Booking Holdings and Zscaler: Riding AI Waves in a Volatile Market

The global economy is navigating choppy waters—geopolitical tensions, fluctuating interest rates, and inflationary pressures—all while technological disruption accelerates. Amid this uncertainty, companies with durable competitive advantages and scalable growth models are emerging as winners. Booking Holdings (BKNG) and Zscaler (ZS) exemplify this trend, leveraging artificial intelligence (AI) to fortify their moats and drive resilient performance. Let's dissect how their strategies and valuations position them for outperformance.

Booking Holdings: AI as the Engine of Travel Recovery

Booking Holdings, the parent company of Booking.com, Agoda, and Kayak, has transformed itself into a tech-driven travel powerhouse. Its Q2 2025 guidance of 10%-12% revenue growth underscores its ability to capitalize on a rebounding tourism sector, while its AI initiatives are the unsung heroes of this momentum.

Key Advantages:
1. AI-Driven Personalization: The company's AI algorithms analyze 319 million room nights booked (Q1 2025) to deliver hyper-targeted recommendations, boosting air ticket sales by 45% YoY.
2. Global Diversification: Europe's 7% room-night growth and emerging markets expansion (e.g., Latin America) reduce reliance on volatile U.S. domestic travel.
3. Cash Machine: With $7.89 billion in free cash flow (2024) and a 96.84% gross margin, the company can invest in AI without diluting returns.

Valuation & Risks:
- Trading at 24x 2025E EBITDA (below its five-year average of 28x), Booking is undervalued relative to its 14.54% CAGR in EPS to 2029.
- Risks include currency headwinds (e.g., weakening Latin American currencies) and competition from Airbnb's experiential travel push.

The company's July 29 earnings report will be critical. Analysts' “Moderate Buy” consensus (price target: $4,062.89) suggests a 10-15% upside, but investors should monitor execution of its AI roadmap.

Zscaler: Securing the Cloud with AI-Enhanced Zero Trust

Zscaler, a leader in cloud security, is thriving in an era where cyber threats outpace traditional defenses. Its Q2 2025 revenue surged 23% YoY to $647.9 million, fueled by demand for its AI-integrated Zero Trust architecture.

Key Advantages:
1. AI-Driven Security: The Zero Trust Segmentation solution and Zscaler Zero Trust Browser (FedRAMP-certified) use machine learning to block lateral movement in ransomware attacks.
2. Strong Financials: $3.01 billion in cash and $1.88 billion deferred revenue highlight customer stickiness. FCF margins of 30.31% (LTM) fund R&D without over-leveraging.
3. Strategic Leadership: EVP of AI Innovations Phil Tee is accelerating tools like behavioral analytics to preempt threats.

Valuation & Risks:
- The stock trades at a high 19.03x P/S ratio, above the software industry average of 5.5x but below CrowdStrike's 30.9x. The forward P/E of 87.50 reflects high expectations for earnings turnaround.
- Risks include its $73 million LTM negative EBITDA, a Piotroski F-Score of 2 (signaling weak financial health), and macroeconomic slowdowns impacting enterprise IT budgets.

While analysts maintain a “Buy” rating (average target: $296.73), investors must weigh Zscaler's growth against its valuation premium. A post-September 2 earnings report showing profitability improvements could justify its price tag.

Investment Thesis: Moats Matter, but Valuations Matter More

Both companies exemplify how AI can turn data into defensible advantages:
- Booking Holdings uses AI to optimize pricing and demand, ensuring it stays ahead in a fragmented travel tech space. Its valuation is compelling, and its July earnings are a key catalyst.
- Zscaler's AI-enhanced security solutions are mission-critical in a world of rising cyberattacks. However, its premium multiples demand flawless execution.

Actionable Takeaways:
1. Booking Holdings: Buy the dip ahead of July 29 earnings. The stock's 24x EBITDA multiple is a bargain for a high-margin, cash-rich growth story.
2. Zscaler: Wait for a pullback or a positive earnings surprise in September. The stock's valuation is rich unless FCF margins can offset losses in operating expenses.

Conclusion: AI as the Anchor in a Volatile Sea

In a world of macro uncertainty, companies like Booking Holdings and Zscaler are proving that technology-driven moats can weather storms. Booking's global scale and Zscaler's security leadership are undeniable strengths, but investors must remain disciplined. Booking's undervalued metrics and Zscaler's upcoming catalysts offer opportunities—but only for those willing to prioritize fundamentals over hype.

Stay tuned for the next earnings reports; they could set the course for years ahead.