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Zscaler's Data Security Push: Can Its Security Tools Win More Deals?
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Key Takeaways
Zscaler is expanding its data security platform as AI adoption raises risks of sensitive information leaks.
Data Security ARR tops $500M in Q3 and the solution was in about 70% of Security for AI deals in Q4.
A seven-figure Zscaler expansion deal lifted an asset manager's annual spending nearly 40% to over $5M.
Zscaler, Inc. (ZS - Free Report) is strengthening its data security business as companies adopt artificial intelligence (AI) and face growing risks of sensitive information leaks. Its integrated security platform could help enterprises simplify data protection while creating opportunities to win larger deals and expand existing customer relationships.
Data Security has become an important growth driver for Zscaler. In the third quarter of fiscal 2026, its Data Security annual recurring revenues (ARR) crossed $500 million, growing more than 30% year over year. The company offers tools for data discovery, classification, data loss prevention and data security posture management. These capabilities help businesses identify sensitive information and control how it is accessed and shared across cloud applications and endpoints.
Customer demand is also encouraging. In the fourth quarter of fiscal 2026, about 70% of Zscaler’s Security for AI deals included its Data Security solution. This highlights the connection between AI adoption and the need to protect confidential business information. Zscaler also won a seven-figure expansion deal with a global asset management firm that selected its data security posture management solution over a private competitor. The customer’s annual spending increased nearly 40%, reaching more than $5 million in ARR.
The company reported fiscal 2026 revenues of $3.35 billion, up 25% year over year. If data security adoption continues to expand, cross-selling could support future growth and strengthen Zscaler’s position in the AI security market. The Zacks Consensus Estimate for Zscaler’s fiscal 2027 revenues is currently pegged at $3.93 billion, indicating a 17.2% year-over-year increase.
How Do Rivals Fare Against ZS in Data Security Space?
Zscaler competes with several cybersecurity players, including Palo Alto Networks, Inc. (PANW - Free Report) and Rubrik, Inc. (RBRK - Free Report) , that are enhancing capabilities in the data security space.
Palo Alto Networks competes with Zscaler through its cloud security and AI-powered security platforms, which help businesses protect applications and sensitive information. In the fourth quarter of fiscal 2026, its revenues grew 34% year over year to $3.41 billion, while Next-Generation Security ARR increased 63% to $9.1 billion. Palo Alto Networks’ broad platform gives customers more options for consolidating security tools.
Rubrik focuses on protecting business data, recovering information after cyberattacks and reducing data-related risks. In the second quarter of fiscal 2027, revenues increased 38% year over year to $427.3 million, while subscription ARR rose 33% to $1.66 billion. Its Rubrik Security Cloud platform also incorporates AI-driven capabilities to strengthen data protection and cyber recovery.
ZS shares have risen 2.9% year to date, while the Zacks Security industry has surged 82.6%.
Zscaler YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, ZS trades at a forward price-to-sales ratio of 9.27, significantly below the industry’s average of 17.84.
Zscaler Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Zscaler’s fiscal 2027 and 2028 earnings implies a year-over-year increase of 16.6% and 13.3%, respectively. Estimates for fiscal 2027 and 2028 have been revised upward over the past 30 days.
View the Zacks #1 Rank List
Image: Shutterstock
Zscaler's Data Security Push: Can Its Security Tools Win More Deals?
Key Takeaways
Zscaler, Inc. (ZS - Free Report) is strengthening its data security business as companies adopt artificial intelligence (AI) and face growing risks of sensitive information leaks. Its integrated security platform could help enterprises simplify data protection while creating opportunities to win larger deals and expand existing customer relationships.
Data Security has become an important growth driver for Zscaler. In the third quarter of fiscal 2026, its Data Security annual recurring revenues (ARR) crossed $500 million, growing more than 30% year over year. The company offers tools for data discovery, classification, data loss prevention and data security posture management. These capabilities help businesses identify sensitive information and control how it is accessed and shared across cloud applications and endpoints.
Customer demand is also encouraging. In the fourth quarter of fiscal 2026, about 70% of Zscaler’s Security for AI deals included its Data Security solution. This highlights the connection between AI adoption and the need to protect confidential business information. Zscaler also won a seven-figure expansion deal with a global asset management firm that selected its data security posture management solution over a private competitor. The customer’s annual spending increased nearly 40%, reaching more than $5 million in ARR.
The company reported fiscal 2026 revenues of $3.35 billion, up 25% year over year. If data security adoption continues to expand, cross-selling could support future growth and strengthen Zscaler’s position in the AI security market. The Zacks Consensus Estimate for Zscaler’s fiscal 2027 revenues is currently pegged at $3.93 billion, indicating a 17.2% year-over-year increase.
How Do Rivals Fare Against ZS in Data Security Space?
Zscaler competes with several cybersecurity players, including Palo Alto Networks, Inc. (PANW - Free Report) and Rubrik, Inc. (RBRK - Free Report) , that are enhancing capabilities in the data security space.
Palo Alto Networks competes with Zscaler through its cloud security and AI-powered security platforms, which help businesses protect applications and sensitive information. In the fourth quarter of fiscal 2026, its revenues grew 34% year over year to $3.41 billion, while Next-Generation Security ARR increased 63% to $9.1 billion. Palo Alto Networks’ broad platform gives customers more options for consolidating security tools.
Rubrik focuses on protecting business data, recovering information after cyberattacks and reducing data-related risks. In the second quarter of fiscal 2027, revenues increased 38% year over year to $427.3 million, while subscription ARR rose 33% to $1.66 billion. Its Rubrik Security Cloud platform also incorporates AI-driven capabilities to strengthen data protection and cyber recovery.
Zscaler’s Price Performance, Valuation & Estimates
ZS shares have risen 2.9% year to date, while the Zacks Security industry has surged 82.6%.
Zscaler YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, ZS trades at a forward price-to-sales ratio of 9.27, significantly below the industry’s average of 17.84.
Zscaler Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Zscaler’s fiscal 2027 and 2028 earnings implies a year-over-year increase of 16.6% and 13.3%, respectively. Estimates for fiscal 2027 and 2028 have been revised upward over the past 30 days.
Image Source: Zacks Investment Research
Zscaler currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.