Is Zscaler (ZS) a better buy than Netskope given its upcoming earnings report?

``` The deep research logic is organized as follows: Okay, let's tackle this question: Is Zscaler (ZS) a better buy than Netskope given its upcoming earnings report? Hmm, the user is asking for a comparison between Zscaler and Netskope, focusing on Zscaler's upcoming earnings. First, I need to gather all the relevant data from the provided references. Starting with Zscaler. The references mention that Zscaler has an upcoming earnings report on September 2, 2025. The earnings per share (EPS) is projected to be $0.8, which is a 9.09% decline from the previous year. The revenue is expected to be $706.19 million, up 19.11% year-over-year. However, the stock has dipped recently, underperforming the broader market. There's also a partnership with CrowdStrike and Red Canary, which might boost their cloud-native security platform. Analysts have mixed views, with some considering Zscaler undervalued, but there's competition from larger vendors like Netskope. Now, looking at Netskope. They filed for an IPO with a projected valuation of $5 billion, down from a 2021 high of $7.5 billion. Their ARR is $707 million, growing 33% YoY. Despite a net loss of $354.5 million, their gross margins are high at 82%, indicating a scalable SaaS model. They're targeting the SASE market, which is projected to grow to $17.22 billion by 2030. Their reliance on channel partners (95% of revenue) is a double-edged sword. The IPO aims to enhance brand visibility rather than raise capital. Comparing financials: Zscaler has a market cap around $42.429 billion, while Netskope's IPO valuation is $5 billion. Zscaler's revenue is $2.168 billion, but they're still reporting net losses. Netskope's revenue is smaller but growing faster. Both companies are unprofitable, but Netskope's losses are narrowing. Zscaler's stock has a high P/E ratio, indicating premium valuation, while Netskope's IPO might offer a lower entry point. Market positioning: Zscaler is a leader in cloud-native security with partnerships enhancing their AI capabilities. Netskope is a pure-play SASE company with a strong AI focus and channel-driven growth. The competition is fierce, with both companies targeting the same enterprise clients. Risks: Zscaler faces pricing pressure and competition from larger vendors. Netskope's high reliance on channel partners and the need to prove profitability post-IPO are risks. The upcoming earnings for Zscaler could be a catalyst, but if they miss estimates, the stock might drop further. Conclusion: Zscaler has a more established presence and partnerships, but Netskope's growth and SASE focus might offer better upside. The decision depends on the user's risk tolerance and investment horizon. If they're looking for short-term gains with potential upside from earnings, Zscaler might be better. For a longer-term play on SASE growth, Netskope could be the choice. ``` ### **Conclusion** **Zscaler (ZS)** appears to be the more attractive option for short-term investors given its upcoming earnings report and established market leadership in cloud-native security. However, **Netskope (NTSK)** offers a compelling long-term growth thesis with its rapid ARR expansion and strategic positioning in the high-growth SASE market. The choice depends on your risk tolerance, investment horizon, and exposure to cybersecurity sector risks. --- ### **Analysis** #### **1. Zscaler (ZS): Strengths and Risks** | Metric | Zscaler (ZS) | Key Takeaway | |----------------------------|-------------------------------------------------------------------------------|------------------------------------------------------------------------------| | **Revenue Growth** | FY2025 revenue: $2.168B (YoY growth: ~16.3%) | Established leader in cloud security with consistent revenue growth. | | **Earnings** | Q4 FY2025 EPS: $0.8 (9.09% YoY decline) | Near-term profitability challenges but improving gross margins (~65%) . | | **Valuation** | Forward P/E: ~77x (premium vs. industry average of 63.52x) | High premium reflects market confidence in its cloud-native platform. | | **Partnerships** | Expanded AI-driven collaboration with CrowdStrike | Enhances threat detection capabilities and reinforces leadership. | | **Competition** | Faces pressure from Netskope and larger vendors like Palo Alto | Risk of market share erosion in a crowded cybersecurity landscape. | #### **2. Netskope (NTSK): Growth Catalysts and Risks** | Metric | Netskope (NTSK) | Key Takeaway | |----------------------------|-------------------------------------------------------------------------------|------------------------------------------------------------------------------| | **Revenue Growth** | ARR: $707M (33% YoY growth) | Fastest-growing pure-play SASE vendor with enterprise adoption (~4,300 clients) . | | **Earnings** | FY2025 net loss: $354.5M (18% YoY improvement) | High R&D intensity (15%+ of revenue) delays profitability . | | **Valuation** | IPO valuation: $5B (31.73% drop from 2021 $7.5B) | Cheaper entry point but faces execution risks post-IPO . | | **Market Position** | SASE market leader (Gartner Magic Quadrant) | AI-driven innovation (SkopeAI) and channel-driven growth (~95% revenue) . | | **Competition** | Direct rival to Zscaler in cloud-native security | Risk of pricing pressure and market saturation. | --- ### **Key Comparisons** | Metric | Zscaler (ZS) vs. Netskope (NTSK) | |----------------------------|-------------------------------------------------------------------------------| | **Growth Potential** | Zscaler: Established but slower growth (~16% YoY vs. Netskope’s 33% ARR growth) . | | **Profitability** | Both unprofitable, but Netskope’s narrowing losses (18% YoY improvement) . | | **Valuation** | Zscaler: Premium P/E (~77x vs. industry 63.52x) ; Netskope: Cheaper IPO ($5B vs. $7.5B in 2021) . | | **Market Risk** | Zscaler: Short-term volatility (recent 3.38% month-over-month decline) ; Netskope: IPO execution risk . | --- ### **Final Take** - **Buy Zscaler (ZS)** if you prioritize short-term stability, established market leadership, and exposure to AI-driven cybersecurity innovation. Its upcoming earnings report (Sep 2, 2025) could drive upside if it beats revised estimates (~$706M revenue, $0.8 EPS) . - **Buy Netskope (NTSK)** if you’re willing to take on higher risk for long-term upside in the SASE market (~$17.22B by 2030) . Its IPO timing aligns with a rebound in tech listings, offering a cheaper entry point (~$5B valuation vs. $7.5B in 2021) . |code|Ticker|Name|Date|Total Revenue|Net Income|Diluted EPS|market_code| |---|---|---|---|---|---|---|---| |Z|Z.O|Zillow Group C|2024 Q3|5.81E8|-2.0E7|-0.08|185| |Z|Z.O|Zillow Group C|2024 Q4|5.54E8|-5.2E7||185| |Z|Z.O|Zillow Group C|2025 Q1|5.98E8|8000000|0.03|185| |Z|Z.O|Zillow Group C|2025 Q2|6.55E8|2000000|0.01|185|