ZS · Forward model · Bull case
The Bull case, 20 quarters out
Model as of
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.
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Latest: $2.12B (2031Q3E)
| Period | Value |
|---|---|
| 2023Q2 | $388M |
| 2023Q3 | $419M |
| 2023Q4 | $455M |
| 2024Q1 | $497M |
| 2024Q2 | $525M |
| 2024Q3 | $553M |
| 2024Q4 | $593M |
| 2025Q1 | $628M |
| 2025Q2 | $648M |
| 2025Q3 | $678M |
| 2025Q4 | $719M |
| 2026Q1 | $788M |
| 2026Q2 | $816M |
| 2026Q3 | $850M |
| 2026Q4E | $883M |
| 2027Q1E | $935M |
| 2027Q2E | $988M |
| 2027Q3E | $1.04B |
| 2027Q4E | $1.10B |
| 2028Q1E | $1.16B |
| 2028Q2E | $1.21B |
| 2028Q3E | $1.28B |
| 2028Q4E | $1.34B |
| 2029Q1E | $1.40B |
| 2029Q2E | $1.46B |
| 2029Q3E | $1.53B |
| 2029Q4E | $1.60B |
| 2030Q1E | $1.67B |
| 2030Q2E | $1.74B |
| 2030Q3E | $1.81B |
| 2030Q4E | $1.89B |
| 2031Q1E | $1.97B |
| 2031Q2E | $2.04B |
| 2031Q3E | $2.12B |
Where each case comes from
Bear case — primary sources
The primary sources this case is built from — filings, calls and posts. Where they are claims by an interested party rather than disclosures, every number in the Bear column is what happens if they are taken at face value.
The guide that was cut, and the growth underneath the headline
- May 26, 2026 Free cash flow margin of approximately 22.8 to 23.3%, down from our prior expectation of 26.5 to 27%, reflecting capex in the high single-digits as a percent of revenue.
- May 26, 2026 Excluding the acquisition of Red Canary, which contributed ARR of $127 million, ARR grew 21% to $3,398 million and net new ARR grew 14%.
- May 26, 2026 GAAP loss from operations was $29.6 million, or 3% of revenue, compared to a loss of $25.4 million, or 4% of revenue, in the third quarter of fiscal 2025.
Base case — primary sources
The primary sources this case is built from — filings, calls and posts. Where they are claims by an interested party rather than disclosures, every number in the Base column is what happens if they are taken at face value.
The three guides the base case has to reproduce
- May 26, 2026 Revenue of $875 million to $878 million, growth of approximately 22%.
- May 26, 2026 Revenue of approximately $3.3295 billion to $3.3325 billion, growth of 24.6 to 24.7%, up from prior guidance of $3.309 billion to $3.322 billion, or growth of 24%.
- May 26, 2026 As of April 30, 2026, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 6,459.3 million. We expect to recognize 46 % of the transaction price over the next 12 months
Bull case — primary sources
The primary sources this case is built from — filings, calls and posts. Where they are claims by an interested party rather than disclosures, every number in the Bull column is what happens if they are taken at face value.
Beating the guide while the margin sets records
- Feb 26, 2026 Our innovation, combined with disciplined execution, enabled us to operate at a Rule-of-62 fiscal year-to-date, significantly outperforming the Rule-of-40 benchmark.
- May 26, 2026 Non-GAAP income from operations was $195.8 million, or 23% of revenue, compared to $146.7 million, or 22% of revenue, in the third quarter of fiscal 2025.
- May 26, 2026 Non-GAAP income from operations of $755 million to $757 million, growth of approximately 30%, up from prior guidance of $742 million to $748 million, or growth of 28 to 29%.
Chaudhry case — primary sources
The primary sources this case is built from — filings, calls and posts. Where they are claims by an interested party rather than disclosures, every number in the Chaudhry column is what happens if they are taken at face value.
What the founder filed, and what it does not quantify
- May 26, 2026 Zscaler is ideally positioned as the cybersecurity platform for the AI era. Our differentiated Zero Trust SASE architecture, which hides applications from attackers and eliminates lateral movement, has never been more essential in securing against threats exposed by frontier models and compromised AI agents
- May 26, 2026 Announced the intent to acquire Symmetry Systems , which would combine Zscaler's Zero Trust Exchange TM platform and Symmetry Systems' access graph technology to govern AI agent communication at scale.
- May 26, 2026 Joined Anthropic's Project Glasswing to revolutionize AI-driven defense, gaining access to the Claude Mythos Preview model.
