Zscaler, Inc. (ZS Quick QuoteZS - Free Report) and Cisco Systems, Inc. (CSCO Quick QuoteCSCO - Free Report) are well-known companies in the fast-growing enterprise cybersecurity market, but their business models are very different. Zscaler is a cloud-native security specialist built around zero-trust access, SASE and AI security, while Cisco combines cybersecurity with networking, observability and infrastructure.

Both companies are seeing stronger demand as enterprises secure cloud workloads and AI systems. However, investors must be wondering which stock offers the better combination of growth, financial strength, valuation and risk.

Let’s delve deeper to determine which stock offers a better investment option right now.

Zscaler: Strong Business, But Growth Is Losing Momentum

Zscaler continues to post solid financial results. In the fourth quarter of fiscal 2026, revenues increased 24.9% year over year to $898.2 million, while non-GAAP earnings per share (EPS) jumped 33.7% to $1.19. Annual recurring revenue (ARR) also rose 25% to $3.77 billion, and RPO increased roughly 27% to $7.4 billion. Net new ARR growth (excluding contribution from the Red Canary acquisition) accelerated to 17% in the fourth quarter compared with 7% in fiscal 2025. This suggests customers are not simply renewing existing subscriptions but are expanding their use of Zscaler's platform.

The company’s Zero Trust platform remains its biggest strength. More than 950 enterprises had adopted its Zero Trust Everywhere offering by the end of the fourth quarter, up from more than 700 in the previous quarter and 350 in the year-ago quarter. With about 11,000 enterprise customers globally, Zscaler still has plenty of room to expand.

The company is also widening its opportunity beyond traditional user-based security. In the fourth quarter, Zscaler’s non-seat-based offerings generated about 30% of new and upsell annual contract value, with ARR tied to these offerings growing more than 100%. Its Z-Flex program also produced more than $770 million of fourth-quarter contract value, while larger customers continued expanding their deployments.

AI is another important opportunity. Zscaler is extending its Zero Trust technology to protect AI applications and agents, while the Symmetry Systems acquisition could improve visibility into identity and access across AI environments. The company’s Security for AI bookings rose more than 50% sequentially in the fourth quarter, and its Zero Trust Exchange is being positioned to secure users, workloads, branches, AI applications and agents. It is processing more than 750 billion transactions per day through its security cloud, which supports its ability to collect security telemetry at scale.

Zscaler, Inc. Price, Consensus and EPS Surprise

Zscaler, Inc. price-consensus-eps-surprise-chart | Zscaler, Inc. Quote

Zscaler's biggest problem is its slowing growth. The company once routinely delivered revenue growth above 40%. This has now fallen to the mid-20% range, and management is projecting roughly 17% growth in both revenues and ARR.

At the same time, Zscaler is preparing for higher infrastructure spending. AI workloads require more computing, storage, networking and memory capacity, pushing capital expenditures higher. Capital expenditures accounted for 8.3% of fiscal 2026 revenues, up from 6.1% in fiscal 2025. Management expects capital spending to remain elevated in fiscal 2027 and potentially reach the low-teens percentage of revenues.

Higher investment can be justified when it leads to faster growth. The problem for Zscaler is that spending is rising, while revenue and ARR growth are expected to slow.

Free cash flow also reflects this pressure. Zscaler's free cash flow margin declined to 23% in fiscal 2026 from 27% in fiscal 2025. Management expects the margin to remain around 23%-23.5% in fiscal 2027.

Cisco: Diversification Strengthens Its Cybersecurity Case

Cisco has a much larger revenue base and a more diversified business model. In the fourth quarter of fiscal 2026, the company’s revenues rose 18% to $17.25 billion, and non-GAAP EPS increased 23% to $1.22. CSCO also generated operating cash flow of $5.39 billion in the fourth quarter and $14.2 billion in the full fiscal year 2026, providing considerable support for investments and shareholder returns.

The strongest growth driver is increasingly tied to AI infrastructure and networking. Cisco received $9.3 billion of hyperscaler AI infrastructure orders in fiscal 2026, about 4.5 times fiscal 2025's level. It recognized roughly $4 billion of AI infrastructure revenues in fiscal 2026 and expects that figure to rise to $7.5 billion in fiscal 2027. The AI opportunity is expanding beyond hyperscalers. CSCO recorded $1.3 billion of fiscal 2026 AI orders from neocloud, sovereign-cloud and enterprise customers.

