Cantor Fitzgerald reiterates Overweight on Zscaler stock ahead of earnings By Investing.com

Cantor Fitzgerald reiterated an Overweight rating on Zscaler with a $300 price target ahead of its May 26 fiscal Q3 earnings, citing strong partner checks and a favorable shift toward non-seat-based pricing. The firm highlighted more than 25% of new annual contract value from non-seat-based pricing, over 100% growth in that revenue stream, and continued strength in ZFlex, Zero Trust Everywhere, Data Security Everywhere, and AI Security. Other analysts are also constructive, with Guggenheim expecting a revenue beat and possible guidance raise.

Analysis

The market is implicitly treating this as a quality-vs-multiple setup, not a pure earnings event. If Zscaler can confirm that non-seat-based pricing is scaling, the next leg is likely driven by revenue durability rather than just a beat-and-raise, because that mix reduces the usual recession/layoff sensitivity that is pressuring legacy seat-count software names. That creates a relative winner not just in cybersecurity, but across high-multiple SaaS where renewal scrutiny is intensifying; ZS could become the proof point that usage-linked monetization is a better defense than discounting.

The second-order effect is on adjacent security platforms and point solutions: if Zscaler’s AI-security and data-security attach rates are real, it pressures smaller vendors that rely on isolated use cases and makes consolidation harder for laggards. In other words, the market may reward breadth plus control-plane positioning, while penalizing products that are easy to commoditize into larger bundles. Over the next 1-3 quarters, the key question is whether reacceleration is genuine demand inflection or merely contract mix; the former supports multiple expansion, the latter caps the move even on good results.

The risk is that expectations have shifted from “can they grow?” to “can they prove the model is structurally better than the sector?” after the stock’s de-rating. If guidance comes in only in line, the stock could still sell off because the bar is now set for clean upside in ARR quality, not just top-line growth. Conversely, a strong print could catalyze a rerating of the entire zero-trust complex as investors re-underwrite cybersecurity as one of the few software areas with pricing power and AI-related incremental spend.

The contrarian view is that the recent optimism may be underestimating how much of the upside is already crowded into channel checks and analyst targets. The more interesting trade is not outright chasing the name pre-print, but positioning for dispersion: leaders with platform breadth and AI-security exposure should outperform, while lower-quality security software names may lag if Zscaler validates a premium control-layer model. This is a 1-3 day catalyst for vol, but the fundamental read-through extends 3-6 months if management confirms durable net-new ARR momentum.

Key Decisions for Investors

• Buy ZS into/after earnings only on confirmed guidance upside; use a 2-4 week horizon and size for a 10-15% upside / 8-10% downside setup if ARR reaccelerates and non-seat mix is validated.
• Pair trade: long ZS / short a basket of lower-breadth cybersecurity or SaaS names with more seat-based exposure; thesis is relative multiple expansion for the control-layer leader if the print confirms pricing resilience.
• If options liquidity is sufficient, buy ZS post-earnings upside calls or a call spread for the next 1-2 months; target a catalyst-driven rerating while capping premium if the guide is merely stable.
• Use any post-earnings spike to trim if the move is driven by sentiment rather than guide quality; if the stock gaps >8-10% on limited guidance raise, fade part of the move because multiple compression can reassert quickly.
• Watch for a read-through into PANW, FTNT, and CRWD over the following 1-2 weeks; if ZS confirms AI-security demand, rotate into the strongest platform name and avoid weaker point solutions.