Zscaler stock falls 12% despite strong growth: Analysts predict a rebound to $365 in 2026

Zscaler’s stock has recently experienced a decline of 12.5% to $146.40 despite the company surpassing analyst expectations with an impressive second-quarter performance. The cybersecurity giant reported revenue of $816 million, marking a substantial 26% increase from the previous year.

CEO Jay Chaudhry emphasized the company’s focus on securing “Agentic AI,” where autonomous agents are set to interact with critical data on a massive scale. Chaudhry highlighted that Zscaler’s Zero Trust Exchange is uniquely positioned to handle this agentic traffic by minimizing the attack surface and restricting lateral movement through its Zero Trust architecture.

Zscaler processed close to 1 trillion AI transactions in 2025 and saw substantial growth in its “Zero Trust Everywhere” customer base, which now includes over 550 enterprises. Furthermore, the company made strategic acquisitions of Red Canary and SquareX to enhance its browser security and managed detection capabilities.

The TIKR Model suggests that the market may be overly focused on short-term issues related to the Red Canary integration, overlooking the long-term value potential of Zscaler’s AI security solutions. It projects a target price of $365.57, indicating a significant potential return of 118.4%.

Zscaler is actively expanding its metered usage solutions, accounting for more than 25% of new annual contract value and growing at a rate exceeding 100% year over year. CFO Kevin Rubin credited sales productivity improvements for driving record operating income, with a 36% free cash flow margin and 26% revenue growth achieved in the first half of the year.

The TIKR Advanced Valuation Model identifies Zscaler as a leading software provider transitioning into a key security layer for the AI era. With a target price of $365.57 and a current price of $146.40, the model suggests an annualized return of 19.3%. Zscaler is positioning itself as a dominant player in securing machine-to-machine communication and has seen substantial growth in its Zero Trust Everywhere enterprise segment.

In conclusion, Zscaler is a reinvigorated cybersecurity company leveraging its cloud-native background to establish dominance in the AI infrastructure space. With a projected total return of 118.4%, Zscaler represents an attractive investment opportunity. The company’s growing AI transaction volume, adoption of Zero Trust Cloud, and the success of its Z Flex flexible licensing program are key drivers toward achieving the $365.57 target price.