 revenue is expected to reach $3.908 billion to $3.938 billion. Both ranges are in line with analyst estimates, while full-year non-GAAP EPS is projected at $4.86 to $4.90.
The expectation bar was low, so meeting it without a surprise may have been enough to satisfy investors. CEO Jay Chaudhry described the agentic AI era as the company’s biggest opportunity ever. But so far, the guidance only meets expectations rather than showing that opportunity through stronger numbers. The gap between its AI ambitions and growth guidance is becoming harder to ignore.
What 43.24x Earnings Asks of Zscaler
Zscaler’s forward P/E of 43.24x reflects a stock priced for years of steady execution, and the latest guidance does little to challenge that assumption. Analyst estimates project EPS growth of 16.60% in fiscal 2027 and 14.23% in 2028. Even if those estimates are achieved, the P/E based on fiscal 2029 and 2030 earnings remains 31.83x and 26.30x, respectively.
Investors should also remember that Zscaler is not GAAP profitable. So its valuation relies on non-GAAP earnings that exclude certain costs. On the other hand, the company is generating real cash. Free cash flow margin is guided at about 23% to 23.5%, while cash and short-term investments totaled $3.47 billion, against approximately $1.70 billion in convertible debt as of July 31, 2026.
In my view, the AI security opportunity can justify a premium, but the current price already reflects a successful outcome. Zscaler looks considerably cheaper than CrowdStrike, but does that make it the better investment? Our CRWD vs. ZS comparison takes a closer look.
Zscaler’s hedge fund ownership climbed to 52 funds at the end of Q2 2026 from 46 funds at the end of Q1 2026. Meanwhile, short interest was 6.10% of float as of September 15, 2026.
The unchanged guidance was enough to lift the stock, and hedge fund ownership also increased. However, with the shares trading at a 43.24x multiple and short interest of 6.10%, the AI story needs to deliver measurable results.
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