"Zscaler Stock Gets Relative Strength Rating Upgrade"

Zscaler, Inc. (NASDAQ: ZS) has been making waves in the cybersecurity sector, and its recent financial performance has caught the attention of analysts and investors alike. The company's stock has received a relative strength rating upgrade, driven by impressive financial results and strategic initiatives that position it as a leader in cloud security. Let's dive into the details and understand why Zscaler is gaining traction in the market.



Strong Financial Performance

Zscaler's Q2 2025 earnings report showcased robust financial performance, with revenue growing 23% year-over-year to $647.9 million. This growth was driven by increased sales productivity, double-digit new and upsell business growth, and lower sales attrition. The company's annual recurring revenue (ARR) grew 23% year-over-year to over $2.7 billion, and the net retention rate (NRR) improved to 115%, indicating strong customer retention and upsell success.

These financial metrics have significantly influenced Zscaler's relative strength rating upgrade. Analysts have taken notice of the company's strong performance, with Rosenblatt Securities upgrading the stock to Buy from Hold and lifting its price target. Robert Baird, JPMorgan Chase & Co., Deutsche Bank, and Wedbush have also increased their price targets, with all new targets above the pre-release consensus. This indicates that analysts are re-engaging with the market and recognizing Zscaler's strong financial performance as a catalyst for growth.

Adoption of Zero Trust Everywhere and AI-Driven Demand

Zscaler's strong financial results and market confidence are driven by several specific factors, including the adoption of Zero Trust Everywhere and AI-driven demand. Over 130 enterprises have adopted the Zero Trust Everywhere strategy, with a goal to triple this number in the next 18 months. This strategic initiative aims to eliminate legacy security appliances and reduce the attack surface, which is a significant driver of Zscaler's growth.

Data protection saw over 40% year-over-year growth in net new ACV, driven by increasing adoption of Gen AI and customer demand for secure public AI app usage. This highlights the growing demand for AI-driven security solutions, which is a key factor in Zscaler's financial performance. The company's introduction of AI innovations, such as the Zero Trust Segmentation solution for branches and cloud environments, further supports the AI-driven demand.

Competitive Positioning and Partnerships

Zscaler's competitive positioning in the cybersecurity sector is significantly bolstered by its strategic partnerships with government agencies and global system integrators (GSIs). The company has secured a significant 8-figure deal with an APAC government and is engaged with several U.S. government agencies. This engagement with government entities not only provides a stable revenue stream but also enhances Zscaler's credibility and market presence.

GSIs are actively partnering with Zscaler to drive business by embedding the platform into their transformation practices. This collaboration allows Zscaler to leverage the extensive networks and expertise of GSIs, expanding its reach and customer base. For instance, Zscaler's partnership with Nokia, a multinational technology leader, highlights how Zscaler's Zero Trust Exchange can enhance security, improve operational efficiency, and strengthen cloud capabilities.

Market Confidence and Analyst Sentiment

Zscaler's strong financial performance, including a 23% year-over-year increase in revenue and a 25% year-over-year increase in deferred revenue, has boosted market confidence. The company's guidance for Q3 2025, which includes revenue of $665 million to $667 million and non-GAAP income from operations of $140 million to $142 million, further supports market confidence.

The average rating for ZS stock is "Buy" among 33 analysts, with a 12-month stock price forecast of $234.61, which is an increase of 12.38% from the latest price. This positive analyst sentiment is a key factor in market confidence. Analysts have upgraded their ratings and price targets, with a high forecast of $270.00, indicating that Zscaler is well-positioned for continued growth.

Conclusion

Zscaler's relative strength rating upgrade is a testament to its strong financial performance, strategic initiatives, and competitive positioning in the cybersecurity sector. The company's adoption of Zero Trust Everywhere and AI-driven demand, combined with its partnerships with government agencies and GSIs, position it for continued success. As Zscaler continues to innovate and expand its market presence, investors are taking notice, and the stock is poised for further growth.