Zscaler Q4 Earnings Preview: Rising On CrowdStrike's Coattails

Zscaler (ZS), up over 50% year-to-date, is poised to report Q4 FY25 earnings, with market attention focused on sustained enterprise momentum, particularly in $100K+ and $1M+ ARR customer growth, and the adoption of its Z-Flex purchasing program. Analogous to strategic partner CrowdStrike's recent strong results driven by AI-necessitated demand and its Flex program, Zscaler's platform expansion (Zero Trust Everywhere, Data Security) is expected to drive continued adoption. While consensus estimates suggest a sequential slowdown in Q4 revenue growth, the crucial determinant for investors will be the FY26 revenue guidance, as a robust outlook could lead to a significant stock re-rating, supporting a maintained price target of $373.

Analysis

Zscaler (ZS) is approaching its Q4 FY25 earnings report with significant investor focus, following a 50% year-to-date stock appreciation. The primary thesis hinges on the company's ability to sustain enterprise momentum and translate platform expansion into durable growth. While Q3 FY25 results were strong, with 23% YoY revenue growth and a stable 22% non-GAAP operating margin, consensus estimates for Q4 point to a sequential revenue growth slowdown to 19.27%. However, positive sentiment is being driven by strong Q2 results from strategic partner CrowdStrike (CRWD), whose revenue growth accelerated to 21.3% YoY, attributed to AI-driven demand and the success of its Falcon Flex subscription program. Given the Zscaler-CrowdStrike partnership and Zscaler's launch of a similar Z-Flex program, the market anticipates a comparable uplift. Key metrics to watch include growth in high-value customers with $100K+ and $1M+ Annual Recurring Revenue (ARR), which posted 19% and 29% CAGRs respectively over the last two years, and any quantitative updates on the adoption of Z-Flex. The ultimate determinant for the stock's trajectory will be the FY26 forward guidance; if management guides for revenue growth above the current consensus of 20.45%, it could trigger a significant re-rating toward the analyst's $373 price target, especially if it signals an ability to match the growth rates of peers like Cloudflare.

Key Decisions for Investors

• Investors should monitor FY26 revenue guidance closely, as any figure at or above FY25's expected 22.75% growth rate would be a primary catalyst for a significant stock re-rating, superseding the importance of the Q4 results themselves.
• Pay close attention to management's commentary on the Z-Flex purchasing program and growth in $1M+ ARR customers, as these are key leading indicators of successful platform adoption and validation of the bullish thesis derived from CrowdStrike's performance.
• Given the strong positive signals from its strategic partner and the potential for an earnings beat, maintaining a long position may be warranted, but investors should be prepared for volatility if forward guidance signals a confirmed growth deceleration.
• Consider the risk that a failure to provide strong forward guidance could entrench a narrative of slowing growth, potentially pressuring the stock despite its recent 8% pullback.