ZS Trade Update: We're Up Over 20% — Positional Traders, Book the Profit. Risk Takers, Here's Your Game Plan.

Let me be direct with you. When I gave this trade on ZS, it was a beaten-down cybersecurity name sitting near multi-year lows after a brutal 34% year-to-date selloff. The market had priced in every possible negative — decelerating revenue growth, continued net losses, fears of competition from CrowdStrike and Fortinet. The stock had gone from nearly $337 at its 52-week high to levels where even a mediocre catalyst could spark a serious bounce.

That's exactly what happened. ZS is now at $151, and if you got in near the trade entry, you're sitting on a 20%+ gain. I want to make sure you handle it correctly from here — because this is where a lot of traders give money back.

Why This Trade Worked

The thesis was never that Zscaler is some perfect high-growth business trading at a discount. The thesis was much simpler: the stock had been sold too hard, too fast, in a company with real fundamentals. Let me show you what the numbers actually look like.

In Q3 of fiscal year 2026 — the most recent quarter — Zscaler reported revenue of $850.5 million, growing 25% year-over-year. Annual Recurring Revenue hit $3.525 billion, also up 25% YoY. The company has $4.6 billion in total current assets and a net profit margin of -1.6% — which sounds bad until you realize that's borderline profitable for a company this size, and management is actively pushing toward profitability. The zero-trust security model they pioneered isn't going away. Every enterprise deploying AI agents needs exactly the kind of cloud-native security architecture that Zscaler builds.

The market sold it like it was going bankrupt. It wasn't. That gap between sentiment and reality is where trades are made.

Where ZS Stands Right Now

At $151, Zscaler is trading at a price-to-sales ratio of about 6.6x — meaningfully cheaper than its cybersecurity peers CrowdStrike and Fortinet. Is it cheap in an absolute sense? No. But in the context of what this business does and what it earns, it's not the disaster story the stock price suggests. Here are the key metrics you should know.

The AI Security Angle — Why This Isn't Over

Here's the part that makes ZS interesting beyond the bounce. Every major enterprise running AI workloads needs to secure two things: the data flowing into AI models, and the infrastructure those models run on. Zscaler's zero-trust architecture — where every packet is authenticated regardless of origin — is purpose-built for exactly this environment.

When your employees start using AI agents that connect to internal databases, APIs, and customer records, the attack surface doesn't grow linearly. It explodes. Traditional perimeter security — firewalls, VPNs — is completely inadequate. Zscaler's platform sits in the middle of every connection and validates it. That's the product that enterprises are buying more of, not less.

In the most recent quarter, Zscaler's largest customers — those spending over $1M annually — grew 26% year-over-year. That's not a company being displaced. That's a company getting more embedded into its customers with every AI deployment they run. The market priced this business for contraction. The business delivered expansion.

Q4 FY2026 Earnings — The Next Catalyst

Zscaler's fiscal year ends in July, which means Q4 FY2026 earnings are likely in early September. This is the make-or-break quarter for the bull case. Management guided to $935–$940M in Q4 revenue. If they hit or beat that number with continued ARR growth and improving margins, the stock has a clear path to $170–$180 on the re-rate alone.

The setup is actually asymmetric in an interesting way. If Q4 disappoints, the stock likely pulls back to $130–$135 — which is still above the trade entry and still a meaningful drawdown. If Q4 beats — which Zscaler has done consistently for 14 straight quarters — the combination of an earnings beat, raised guidance, and improving profitability metrics could push this to $180–$200 by year-end.

That's why I'm saying risk takers can hold. The trade has worked, the thesis has been confirmed, and the next catalyst is identifiable and reasonably close.

What To Do Now — The Exact Game Plan

I want to be specific here because "it depends on your risk tolerance" is not advice. Here's what I actually think you should do:

The Bottom Line

This trade worked because the thesis was correct: Zscaler is not a broken business, and the market had overshot to the downside. The combination of improving fundamentals, expanding ARR, and the secular AI security tailwind made the risk-reward compelling at $126. At $151, that calculus has shifted.

Positional traders, you've executed the trade correctly. Take the gain. Risk takers, you have a defined plan — stop at $136, target at $195, catalyst in September. Stick to the plan.

If you want to track new trade setups as I post them, head to the Trades page below. Every conviction call goes there first, with full entry, target, and stop levels before the move happens.

Disclaimer: This article is for informational and educational purposes only. It does not constitute financial advice. Past performance is not indicative of future results. Always conduct your own due diligence before making any investment decisions. Balaji N, CFP is not your financial advisor.