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Zscaler vs. Alphabet: Which Cloud Security Stock Has the Edge?
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Key Takeaways
Zscaler has the edge over Alphabet for focused cloud cybersecurity exposure despite its valuation premium.
Zscaler's AI security bookings rose more than 50% sequentially as Zero Trust Everywhere adoption topped 950.
Zscaler's EPS estimates rose 7.9% for 2027 and 5.9% for 2028, but its 10.41X P/S tops Alphabet's 7.19X.
Zscaler, Inc. (ZS - Free Report) and Alphabet Inc. (GOOGL - Free Report) are capitalizing on rising demand for cloud cybersecurity and AI-driven security solutions, but their investment strategies differ.
Zscaler specializes in zero-trust security, helping enterprises protect applications, data and AI workloads. Alphabet is strengthening Google Cloud's security capabilities through its acquisition of Wiz and the development of AI-powered cybersecurity tools.
Both companies benefit from growing enterprise security needs, but differences in financial performance, valuation and market risks make this an interesting stock face-off. Let’s find out which stock offers the better investment opportunity right now.
The Case for Zscaler Stock
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 revenues (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.
Its Zero Trust platform remains a key growth driver. More than 950 enterprises adopted Zero Trust Everywhere by quarter-end compared with more than 700 in the previous quarter and 350 a year earlier. With approximately 11,000 enterprise customers worldwide, Zscaler has considerable room to expand. Its collaboration with Google Cloud, recognized with a 2026 Partner of the Year award for Security in the Application category, strengthens its position in the cloud security market.
Zscaler is also expanding beyond traditional user-based security. Non-seat-based offerings contributed about 30% of new and upsell annual contract value in the fourth quarter, with related ARR growing more than 100%. Its Z-Flex program generated more than $770 million in quarterly contract value, highlighting demand from larger customers.
AI security presents another growth opportunity. Security for AI bookings rose more than 50% sequentially, while the Symmetry Systems acquisition could strengthen identity and access protection across AI environments. Zscaler's security cloud processes more than 750 billion transactions daily, providing valuable data to identify and address emerging threats.
Nonetheless, Zscaler's biggest problem is its slowing growth. Revenue growth has declined from more than 40% historically to the mid-20% range, while management expects revenue and ARR growth of roughly 17%. 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 infrastructure costs could also pressure cash generation. 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.
The Case for Alphabet Stock
Alphabet offers a broader investment proposition, combining cybersecurity with digital advertising, cloud computing and AI. In the second quarter of 2026, the company’s total revenues rose 24% year over year to $119.8 billion, while operating income increased 30% to $40.8 billion. Second-quarter EPS jumped to $9.11 from $2.31 in the year-ago quarter. The sharp increase primarily reflected unrealized gains in the company’s equity securities portfolio.
Alphabet’s Google Cloud is building a broader cybersecurity platform by combining its existing security capabilities with Wiz, whose acquisition was completed in March 2026. The portfolio brings together Google Threat Intelligence, Google Security Operations, Mandiant's incident-response expertise and Wiz's cloud and AI security capabilities.
This integrated approach allows enterprises to identify cloud vulnerabilities, prioritize risks and respond to threats across multicloud and hybrid environments. Google's AI models can also help security teams investigate incidents and automate parts of their response. Wiz continues to support major cloud platforms, including Amazon Web Services, Microsoft Azure and Google Cloud, giving customers flexibility across their infrastructure.
Alphabet's latest results demonstrate the scale behind this opportunity. In the second quarter of 2026, Google Cloud revenues surged 82% year over year to $24.8 billion, and its backlog reached $514 billion. However, these figures cover the entire Google Cloud business, not cybersecurity alone. Alphabet does not separately disclose Google Cloud security revenues in the supplied results.
Google Cloud's principal advantages are its AI infrastructure, broad enterprise relationships and ability to bundle security with other cloud services. Its challenges include competition from specialized cybersecurity vendors, integration risks and substantial infrastructure spending. Zscaler's narrower focus may appeal to enterprises seeking dedicated zero-trust protection rather than a broader cloud ecosystem.
Nevertheless, Alphabet faces substantial investment demands. Capital expenditure reached $44.9 billion in the second quarter, contributing to negative quarterly free cash flow of $5.9 billion. Management raised its 2026 capital expenditure forecast to $195-$205 billion and expects spending to increase significantly in 2027. Such investment could pressure cash flow and returns if AI demand does not generate sufficient revenues. Competition in cloud computing and AI, along with the challenge of integrating Wiz, adds further uncertainty.
