Can Zscaler (ZS) Support Its Price As ARR Growth Slows?

Zscaler has delivered strong growth in its security platform and AI-focused offerings, yet the real question for investors is whether the current share price lines up with the cash flows the business is expected to generate. With the stock now trading around US$197.47, the focus shifts to what the underlying cash flow profile can reasonably support.

• Over the past 3 years, Zscaler has returned about 32.7%, which puts the spotlight on whether that multi year gain is backed by its future cash generation or by shifting expectations.
• Recent reports of solid recurring revenue growth alongside a slower pace of expected ARR expansion and sales execution challenges can change assumptions about how quickly Zscaler converts its Zero Trust and AI security demand into cash flows.
• What if you looked at Zscaler through its sales instead? See why Zscaler's 9.6x P/S tells a different valuation story.

The stock's next move may depend on whether the current market price can be justified by Zscaler's intrinsic value based on its cash flows.

If you are weighing Zscaler against other AI-focused security and infrastructure plays, a quick way to pressure test your thesis is to compare it with 89 AI infrastructure stocks.

Is Zscaler a Bargain on Cash Flow?

The Discounted Cash Flow (DCF) model estimates what Zscaler might be worth based on the cash it could return to shareholders over time. On the latest twelve month view, the business generated free cash flow of about $805.9 million. As a result, the model is not leaning on a turnround story but on an already sizeable cash engine that analysts expect to keep growing from here.

Those rising free cash flow projections, when discounted back, put the estimated intrinsic value meaningfully above the current share price of $197.47. The guidance for slower ARR expansion, the move toward usage based contracts, and recent sales execution issues help explain why the market is cautious even as the DCF still points higher than where the stock trades today. This is because the cash flow profile prices in growth that is less tied to any single year of bookings volatility. The fiscal 2026 update showing around 25% revenue and ARR growth, alongside AI focused product launches, sits in tension with that more muted sentiment and supports the idea that the current market price may not fully reflect the long run cash generation implied by the model. Find out what Zscaler could be worth using our Discounted Cash Flow (DCF) estimate.

The Zscaler Narrative: What Would Justify Today's Price?

Simply Wall St Narratives pick up where the Zscaler valuation puzzle leaves off by explaining which paths for growth, margins and earnings would need to occur for the share price to sit materially above or below where it trades today. Instead of a single output from a ratio or model, they describe the future those numbers rely on so you can track how Zscaler's actual progress aligns over time on the Community page.

Community views on Zscaler split between those who see an emerging AI security platform and others who think expectations already bake in a lot of that promise.

Bull case: 21% undervalued

"Historically, the company monetized employees accessing applications, increasingly, it is monetizing workloads, branches, IoT devices, data, AI models and AI agents…"

Discover why this Narrative puts Zscaler at 21% undervalued.

Bear case: roughly fairly valued

"Increasing integration of security capabilities by public cloud providers (like AWS, Azure, Google Cloud) could erode Zscaler's competitive advantage and reduce its total addressable market…"

Explore why this Narrative puts Zscaler at roughly fairly valued.

Zscaler’s value case still hinges on who is steering it

Cash flows and narratives only tell part of the story, because how Zscaler’s leaders think, the incentives they face, and the rewards they receive can heavily shape the outcome for shareholders. See who runs Zscaler and how they are paid.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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