From cash flow to fair value
The published model, discounted at 10.0% a year with an exit multiple of 8.5x on revenue. The horizon and sliders above do not change this walk.
| Present value of free cash flow, 20 quarters | $6.37B |
| Terminal-year revenue | $8.02B |
| Terminal-year EBITDA | $3.25B |
| Exit multiple, on revenue | 8.5x |
| Terminal value | $68.20B |
| Discounted at 10.0% a year, terminal value becomes | $42.35B |
| Share of enterprise value from the terminal | 87% |
| Enterprise value | $48.72B |
| Net cash | $1.84B |
| Equity value | $50.55B |
| Shares | 0.16B |
| Fair value per share | $314.51 |
| Against the deployed price of $199.42, as of | +58% |
Terminal value is 84.7% of enterprise value in the base case, so the exit multiple is by a wide margin the single largest input in this model and every statement about Zscaler being cheap or dear is a statement about it. The base takes 7.0x terminal revenue: the terminal year grows 13.5% at a 28.8% free-cash-flow margin, which is about 24x terminal cash flow. Sensitivity is roughly $27 a share per turn of multiple - at 5.0x the model gives about $179 against a $184.23 tape, at 6.0x about $206, at 7.0x $232 and at 8.34x about $268. Repo peers at the same line: Okta 6.0x on a 6% terminal grower, ServiceNow 7.5x, Datadog 8.0x, Palo Alto 9.0x, CrowdStrike 12.0x at a 35% free-cash-flow margin. Zscaler grows more than twice as fast as Okta at a similar cash margin and does not reach CrowdStrike's. Zscaler's own multiple today is 8.34x - $27,774M of enterprise value over the $3,331M fiscal-2026 revenue guide midpoint - so holding today's multiple for five years is the bull case, not the base. The discount rate is 10%, peer-consistent for a cash-generative security-software business with $1.8bn of net cash, no cash-pay debt and no financing need.
Read the other way round: at $199.42 the market is paying 4.8x terminal-year revenue, holding every other assumption on this page fixed. That is the number to argue about.
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.
Fiscal 2026 fourth-quarter capacity catch-up
2026 Q4 → 2026 Q4Management cut the fiscal-2026 free-cash-flow margin guide to 22.8-23.3% from 26.5-27%, 'reflecting capex in the high single-digits as a percent of revenue'. Against the $718.4M of free cash flow already banked in nine months that leaves $41-58M for the July quarter, against $172M a year earlier. A percentage-of-revenue capex line cannot express a dated one-quarter step, so the catch-up is carried here.
The projected path
The published model's 20 quarters. The horizon and sliders above do not change this table.
| Quarter | Zero Trust Exchange subscriptions | Revenue | YoY | EBITDA | Capex | FCF | R40 | PV of FCF |
|---|---|---|---|---|---|---|---|---|
| 2026 Q4E | $883M | $883M | +23% | $337M | $264M | $70M | +31 | $68M |
| 2027 Q1E | $935M | $935M | +19% | $359M | $83M | $262M | +47 | $250M |
| 2027 Q2E | $988M | $988M | +21% | $381M | $87M | $279M | +49 | $260M |
| 2027 Q3E | $1.04B | $1.04B | +23% | $404M | $92M | $297M | +51 | $270M |
| 2027 Q4E | $1.10B | $1.10B | +24% | $428M | $96M | $315M | +53 | $280M |
| 2028 Q1E | $1.16B | $1.16B | +24% | $452M | $100M | $334M | +52 | $289M |
| 2028 Q2E | $1.21B | $1.21B | +23% | $476M | $105M | $353M | +52 | $299M |
| 2028 Q3E | $1.28B | $1.28B | +22% | $502M | $110M | $372M | +51 | $308M |
| 2028 Q4E | $1.34B | $1.34B | +22% | $528M | $115M | $393M | +51 | $317M |
| 2029 Q1E | $1.40B | $1.40B | +21% | $555M | $120M | $413M | +51 | $326M |
| 2029 Q2E | $1.46B | $1.46B | +21% | $582M | $125M | $434M | +50 | $334M |
| 2029 Q3E | $1.53B | $1.53B | +20% | $610M | $130M | $456M | +50 | $343M |
| 2029 Q4E | $1.60B | $1.60B | +20% | $639M | $135M | $479M | +50 | $351M |
| 2030 Q1E | $1.67B | $1.67B | +19% | $669M | $141M | $502M | +49 | $359M |
| 2030 Q2E | $1.74B | $1.74B | +19% | $699M | $146M | $525M | +49 | $367M |
| 2030 Q3E | $1.81B | $1.81B | +18% | $730M | $152M | $549M | +49 | $375M |
| 2030 Q4E | $1.89B | $1.89B | +18% | $762M | $158M | $574M | +48 | $383M |
| 2031 Q1E | $1.97B | $1.97B | +18% | $794M | $164M | $599M | +48 | $390M |
| 2031 Q2E | $2.04B | $2.04B | +17% | $828M | $170M | $625M | +48 | $397M |
| 2031 Q3E | $2.12B | $2.12B | +17% | $862M | $176M | $651M | +48 | $405M |
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.
| Date | Fair value then | Note |
|---|---|---|
| 2026-08-31 | $232.34 | Model created from the verified research brief, on the 2026 Q3 basis (three months ended 30 April 2026) and the $184.23 close of 28 August 2026. |