Zscaler Earnings: Robust Sales Growth and Improved Profitability Underscore a Solid Quarter

We are raising our fair value estimate for narrow-moat Zscaler to $213 per share from $183. Our fair value estimate raise is primarily spearheaded by a revised outlook on the firm’s long-term growth prospects as we expect vendor consolidation and artificial intelligence, or AI, to drive greater demand for Zscaler’s security solutions. The firm’s solid financial results for the second quarter and better-than-expected guidance for the upcoming quarter and the remainder of fiscal 2024 also support our fair value increase. We continue to be bullish on the overall opportunity in front of Zscaler and view its solutions as uniquely poised to benefit as customers increasingly shift their architectures from on-premises to the cloud, creating tailwinds for Zscaler’s cloud-first security solutions.