Zscaler Inc.

Zscaler's business is built on the observation that traditional corporate security — perimeter firewalls, VPNs, on-premise security hardware — was designed for a world where employees worked inside corporate offices and data lived in on-premise data centers. That world no longer exists: employees work from home, access corporate resources from cloud-connected devices, and rely on dozens of SaaS applications, meaning the perimeter has dissolved. Zero-trust architecture assumes that no network connection is inherently trusted, verifying every user and device individually before granting access. Zscaler is the largest pure-play implementation of this model, routing corporate traffic through its cloud before allowing it to reach corporate resources.

ZS climbed roughly 30% between late April and mid-May 2026 as enterprise cybersecurity budgets showed no signs of compression despite broader macro uncertainty. Security spending is notoriously non-discretionary: a company that cuts its Zscaler subscription faces immediate breach exposure that costs multiples of what the software saves. That spending inelasticity makes ZS one of the more defensive growth stocks in the software sector, though its premium valuation — typically 10-15x forward revenue — still means it gets hit hard during broad market risk-off events.

ZS earnings are high-stakes events. The stock typically moves 15-25% on earnings day depending on whether annual recurring revenue (ARR) growth and net revenue retention (NRR) beat or miss consensus. ARR is more important than reported revenue because it represents contracted future revenue — when ARR accelerates, revenue will follow in subsequent quarters. NRR above 120% means existing customers are expanding their Zscaler deployments year over year, which is the clearest signal that the zero-trust architecture is delivering enough value to justify increased spending.

ZS trades as part of the cloud security basket alongside PANW, CRWD, and NET. When institutional money rotates into cybersecurity — typically after a high-profile breach, geopolitical escalation, or a sector upgrade — ZS participates in the basket move regardless of its own news. This means the setup before entering ZS needs to consider both ZS-specific fundamentals and the overall momentum of the cloud security group. A ZS breakout on above-average volume with PANW and CRWD also pushing higher is a higher-quality setup than ZS moving alone.