We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Zscaler's Cross-Selling Strategy: Can Data Security Lift Revenues?
Read MoreHide Full Article
Key Takeaways
Zscaler's Data Security ARR grew 34% in fiscal 2026 to $410 million, with bookings growth exceeding 40%.
Less than 20% of ZS customers use multiple Data Security products, leaving significant room for cross-selling.
ZS sees over $15 billion in untapped spending potential within existing customers, supporting revenue growth.
Zscaler Inc.’s (ZS - Free Report) cross-selling strategy could make Data Security a larger revenue contributor as enterprises seek to protect sensitive information across cloud apps, endpoints and AI tools. Rather than depending only on new customer wins, the company is encouraging existing clients to add more modules to its Zero Trust platform.
On its October 2026 Investor Day, Zscaler reported fiscal 2026 Data Security ARR (annual recurring revenue) growth of 34% year over year and bookings growth above 40%. The business generated $410 million in ARR and recorded a 31% compound annual growth rate from fiscal 2023 to fiscal 2026. Its offerings include inline and endpoint data loss prevention, SaaS security, data security posture management, classification and encryption.
Adoption leaves room for expansion. Customers with multiple Data Security products saw more than 40% year-over-year ARR growth, yet fewer than 20% of Zscaler customers had adopted multiple products. Zscaler estimates more than $15 billion in untapped spending potential within existing customers compared with $3.8 billion in fiscal 2026 ending ARR. This is an opportunity to boost overall revenue growth.
A recent deal illustrates the potential. A global asset management firm selected Zscaler’s data security posture management solution, lifting its annual spending nearly 40% to more than $5 million in ARR.
In addition, 70% of Security for AI deals in the fourth quarter of fiscal 2026 included Data Security. By turning customer interest into wider product adoption and recurring contracts, Zscaler could deepen customer relationships and give revenues another source of growth as enterprise AI adoption grows.
VRNS and RBRK: ZS’ Rivals Competing in Data Security Space
Varonis Systems (VRNS - Free Report) directly competes in data security with tools that identify sensitive information, monitor access and reduce exposure. In the third quarter of 2026, Varonis Systems’ revenues rose 17.3% year over year to $189.5 million, while SaaS revenues climbed to $185.1 million from $125.8 million.
Varonis Systems’ SaaS ARR increased 42% year over year to reach $774.6 million at the end of the third quarter, reflecting customer movement to its cloud platform. Excluding conversions, SaaS ARR increased 24% year over year in the third quarter compared with 25% growth in the preceding quarter. This indicates that underlying demand continues to support growth beyond the migration of existing customers.
Rubrik (RBRK - Free Report) , another competitor, focuses on data protection, cyber recovery and security across cloud environments. In its second quarter of fiscal 2027, revenues grew 38% to $427.3 million, and subscription ARR rose 33% to $1.66 billion.
Rubrik also had 3,084 customers with at least $100,000 in subscription ARR, up 23% year over year. These customers represented 88% of Subscription ARR, reflecting Rubrik's growing exposure to larger enterprise relationships.
ZS shares have fallen 13.3% year to date, while the Zacks Security industry has surged 71.3%.
Zscaler YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, ZS trades at a forward price-to-sales ratio of 7.74, significantly below the industry’s average of 16.58.
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 13.4%, respectively. Estimates for fiscal 2027 and 2028 have been revised upward over the past 60 days.
View the Zacks #1 Rank List
Image: Shutterstock
Zscaler's Cross-Selling Strategy: Can Data Security Lift Revenues?
Key Takeaways
Zscaler Inc.’s (ZS - Free Report) cross-selling strategy could make Data Security a larger revenue contributor as enterprises seek to protect sensitive information across cloud apps, endpoints and AI tools. Rather than depending only on new customer wins, the company is encouraging existing clients to add more modules to its Zero Trust platform.
On its October 2026 Investor Day, Zscaler reported fiscal 2026 Data Security ARR (annual recurring revenue) growth of 34% year over year and bookings growth above 40%. The business generated $410 million in ARR and recorded a 31% compound annual growth rate from fiscal 2023 to fiscal 2026. Its offerings include inline and endpoint data loss prevention, SaaS security, data security posture management, classification and encryption.
Adoption leaves room for expansion. Customers with multiple Data Security products saw more than 40% year-over-year ARR growth, yet fewer than 20% of Zscaler customers had adopted multiple products. Zscaler estimates more than $15 billion in untapped spending potential within existing customers compared with $3.8 billion in fiscal 2026 ending ARR. This is an opportunity to boost overall revenue growth.
A recent deal illustrates the potential. A global asset management firm selected Zscaler’s data security posture management solution, lifting its annual spending nearly 40% to more than $5 million in ARR.
In addition, 70% of Security for AI deals in the fourth quarter of fiscal 2026 included Data Security. By turning customer interest into wider product adoption and recurring contracts, Zscaler could deepen customer relationships and give revenues another source of growth as enterprise AI adoption grows.
VRNS and RBRK: ZS’ Rivals Competing in Data Security Space
Varonis Systems (VRNS - Free Report) directly competes in data security with tools that identify sensitive information, monitor access and reduce exposure. In the third quarter of 2026, Varonis Systems’ revenues rose 17.3% year over year to $189.5 million, while SaaS revenues climbed to $185.1 million from $125.8 million.
Varonis Systems’ SaaS ARR increased 42% year over year to reach $774.6 million at the end of the third quarter, reflecting customer movement to its cloud platform. Excluding conversions, SaaS ARR increased 24% year over year in the third quarter compared with 25% growth in the preceding quarter. This indicates that underlying demand continues to support growth beyond the migration of existing customers.
Rubrik (RBRK - Free Report) , another competitor, focuses on data protection, cyber recovery and security across cloud environments. In its second quarter of fiscal 2027, revenues grew 38% to $427.3 million, and subscription ARR rose 33% to $1.66 billion.
Rubrik also had 3,084 customers with at least $100,000 in subscription ARR, up 23% year over year. These customers represented 88% of Subscription ARR, reflecting Rubrik's growing exposure to larger enterprise relationships.
Zscaler’s Price Performance, Valuation & Estimates
ZS shares have fallen 13.3% year to date, while the Zacks Security industry has surged 71.3%.
Zscaler YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, ZS trades at a forward price-to-sales ratio of 7.74, significantly below the industry’s average of 16.58.
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 13.4%, respectively. Estimates for fiscal 2027 and 2028 have been revised upward over the past 60 days.
Image Source: Zacks Investment Research
Zscaler currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.