Zscaler (ZS) Surges 2.7% on Bullish Earnings Guidance and Analyst Hype—But Can It Sustain Momentum?

Summary
• Zscaler (ZS) trades at $318.30, up 2.7% intraday, nearing its 52-week high of $319.90
• Analysts raised 12 price targets, including JPMorgan ($351) and RBC ($335), while Zacks downgraded to 'Strong Sell'
• Q4 earnings beat estimates, but Q2 billings miss and a security breach triggered mixed sentiment

Zscaler’s stock is in a whirlwind of conflicting signals. Strong forward guidance and a flurry of analyst upgrades have pushed shares to a near-52-week high, yet a recent earnings miss and security concerns have introduced volatility. With options activity surging and technical indicators mixed, traders are weighing whether this rally is a breakout or a correction in the making.

Earnings Optimism vs. Security Scrutiny Drives ZS Volatility
Zscaler’s 2.7% intraday gain reflects a tug-of-war between bullish earnings momentum and lingering doubts. The company’s Q4 results exceeded expectations, with non-GAAP EPS of $0.89 and revenue of $719.2M, while FY2026 guidance of $3.64–$3.68 EPS (vs. $2.23 consensus) signaled confidence in AI-driven security demand. However, a Q2 billings miss and a recent supply-chain breach via Salesloft Drift rattled investor sentiment. Analysts like JPMorgan and RBC raised targets, but Zacks’ 'Strong Sell' downgrade and UBS’ revised $350 target highlighted valuation concerns. The stock’s 51% YTD rally has created a tug-of-war between growth optimism and profit skepticism.

Cybersecurity Sector Volatile as CrowdStrike (CRWD) Rises 2.19%
Zscaler’s cybersecurity peers are mixed. CrowdStrike (CRWD), the sector’s top performer, rose 2.19% on strong Q2 results and a $1.17B revenue beat. However, ZS’s rally has outpaced CRWD’s 21% YTD gain, reflecting divergent investor sentiment. While CRWD benefits from consistent growth, ZS’s AI-focused strategy and aggressive guidance have attracted speculative buyers. The sector’s 31% average RSI suggests overbought conditions, but ZS’s 62.55 RSI indicates it’s still within a bullish range.

Options and ETFs for Navigating ZS’s Bullish Breakout
• MACD: 7.52 (above signal line 6.13), RSI: 62.55 (neutral), Bollinger Bands: $317.90 (upper), $275.11 (lower)
• 200-day MA: $246.12 (far below), 30-day MA: $290.24 (below current price)

Zscaler’s technicals suggest a short-term bullish breakout. The stock is trading near its 52-week high and above the 30-day MA, with a MACD crossover and RSI in neutral territory. Key support is at $296.50 (middle Bollinger Band), while resistance lies at $319.90 (52-week high).

Top Options Picks:
• ZS20251017C320
- Strike: $320, Expiration: 2025-10-17, IV: 52.34%, Leverage: 48.79%, Delta: 0.4568, Theta: -1.891, Gamma: 0.0204, Turnover: 20,879
- IV (high volatility) and Leverage (48.79%) suggest strong short-term potential. Delta (0.4568) indicates moderate sensitivity to price moves. Theta (-1.891) implies time decay is manageable for a 3-day expiration. Gamma (0.0204) ensures responsiveness to price swings. Payoff: At a 5% upside (target $334.21), payoff = $14.21 per share.
• ZS20251017C322.5
- Strike: $322.5, Expiration: 2025-10-17, IV: 47.59%, Leverage: 66.06%, Delta: 0.3956, Theta: -1.658, Gamma: 0.0218, Turnover: 9,584
- Leverage (66.06%) and IV (47.59%) offer a balanced risk-reward profile. Delta (0.3956) and Gamma (0.0218) suggest it’s ideal for a moderate breakout. Theta (-1.658) is less aggressive than the $320 call. Payoff: At $334.21, payoff = $11.71 per share.

Action: Aggressive bulls should target ZS20251017C320 for a 3-day breakout. If $320 breaks, consider rolling into ZS20251024C335 for extended exposure.

Backtest Zscaler Stock Performance
The back-test has been completed. Below is an interactive module that summarises the trading idea, key settings and performance metrics. Please scroll the panel on the right to see full details.Key take-aways • Period tested: 2022-01-01 → 2025-10-13 • Total return: 29.66 % Annualised: 8.02 % • Max draw-down: 12.9 % • Average trade: 0.86 % (wins 3.79 % | losses −3.54 %) • Sharpe ratio: 0.53 Parameter notes (auto-filled): 1. RSI period defaulted to 14 (industry standard). 2. Oversold threshold set at 30, matching common technical practice. 3. Close price was used for entry/exit calculations.

ZS at a Crossroads: Hold for AI Momentum or Exit on Valuation Concerns?
Zscaler’s rally hinges on whether its AI-driven security growth can justify a -1,214 P/E ratio. The stock’s 2.7% gain today aligns with its 51% YTD surge, but a Q2 billings miss and Zacks’ downgrade highlight risks. Technicals favor a short-term push toward $319.90, but a breakdown below $296.50 (Bollinger middle band) could trigger a pullback. CrowdStrike’s 2.19% rise suggests sector-wide optimism, but ZS’s 48.79% leverage ratio in the $320 call indicates high conviction. Traders should monitor the 2025-10-17 options expiration and earnings catalysts. Watch for $320 breakouts or a retest of $296.50 support.