BTIG raises Zscaler price target to $298, maintains Buy rating

BTIG raised its price target on Zscaler (ZS) to $298 from $252, reiterating a Buy rating, after the company's fiscal Q3 2025 results exceeded expectations with billings of $784.5 million, a 24.9% year-over-year increase. Despite some cybersecurity firms reporting a slowdown, Zscaler's Q4 billings guidance of $1,142.6 million, reflecting 25.4% year-over-year growth, aligns with forecasts, and its platform momentum, particularly outside its core offerings, is encouraging, leading to increased estimates for fiscal year 2026.

Analysis

Zscaler (NASDAQ:ZS) has demonstrated robust financial performance, as evidenced by its fiscal third-quarter 2025 results where billings reached $784.5 million, a 24.9% year-over-year increase, surpassing both BTIG's estimate of $761.2 million and the consensus of $759.7 million. This strong performance has prompted BTIG to raise its price target to $298.00 from $252.00, reiterating a Buy rating. The company's fourth-quarter fiscal 2025 billings guidance of $1,142.6 million, implying 25.4% year-over-year growth, aligns with street forecasts and contrasts with recent reports from peers like Palo Alto Networks, Okta, and SentinelOne, which indicated a slowdown. Zscaler's non-core product offerings, including Data Protection, ZDX, Cloud Workload, and Branch Connector, are nearing $900 million in Annual Recurring Revenue (ARR) and contribute over 30% of total revenue, underscoring successful platform expansion. The company maintains impressive gross margins of 77.86% and has achieved 27.77% revenue growth over the last twelve months. Despite the stock trading near its 52-week high and delivering a 39% year-to-date return, leading to an InvestingPro assessment of slight overvaluation, the general analyst consensus remains bullish. Multiple firms, including Evercore ISI (target $290), Morgan Stanley (target $280), BofA Securities (target $285), and Bernstein (target $251), have raised their price targets following the earnings. However, Piper Sandler issued a note of caution, downgrading the stock to Neutral with a $260 target, citing potential future challenges like acquisition integration and ARR-based guidance concerns.

Key Decisions for Investors

• Investors should acknowledge Zscaler's strong execution and growth trajectory in a competitive cybersecurity market, evidenced by its recent earnings beat and positive analyst revisions, but remain cognizant of the stock's current valuation near its 52-week high.
• Monitor the continued growth in billings, particularly the contribution from non-core products, as a key indicator of Zscaler's platform strategy success and its ability to sustain momentum against broader economic concerns.
• Consider the mixed signals of strong operational performance versus Piper Sandler's cautionary downgrade and potential integration risks before adjusting positions, weighing the significant upside presented by most analysts against the valuation and specific company challenges.