Wondering Why Zscaler Fell? Here's What The Bears Saw

Zscaler has been in the headlines after its shares plunged more than 30% in a single session when fiscal 2027 guidance underwhelmed and senior sales leaders exited. That kind of shock day grabs attention. Holding Zscaler over the past year would have meant a 21.0% loss, including dividends. If you had bought in a year ago on the bullish zero trust and AI story, how should you now think about the firm’s slower growth outlook and leadership turnover risk?

Zscaler is not the only name tied to this theme. Zero in on 55 AI infrastructure stocks and compare how each one is priced.

The Two Futures Zscaler Investors Had To Weigh

The shares cost US$319 at the start of the period, and investors had to decide which Zscaler story to trust more.

On the optimistic side, the bullish narrative saw a Fair Value of US$385, a price implied by expectations of strong execution. Supporters focused on assumptions like revenue rising 23.7% a year and profit margins improving from a small loss to 6.4% within three years.

The cautious view argued for a Fair Value of US$173, a much lower implied entry point. That camp accepted 18.7% annual revenue growth but worried about Zscaler facing heavy competition from Palo Alto Networks and CrowdStrike and what that might mean for a future P/E around 61x.

What The Zscaler Evidence Actually Tested

Zscaler kept rolling out new AI security products and partnerships, including Agentic SOC and an expanded Zero Trust AI platform, which supported the bullish focus on product expansion. Fiscal 2026 also brought higher revenue and a smaller net loss, with net margin improving from -2.4% to -0.4%. Profitability was still not reached, so the optimistic margin story remained unproven. Overall, the evidence pointed in both positive and negative directions.

The key assumption here was that rapid platform and AI product releases would quickly translate into profitable growth. For any other stock built on a similar promise, investors can track the trend in net income and margin alongside product announcements, and compare that trajectory with the timing and size of management’s growth guidance.

What You Would Be Paying For In Zscaler Today

At today’s US$255 share price, this Narrative’s Fair Value sits above the market level. This reflects a view that Zscaler’s zero trust and AI security platform has more potential than the current label of a slower growing SASE vendor implies.

For that higher figure to hold, a buyer today would need to believe Zscaler can sustain strong sales execution in its newer usage based and AI security products while managing leadership transition and heavier capital spending.

"Key Takeaways: Bullish analysts expect Zscaler to convert rising demand for Zero Trust, AI security, and broader platform adoption into continued growth in large enterprise deals and multi-year commitments. The main factor that would need to work in its favor is that Zscaler sustains sales execution around Z-Flex and newer non-seat, metered products such as Zero Trust Branch, Zero Trust Cloud, and security for AI, while managing leadership transition and higher capital spending."

One Narrative disagrees with today's price. → See where this Narrative says Zscaler should trade

How Could You Get There Earlier?

The next headline does not have to be where your research begins. Go straight to the companies and see whether a contrarian opportunity could be taking shape.

• Company 1 - 40% below our estimate - expands device trade-in and refurbishment as subsidies and eco policies shift consumer behavior.
• Company 2 - 31% below our estimate - anchors digital infrastructure where data traffic must be processed, moved, connected, secured, and managed.
• Company 3 - 37% below our estimate - broadens local payment rails for merchants as digital spending rises in emerging markets.

Three companies from the same screener. Open every one of the 29 undervalued companies on it →

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