The company's networking strength is becoming increasingly relevant to cybersecurity. Cisco reported 40% year-over-year growth in networking product orders in the fourth quarter, marking the eighth straight quarter of double-digit growth. This matters because CSCO can connect networking, security and observability products instead of competing purely as a cybersecurity vendor.

Cisco’s cybersecurity business is also gaining traction. Security revenues increased 14% year over year in the fourth quarter, while the broader security portfolio posted double-digit order growth. More than 1,500 customers purchased newer offerings such as Secure Access, XDR, Hypershield and AI Defense in the fourth quarter, taking net new customers for these products above 6,400 since launch. Firewall orders increased by more than 30%. The company is using its broader portfolio, including Splunk, to build a more integrated security offering.

A massive enterprise network-refresh cycle provides another durable growth driver. Cisco estimates more than $100 billion of networking refresh opportunities over the coming years. Campus networking orders rose more than 15% in fiscal 2026, yet only about 7% of Cisco’s campus switching installed base had been refreshed by fiscal year-end, suggesting substantial runway. The refresh cycle is being accelerated by AI workloads, Wi-Fi 7 adoption, higher bandwidth requirements and cybersecurity needs. Campus networking orders increased 20% in the fourth quarter, while wireless bookings advanced more than 25%. Wi-Fi 7 represented more than half of wireless bookings, creating additional demand for multi-gigabit campus switches.

Cisco Systems, Inc. Price, Consensus and EPS Surprise

Cisco Systems, Inc. price-consensus-eps-surprise-chart | Cisco Systems, Inc. Quote

Cisco is not without challenges. The major concern is margin pressure. The company’s fourth-quarter fiscal 2026 non-GAAP gross margin declined 210 basis points (bps) year over year to 66.3%, while product gross margin fell 270 bps to 64.8%. Cisco attributed the decline primarily to a greater mix of hardware revenues and higher memory costs, partly offset by productivity gains and pricing actions. Cisco guided first-quarter fiscal 2027 non-GAAP gross margin to 65-66%, indicating continued pressure.

Another challenge Cisco is grappling with is the sluggish recurring and services growth. Services revenues were flat year over year at $3.79 billion in the fourth quarter of fiscal 2026. ARR increased only 3% to $32.1 billion despite total revenues jumping 18%. Observability revenues rose just 6%. These trends contrast with the much stronger growth currently being generated by networking hardware.

Valuation Face-Off: Cisco Trades at a Low Multiple

The valuation gap favors Cisco from a multiple perspective. Zscaler trades at a forward 12-month price-to-sales (P/S) multiple of 8.53 compared with 5.80 for Cisco. This premium reflects Zscaler's faster growth and more focused exposure to cloud cybersecurity and zero-trust adoption. However, investors are paying more for that growth even as Zscaler's fiscal 2027 revenue growth is projected to moderate to roughly 17%.

CSCO vs. ZS: Forward 12-Month Price-To-Sales Ratio

Image Source: Zacks Investment Research

Cisco's lower P/S multiple comes alongside much larger revenues, stronger absolute cash generation and a broader mix of networking, security and AI infrastructure businesses. The market is already reflecting different expectations for the two stocks. Cisco shares have soared 38.2% year to date, while Zscaler has declined 6.5%.

CSCO vs. ZS: YTD Price Return Performance

Image Source: Zacks Investment Research

Conclusion: Buy Cisco Stock for Now

Zscaler remains an attractive long-term cybersecurity company. Its zero-trust platform is gaining adoption, its AI security opportunity is expanding, and its efforts to increase sales of non-seat-based products could support future growth. However, the investment case is becoming more demanding as revenue and ARR growth slow and infrastructure spending increases.

Cisco offers a more balanced setup. Its cybersecurity business is growing, its networking franchise is benefiting from AI-driven demand, and its hyperscaler AI infrastructure orders have risen sharply. At the same time, the company generates substantial cash and trades at a lower P/S multiple than Zscaler.

For investors deciding between the two stocks today, buy Cisco stock for now. The combination of valuation support, strong cash generation, cybersecurity growth and a rapidly expanding AI infrastructure opportunity gives Cisco a more balanced risk-reward profile at this stage.

Cisco carries a Zacks Rank #2 (Buy), making it a clear winner over Zscaler, which has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.