ZS vs. GOOGL: What Earnings Estimate Revisions Suggest
Earnings estimate revision trends suggest that analysts are turning more bullish toward Zscaler’s long-term prospects. Over the past 60 days, the Zacks Consensus Estimate for Zscaler’s fiscal 2027 and 2028 earnings has been revised upward by 7.9% and 5.9%, respectively. The consensus estimates for the company’s fiscal 2027 and 2028 EPS indicate a year-over-year increase of 16.6% and 13.2%, respectively.
Meanwhile, the consensus mark for Alphabet’s 2026 and 2027 earnings has been revised upward by mere 0.5% and 2%, respectively, over the past 60 days. Though the consensus estimate for 2026 EPS indicates a 90.6% year-over-year increase, it is mostly because of unrealized gains from the equity securities portfolio recorded during the second quarter. In 2027, GOOGL’s EPS is estimated to decline by 27%.
Zscaler vs. Alphabet: Which Stock Offers Better Value?
Zscaler trades at a forward 12-month price-to-sales (P/S) multiple of 10.41 compared with Alphabet's 7.19. Zscaler's premium reflects its focused cybersecurity business and investors' expectations for sustained growth as enterprises strengthen their security infrastructure.
Alphabet looks more attractive on valuation, given its lower P/S multiple, stronger financial scale and diversified revenue streams. However, its substantial AI infrastructure spending creates uncertainty about future cash flow and investment returns.
Image Source: Zacks Investment Research
Both stocks have struggled so far in 2026, but Zscaler has outperformed Alphabet. ZS shares have gained 15.8% year to date compared with a 1.2% gain for GOOGL.
Alphabet is a compelling choice for investors seeking diversified exposure to AI, cloud computing and cybersecurity at a lower sales multiple. Its financial scale and broad customer base provide important advantages, although rising capital expenditure remains a concern.
However, Zscaler has the edge from an investment perspective for investors prioritizing direct exposure to cloud cybersecurity and AI-driven security demand. Its strong recurring-revenue growth, improving operating margin and expanding security portfolio support its long-term prospects. Earnings estimate revision trends also suggest analysts are more bullish toward Zscaler.
The 10.41 P/S multiple is a significant risk, but Zscaler's focused business model and growth opportunities make it the more compelling choice than Alphabet.
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Zscaler vs. Alphabet: Which Cloud Security Stock Has the Edge?
Key Takeaways
Zscaler, Inc. (ZS - Free Report) and Alphabet Inc. (GOOGL - Free Report) are capitalizing on rising demand for cloud cybersecurity and AI-driven security solutions, but their investment strategies differ.
Zscaler specializes in zero-trust security, helping enterprises protect applications, data and AI workloads. Alphabet is strengthening Google Cloud's security capabilities through its acquisition of Wiz and the development of AI-powered cybersecurity tools.
Both companies benefit from growing enterprise security needs, but differences in financial performance, valuation and market risks make this an interesting stock face-off. Let’s find out which stock offers the better investment opportunity right now.
The Case for Zscaler Stock
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 revenues (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.
Zscaler, Inc. Price, Consensus and EPS Surprise
Zscaler, Inc. price-consensus-eps-surprise-chart | Zscaler, Inc. Quote
Its Zero Trust platform remains a key growth driver. More than 950 enterprises adopted Zero Trust Everywhere by quarter-end compared with more than 700 in the previous quarter and 350 a year earlier. With approximately 11,000 enterprise customers worldwide, Zscaler has considerable room to expand. Its collaboration with Google Cloud, recognized with a 2026 Partner of the Year award for Security in the Application category, strengthens its position in the cloud security market.
Zscaler is also expanding beyond traditional user-based security. Non-seat-based offerings contributed about 30% of new and upsell annual contract value in the fourth quarter, with related ARR growing more than 100%. Its Z-Flex program generated more than $770 million in quarterly contract value, highlighting demand from larger customers.
AI security presents another growth opportunity. Security for AI bookings rose more than 50% sequentially, while the Symmetry Systems acquisition could strengthen identity and access protection across AI environments. Zscaler's security cloud processes more than 750 billion transactions daily, providing valuable data to identify and address emerging threats.
Nonetheless, Zscaler's biggest problem is its slowing growth. Revenue growth has declined from more than 40% historically to the mid-20% range, while management expects revenue and ARR growth of roughly 17%. 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 infrastructure costs could also pressure cash generation. 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.
