Zscaler Sits at the 14th Percentile of Its Own Range While Cyber Rallied
As of October 5, 2026, Zscaler trades at 9.9 times trailing sales, the 14th percentile of its own five-year range, with revenue up 25%. What changed in May, what the market is worried about, and how to check it yourself.
While CrowdStrike and Palo Alto Networks doubled off their April lows, Zscaler went the other way. As of October 5, 2026, its EV/Sales is 9.9, the 14th percentile of its own five-year range and about a third below its five-year median of 14.5. Trailing revenue grew 25%. A shrinking multiple on a business still growing that fast is rare in cybersecurity right now, so it is worth being precise about what the market is pricing.
If you only read one thing
The short version: Zscaler is cheap compared with its own past while most security stocks are expensive compared with theirs. Revenue is still growing 25%, but about 5 points of recent recurring-revenue growth came from an acquisition, and a weak outlook in May broke the market's trust. The low multiple could be an overreaction or an accurate read on slowing growth. The next two quarters should tell.
The numbers
| Measure | Zscaler (ZS) |
|---|---|
| EV/Sales (trailing) | 9.9 |
| 5-year median EV/Sales | 14.5 |
| 5-year low / high | 6.5 / 73.5 |
| 5-year percentile | 14th |
| Revenue growth (trailing year) | 25% |
For comparison, CrowdStrike and Palo Alto sit at the 98th percentile of their own ranges and Cloudflare at the 90th (see our full ranking of AI cybersecurity stocks by valuation percentile). We use EV/Sales because Zscaler reports a small GAAP loss, so it has no meaningful P/E. If the difference between EV/Sales and P/S is fuzzy, our explainer on why EV/Sales and P/S can disagree works through the math.
The five-year high of 73.5 dates from the 2021 software peak. That matters: a stock that once traded at 73 times sales can sit at a low percentile while still costing almost 10 times revenue. The percentile tells you where it is in its own history, not that it is cheap in absolute terms.
The takeaway: Zscaler costs about a third less than its own five-year median relative to sales, while revenue grows 25%. Most of its peers trade near their five-year highs. Ten times sales is still not a low number in absolute terms.
What happened in May
On May 27, Zscaler fell about 31% in a single session after its fiscal third-quarter report (CNBC's coverage of the Zscaler drop). The quarter itself beat expectations. The outlook was the problem: guidance for the following quarter came in below what Wall Street wanted, and the market read it as a sign that growth was slowing faster than expected. The multiple never recovered, even as the rest of the sector rallied into the autumn.
What September showed
The fiscal fourth-quarter report on September 3 (Zscaler's fiscal 2026 results release) was mixed in an informative way:
- Revenue grew 25% to $898.2 million, and annual recurring revenue (ARR) grew 25% to $3.77 billion.
- Excluding the Red Canary acquisition, which added $141 million of ARR, recurring revenue grew 20%, per the results exhibit filed with the SEC.
- Bookings for its security-for-AI products rose more than 50% from the prior quarter.
The takeaway: The 25% headline growth includes an acquisition. Without it, recurring revenue grew about 20%. The AI security products are growing quickly but are still small.
What the market is worried about
The bear reading:
- Growth is slowing underneath. 20% organic is still good, but the trend matters more than the level for a stock valued on sales.
- Guidance credibility. After May, investors will discount the outlook until Zscaler beats it a few times.
- Bundling. The larger platforms sell competing secure-access products inside bigger contracts, and Microsoft sells its own secure-access product alongside its enterprise licenses. A standalone vendor has to win on product.
- Zero-trust access is where agent traffic gets controlled. If companies route AI agents through the same access layer as employees, Zscaler sells into the agent wave directly.
- The AI-security bookings are real. A 50% jump in a quarter is small in dollars but points the right way.
- The multiple already prices a slowdown. At the 14th percentile, the stock needs less to go right than the platforms at the 98th.
The takeaway: The market is worried that Zscaler's growth is slowing and that bigger platforms will squeeze it. The other side says AI agents will run through exactly the kind of access control Zscaler sells. The low multiple prices the first view.
How the multiple can move without the price moving
EV/Sales has revenue in the denominator. If Zscaler's price stays flat for a year while revenue grows 20%, its EV/Sales falls from 9.9 to about 8.3 on arithmetic alone, and the percentile would likely drop further. Acquisitions push the same way: Red Canary's revenue entering the trailing total lowers the multiple mechanically, which we walk through in the denominator trap in P/S after an acquisition.
So a falling percentile is not automatically a falling stock. Check which part of the fraction moved on Zscaler's EV/Sales history chart, and see our guide on how to read a valuation band chart.
The takeaway: If the share price stays flat and revenue keeps growing, Zscaler's multiple keeps falling on its own. A lower percentile next quarter could mean growth, not a selloff.
Where it fits in the theme
Zscaler is the clearest "compressed but still growing" name in the security basket, next to Elastic, Tenable, and SentinelOne. Identity is the other direct way into the agent story; we covered it in why AI agents make Okta and SailPoint the most direct identity plays. The AI cyber defense theme page shows every name by layer, and the cybersecurity valuation screen ranks the security vendors from most to least compressed.
Data: SEC EDGAR XBRL filings and market prices, computed by StockResearch as of October 5, 2026. Quarterly figures come from Zscaler's results release and SEC exhibit, linked above. Jake is the founder of StockResearch.app, where he writes data-first research on valuation dislocations. Nothing here is investment advice or a recommendation to buy or sell any security. Do your own research.