Zscaler's Agentic Ops Surge: Will It Be the Next Growth Driver?

Zscaler is experiencing significant growth in its agentic operations, with ZDX Advanced Plus bookings rising 70% YoY after the launch of ZDX Copilot, and SecOps annual contract value jumping 120% YoY. This growth has propelled Zscaler's New Growth Categories (which include Agentic Operations) to $1 billion in ARR, part of the company's total $2.9 billion ARR in fiscal Q3 2025. While competitors like Palo Alto Networks and CrowdStrike are also expanding in agentic operations, Zscaler's early entry into the market is proving advantageous.

Analysis

Zscaler is demonstrating substantial traction in its agentic operations, a key component of its New Growth Categories (NGC). The introduction of ZDX Copilot has catalyzed a 70% year-over-year increase in ZDX Advanced Plus package bookings, which have reached $75 million since ZDX Copilot's launch, underscoring strong market adoption for its ITOps solutions. Concurrently, Zscaler's SecOps business has seen a 120% year-over-year surge in annual contract value (ACV) following the integration of agentic operations. This momentum has propelled the NGC segment—comprising Zero Trust Everywhere, Data Security Everywhere, and Agentic Operations—to approximately $1 billion in annual recurring revenues (ARR), representing a significant portion of Zscaler's total $2.9 billion ARR as of the third quarter of fiscal 2025. Notably, NGC revenues are reported to be growing at a faster rate than the company's average ARR. While Zscaler benefits from an early mover advantage in the expanding agentic operations market, competition is intensifying with established players like Palo Alto Networks and CrowdStrike also advancing their capabilities in this domain. Zscaler's stock has significantly outperformed the Zacks Security industry year-to-date, gaining 66.8% compared to the industry's 20.6%. However, it trades at a premium forward price-to-sales ratio of 15.16X, above the industry average of 14.6X. Consensus estimates project a slight 0.31% year-over-year decline in earnings for fiscal 2025, followed by an 11.86% growth in fiscal 2026, with both estimates having been revised upward recently, suggesting improving analyst sentiment on future profitability.

Key Decisions for Investors

• Investors should acknowledge Zscaler's robust growth in agentic operations as a significant positive catalyst, evidenced by the $1 billion ARR from New Growth Categories and its faster-than-average ARR growth pace.
• Consider the premium valuation, with a forward P/S ratio of 15.16X, which suggests high growth expectations are priced in and requires sustained strong execution, particularly in the highly competitive agentic operations market against peers like PANW and CRWD.
• Monitor the fiscal 2025 earnings trajectory, which indicates a minor anticipated decline, against the projected rebound and 11.86% growth in fiscal 2026, supported by recent upward estimate revisions, for signs of an earnings inflection point.
• Given the Zacks Rank #3 (Hold) and strong recent share price appreciation, investors may want to assess their position size and risk tolerance, while closely tracking the company's ability to maintain its 'headstart' and convert its NGC momentum into sustained, profitable growth.