Future of Cybersecurity Now Purchased by Zscaler, Company Signals Dedication to Security Investment
Zscaler, Inc. (NASDAQ: ZS) has once again impressed investors with its strong financial performance in Q3 2025, marking an unprecedented earnings history since July 2020. The cybersecurity giant reported a revenue growth of 23% year-over-year, reaching $678 million, and a significant increase in non-GAAP net income, from $113 million to $136 million.
The company's financial strength was further underscored by a 26% increase in deferred revenue to $1.985 billion and a 5x higher reserve of $3 billion for FQ3 2025, providing greater operational flexibility. This financial might has led analysts to predict double-digit EPS growth for FY2026 and FY2027.
Looking ahead, Wall Street analysts expect Zscaler to report EPS of $0.80 and revenue of $707 million for Q4 2025, which will be announced on September 2, 2025. For the fiscal year 2026, analysts anticipate non-GAAP EPS to be between $3.64 and $3.68 per share.
However, the broader market trading at elevated levels could potentially drive down sentiment and affect the ZS stock price. Additionally, fierce competition from well-known players in the cybersecurity industry could pressure operating margins and market share. The cybersecurity market is expected to grow significantly, but slow growth or market saturation could impact the stock price.
Despite these potential challenges, Zscaler is expected to grow its top-line by 25% annually, which is nearly 3.5x the average peer in the industry. This growth potential, combined with a current unchanged forward P/E of around 85, suggests a $380 price target for FY2027.
48 Wall Street analysts have also suggested a $316 price target over the next 12 months, indicating a 14% upside. However, any significant slowdown in billings or free cash flow could trigger a sharp stock correction.
In summary, Zscaler's impressive Q3 2025 results and future prospects make it a high-risk, high-reward investment. Its premium valuation and competitive market position necessitate careful consideration, but its strong financial performance and growth potential suggest significant upside for investors.
