Zscaler (ZS) Stock: Cybersecurity Company Outpaces Nvidia in 2025 Market Rally

TLDR

Table of Contents

Zscaler stock has gained 59% in 2025, outperforming Nvidia’s 32% return
The cybersecurity company reported 23% revenue growth to $2.7 billion in fiscal 2025
Remaining performance obligations jumped 31% to $5.8 billion, indicating strong future revenue pipeline
AI-focused cybersecurity solutions are driving growth, with agentic AI operations up 58% year-over-year
Freedom Capital Markets upgraded the stock to buy with a $320 price target after Q4 earnings

Zscaler has emerged as an unexpected winner in the AI stock race this year. The cloud-based cybersecurity company has delivered a 59% stock price gain in 2025, leaving chip giant Nvidia’s 32% return in the dust.

The zero-trust security provider reported fiscal 2025 revenue of $2.7 billion, representing 23% growth from the previous year. This performance comes as the company capitalizes on the growing intersection of artificial intelligence and cybersecurity.

Zscaler’s business model focuses on verifying user and device identities before granting network access. The zero-trust security market is projected to reach $92 billion annually by 2030, growing at nearly 17% per year.

The company is growing faster than its overall market. Its strategy includes offering cybersecurity tools specifically designed to protect AI applications and large language models.

AI-Driven Revenue Growth Accelerates

Zscaler’s AI-focused offerings are showing impressive traction. The company’s agentic AI security operations recorded 85% annual recurring revenue growth year-over-year. Its agentic AI operations expanded by 58% during the same period.

These solutions help organizations identify IT outages, implement fixes, and improve troubleshooting processes. The agentic AI cybersecurity market is expected to grow at 34% annually through 2033, potentially reaching $322 billion in revenue.

The company’s remaining performance obligations surged 31% to $5.8 billion last quarter. This metric represents contracted future revenue and currently stands at more than double Zscaler’s latest annual revenue.

The faster growth in contracted backlog compared to quarterly revenue suggests strong demand for the company’s services. This indicates Zscaler is securing new business faster than it can fulfill existing contracts.

Analyst Upgrades Follow Strong Quarterly Results

Freedom Capital Markets analyst Almas Almaganbetov upgraded Zscaler to buy from hold this week. He raised his price target 14% to $320 per share following the company’s fiscal fourth-quarter earnings.

The analyst praised the company’s broad-based growth across its product portfolio. Revenue climbed 21% year-over-year in the quarter, while annual recurring revenue increased 22%.

Calculated billings advanced 32% during the period. Almaganbetov highlighted the strong demand for Zscaler’s AI-enhanced solutions as a key growth driver.

Not all investors were initially impressed with the quarterly results. The stock dropped after earnings due to a surprise net loss, though analysts had expected profitability.

Since the initial post-earnings selloff, shares have generally trended upward. Thursday’s nearly 3% gain outpaced the S&P 500’s 0.8% advance.

Valuation Remains Attractive Despite Gains

Zscaler trades at 16 times sales, below Nvidia’s 25 times sales ratio. While this exceeds the technology sector’s average of 8.5 times sales, analysts expect Zscaler’s growth to potentially outpace Nvidia’s in coming years.

Wall Street projects continued double-digit revenue growth for Zscaler over the next three fiscal years. However, consensus estimates have been rising recently, reflecting the company’s improving fundamentals.

Nvidia’s massive revenue base makes maintaining high growth rates increasingly challenging. Zscaler’s smaller scale and exposure to fast-growing AI cybersecurity niches could support stronger long-term expansion.

The cybersecurity company’s stock closed Thursday at $286.66, with a market capitalization of $45 billion. Trading volume reached 380 shares, well below the average daily volume of 1.9 million shares.

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