The Case for Alphabet Stock
Alphabet offers a broader investment proposition, combining cybersecurity with digital advertising, cloud computing and AI. In the second quarter of 2026, the company’s total revenues rose 24% year over year to $119.8 billion, while operating income increased 30% to $40.8 billion. Second-quarter EPS jumped to $9.11 from $2.31 in the year-ago quarter. The sharp increase primarily reflected unrealized gains in the company’s equity securities portfolio.
Alphabet Inc. Price, Consensus and EPS Surprise
Alphabet Inc. price-consensus-eps-surprise-chart | Alphabet Inc. Quote
Alphabet’s Google Cloud is building a broader cybersecurity platform by combining its existing security capabilities with Wiz, whose acquisition was completed in March 2026. The portfolio brings together Google Threat Intelligence, Google Security Operations, Mandiant's incident-response expertise and Wiz's cloud and AI security capabilities.
This integrated approach allows enterprises to identify cloud vulnerabilities, prioritize risks and respond to threats across multicloud and hybrid environments. Google's AI models can also help security teams investigate incidents and automate parts of their response. Wiz continues to support major cloud platforms, including Amazon Web Services, Microsoft Azure and Google Cloud, giving customers flexibility across their infrastructure.
Alphabet's latest results demonstrate the scale behind this opportunity. In the second quarter of 2026, Google Cloud revenues surged 82% year over year to $24.8 billion, and its backlog reached $514 billion. However, these figures cover the entire Google Cloud business, not cybersecurity alone. Alphabet does not separately disclose Google Cloud security revenues in the supplied results.
Google Cloud's principal advantages are its AI infrastructure, broad enterprise relationships and ability to bundle security with other cloud services. Its challenges include competition from specialized cybersecurity vendors, integration risks and substantial infrastructure spending. Zscaler's narrower focus may appeal to enterprises seeking dedicated zero-trust protection rather than a broader cloud ecosystem.
Nevertheless, Alphabet faces substantial investment demands. Capital expenditure reached $44.9 billion in the second quarter, contributing to negative quarterly free cash flow of $5.9 billion. Management raised its 2026 capital expenditure forecast to $195-$205 billion and expects spending to increase significantly in 2027. Such investment could pressure cash flow and returns if AI demand does not generate sufficient revenues. Competition in cloud computing and AI, along with the challenge of integrating Wiz, adds further uncertainty.
ZS vs. GOOGL: What Earnings Estimate Revisions Suggest
Earnings estimate revision trends suggest that analysts are turning more bullish toward Zscaler’s long-term prospects. Over the past 60 days, the Zacks Consensus Estimate for Zscaler’s fiscal 2027 and 2028 earnings has been revised upward by 7.9% and 5.9%, respectively. The consensus estimates for the company’s fiscal 2027 and 2028 EPS indicate a year-over-year increase of 16.6% and 13.2%, respectively.
Meanwhile, the consensus mark for Alphabet’s 2026 and 2027 earnings has been revised upward by mere 0.5% and 2%, respectively, over the past 60 days. Though the consensus estimate for 2026 EPS indicates a 90.6% year-over-year increase, it is mostly because of unrealized gains from the equity securities portfolio recorded during the second quarter. In 2027, GOOGL’s EPS is estimated to decline by 27%.
Zscaler vs. Alphabet: Which Stock Offers Better Value?
Zscaler trades at a forward 12-month price-to-sales (P/S) multiple of 10.41 compared with Alphabet's 7.19. Zscaler's premium reflects its focused cybersecurity business and investors' expectations for sustained growth as enterprises strengthen their security infrastructure.
Alphabet looks more attractive on valuation, given its lower P/S multiple, stronger financial scale and diversified revenue streams. However, its substantial AI infrastructure spending creates uncertainty about future cash flow and investment returns.
Image Source: Zacks Investment Research
Both stocks have struggled so far in 2026, but Zscaler has outperformed Alphabet. ZS shares have gained 15.8% year to date compared with a 1.2% gain for GOOGL.
Image Source: Zacks Investment Research
Conclusion: Zscaler Has the Edge
Currently, Zscaler and Alphabet each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alphabet is a compelling choice for investors seeking diversified exposure to AI, cloud computing and cybersecurity at a lower sales multiple. Its financial scale and broad customer base provide important advantages, although rising capital expenditure remains a concern.
However, Zscaler has the edge from an investment perspective for investors prioritizing direct exposure to cloud cybersecurity and AI-driven security demand. Its strong recurring-revenue growth, improving operating margin and expanding security portfolio support its long-term prospects. Earnings estimate revision trends also suggest analysts are more bullish toward Zscaler.
The 10.41 P/S multiple is a significant risk, but Zscaler's focused business model and growth opportunities make it the more compelling choice than Alphabet.