ZS · Forward model · Bear case

The Bear case, 20 quarters out

Model as of 2026-08-31

Each segment is projected from its own operating driver, rolled up into consolidated cash flow, and discounted back to a fair value per share. The assumptions below are editable — change them and every number on this page moves with them.

REPORTED LINES ONLY. Zscaler operates as one reportable segment and prints one Revenue caption, so this model carries exactly one vertical and all fourteen historical quarters, 2023 Q2 through 2026 Q3, are disclosed GAAP revenue read from the Form 8-K Exhibit 99.1 of each quarter. Nothing is apportioned and nothing is estimated. There is no product split (ZIA/ZPA/ZDX are not reported), no Red Canary line (only its ARR contribution is disclosed, never its revenue), no subscription-versus-services split (the 10-Q gives only 'approximately 98 %', a rounded share) and no geographic verticals (disclosed quarterly, but with no regional ARR, customer count or guidance to drive them). QUARTER LABELS ARE CALENDAR-END: 2026 Q3 is the quarter ended 30 April 2026, which is Zscaler's fiscal 2026 THIRD quarter, and 2026 Q4 is the quarter ending 31 July 2026, its fiscal fourth. The driver is ARR as installed capacity: the base is disclosed, the quarterly build is disclosed, and revenue per $M of ARR is fixed at $250,000 a quarter because that is what Zscaler's own definition of ARR - the next twelve months of subscription revenue - means, not a price assumption. The EBITDA margin is anchored on CASH rather than accounting profit: fiscal 2025 operating cash flow was 36.4% of revenue and fiscal 2024 36.0%, against a 23% non-GAAP operating margin and a GAAP operating LOSS, and the difference is stock-based compensation, the deferred-revenue float and interest income. That last item means about four points of the margin is interest on the same cash pile that is separately added as net cash - a mild double count, left in because stripping it would need an allocation Zscaler does not publish. Capital intensity of 9% is both fiscal years' actual, counting capitalised internal-use software as well as property and equipment, because Zscaler's own free-cash-flow definition subtracts both; the guided fourth-quarter step-up sits in corporate.programs as a single dated quarter rather than being smeared across twenty. The tax rate of 5% leans toward the roughly 1% of revenue Zscaler actually provides for under US loss carryforwards rather than its 21% non-GAAP planning rate, because the EBITDA line here is already a cash margin net of taxes paid.

Where each case comes from

From cash flow to fair value

Capex outside the verticals

Each vertical's capex is a share of its own revenue, which is the right shape for capacity that scales with sales. These are not that: fixed-size programmes with their own schedule that spend whether or not any segment grows. They are added on top, and they are why free cash flow dips in the years below.

The projected path

The published model's 20 quarters. The horizon and sliders above do not change this table.

Every row is projected. A year-over-year change is shown only where the quarter it compares against exists — an em dash means there is no comparable quarter, not a flat year.

Model revisions

Assumptions are marked to reality as each quarter prints. Every change is appended here, with the fair value the model produced at the time, so the model's own history stays visible.