Zscaler’s Upward Revision: Security Demand in the AI Era Fuels Optimism

At the recent RSA Conference, Zscaler’s leadership outlined a compelling vision, framing the company as a critical foundation for securing artificial intelligence. CEO Jay Chaudhry highlighted a significant corporate risk: the explosive adoption of AI applications is dramatically widening the attack surface for businesses. This shift, according to the cloud security specialist, creates a structural tailwind for its business—a trend already visible in its latest financial performance.

Financial Performance Exceeds Expectations

The company’s operational momentum was underscored by its second-quarter results for fiscal 2026. Revenue climbed 26% year-over-year to approximately $815.75 million. Market observers particularly welcomed the growth in annual recurring revenue (ARR), which reached $3.36 billion. This strong performance prompted management to raise its full-year outlook. The new forecast projects ARR to land between $3.730 billion and $3.745 billion by the end of fiscal 2026.

The AI Security Imperative

The rationale for this upgraded guidance is deeply tied to evolving cyber threats. Zscaler reports that enterprise use of AI applications has surged by 91% in just one year. Concurrently, a staggering 83% of all phishing attacks now leverage AI-generated content, overwhelming conventional security tools. The company argues that its model is uniquely positioned, as automated, real-time threat defense transitions from a luxury to a business-critical necessity.

Should investors sell immediately? Or is it worth buying Zscaler?

Chaudhry was careful to note that AI cannot replace deep inspection of data traffic. Instead, the rise of autonomous agents and generative AI demands a globally distributed infrastructure capable of guaranteeing absolute reliability while inspecting massive data volumes. Zscaler believes its focus on deep traffic inspection will remain a key differentiator, even as AI agents become more prevalent, solidifying its claim in the competitive zero-trust architecture market.

A Stark Market Disconnect

Despite the robust operational results and raised forecast, a clear disconnect exists with the company’s market valuation. Since the start of the year, Zscaler shares have declined more than 35%. Currently trading near €121.78, the stock hovers just above its 52-week low. This divergence has not gone unnoticed by analysts, many of whom perceive a significant undervaluation.

Sentiment among professional observers remains strongly positive. Of the 43 financial institutions covering the stock, 35 maintain a “buy” or equivalent rating. Their collective average price target translates to roughly $267 per share—a figure substantially higher than the current trading level. For investors, the primary focus is now on the company’s execution toward its revised fiscal 2026 growth targets.