Unpacking Zscaler's (ZS) Cybersecurity Prospects and Investment Risks

Zscaler (ZS) is a cybersecurity company that has been gaining attention for its cloud-based security solutions. The company's products provide advanced protection against threats and offer scalability and flexibility to businesses. While Zscaler has been growing rapidly, some investors are concerned about its high valuation and potential risks. In this video, Motley Fool experts discuss the company's prospects and potential investment opportunities.

Zscaler, Inc. (NASDAQ: ZS), a leading cloud security company, has announced an expanded partnership with CrowdStrike to enhance AI-driven security operations. This collaboration, facilitated through Red Canary, a Zscaler company, aims to deliver a multi-layered defense against threats, integrating advanced AI technologies from both companies [1].

The partnership involves integrating the Zscaler Zero Trust Exchange™ platform, the AI-native CrowdStrike Falcon® platform, and Red Canary’s agentic-AI driven security operations platform. This integration provides enriched user and endpoint context, enabling faster threat detection and response times. The combined solution aims to replace outdated Endpoint Detection and Response (EDR) tools and fragmented security stacks with a unified, cloud-native architecture [1].

Raj Judge, Board Member and EVP of Corporate Strategy at Zscaler, highlighted the significance of the partnership: “Zscaler and CrowdStrike share a vision to enable secure digital transformation with uncompromising protection across every layer of the enterprise. By expanding our partnership with CrowdStrike through Red Canary, we are accelerating security operations with advanced AI-powered automation, best-of-breed technologies, and a shared commitment to putting our customers first” [1].

Daniel Bernard, Chief Business Officer at CrowdStrike, added, “Organizations are moving away from legacy, point product endpoint vendors in search of platform outcomes and elite protection. By expanding our partnership with Red Canary and Zscaler, we’re delivering world-class security operations powered by the Falcon platform, Red Canary’s agentic-AI managed endpoint expertise, and Zscaler’s cloud-native zero trust capabilities” [1].

The collaboration builds on a successful multi-year partnership between Zscaler and CrowdStrike, with the joint offering enhancing partner-delivered MDR services and unlocking new opportunities across the shared ecosystem [1].

Recent Stock Performance and Valuation

Zscaler (ZS) ended the recent trading session at $270.99, down by 2.44% from the preceding day's closing price. Over the past month, the stock has depreciated by 3.47%, underperforming the Computer and Technology sector's gain of 6.37% [2].

The upcoming earnings release, scheduled for September 2, 2025, is expected to report earnings of $0.8 per share, representing a year-over-year decline of 9.09%. For the full year, the Zacks Consensus Estimates project earnings of $3.18 per share and revenue of $2.66 billion [2].

Zscaler currently has a Zacks Rank of #3 (Hold), with a Forward P/E ratio of 77.89 and a PEG ratio of 5.4. These metrics indicate a premium relative to the industry average Forward P/E of 63.15 and a PEG ratio of 2.63 [2].

Conclusion

The expanded partnership between Zscaler and CrowdStrike aims to provide customers with advanced, AI-driven security solutions. While the stock has seen recent depreciation, investors should consider the company's earnings outlook and the potential benefits of the new partnership. The upcoming earnings report will be crucial in assessing Zscaler's performance and future prospects.

References:
[1] https://www.globenewswire.com/news-release/2025/08/20/3136353/0/en/Zscaler-and-CrowdStrike-Expand-Partnership-to-Strengthen-AI-Driven-Security-Operations.html
[2] https://www.nasdaq.com/articles/zscaler-zs-stock-sinks-market-gains-heres-why