Zscaler CEO: Anthropic's Mythos Has Added 'Fuel to the Fire'

Zscaler issued a weaker-than-expected fourth-quarter revenue forecast earlier this week, signaling softer near-term growth. Evercore downgraded the stock, citing slowing net new customer additions. CEO Jay Chaudhry said the company’s revenue track record remains very good and noted Anthropic’s Mythos has added "fuel to the fire" for cybersecurity demand.

Analysis

The immediate loser is ZS’s multiple, not just the quarter. In cybersecurity, decelerating net adds is a leading indicator that the next 2-3 quarters of revenue resilience will depend more on expansion than on logo wins, which is a much lower-quality mix and usually compresses EV/revenue before it shows up in headline growth. If management is leaning on AI demand to reaccelerate the story, the market will want proof in pipeline conversion, not anecdotes; that creates a higher bar for any post-earnings bounce.

The second-order winner is the broader security complex only if customers continue to reallocate spend toward AI-adjacent data controls, identity, and runtime protection rather than perimeter platforms. That’s a subtle but important shift: AI adoption can expand total security budgets, but it also forces vendor consolidation, which hurts point solutions with weaker platform attachment and helps incumbents that can bundle data, identity, and cloud protection. Over the next 1-2 quarters, the market is likely to reward names with visible billings durability and punish anything with slowing new-customer formation, even if growth remains above software averages.

Evercore’s downgrade matters because it validates the core bearish debate: not whether cybersecurity is secularly attractive, but whether ZS is losing share of wallet to broader platform vendors or simply digesting prior demand. The key reversal catalyst would be a clear rebound in enterprise deal velocity tied to AI security use cases, but that typically takes 1-2 quarters to show and usually requires channel checks before the print. Absent that, the stock can stay range-bound to lower as sentiment shifts from "high-quality growth" to "good company, slower compounding."

Key Decisions for Investors

• Short ZS on strength over the next 1-4 weeks into any AI-security narrative bounce; target a 8-12% downside move if the market continues to discount weaker new-logo momentum, with risk capped above the post-guidance high.
• Consider a ZS/CRWD pair trade: short ZS, long CRWD for 1-3 months. The thesis is that platform breadth and larger enterprise deal footprint should outperform a name where customer acquisition is slowing; expect relative underperformance of 5-10% if security budgets remain selective.
• Avoid buying the dip in lower-conviction cybersecurity names until managements confirm billings stabilization. Use the next earnings cycle as the gating event; the risk/reward is poor before then because the market is likely to sell any rally into revised estimates.
• For long-only portfolios, rotate exposure from point-solution cyber into broader infrastructure security beneficiaries of AI data governance over the next 3-6 months, where AI can be a budget tailwind rather than a story-dependent catalyst.