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- This Cybersecurity Leader Is Still Growing Fast, Even If The Stock Forgot That For A While
This Cybersecurity Leader Is Still Growing Fast, Even If The Stock Forgot That For A While
Noah Zelvis
January 18, 2026
This is what a growth stock reset looks like. The business keeps executing, the numbers stay strong, but the stock gives back a big chunk of its multiple as expectations cool.
That creates confusion for investors who remember where the shares traded, and opportunity for those focused on where the business is actually going.
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What Just Happened
Zscaler Inc (NASDAQ: ZS) has spent the last few months digesting a sharp pullback from its highs. After peaking above $330 late last year, the stock slid roughly 25% before stabilizing around the low $200s. That move came despite earnings that beat expectations and guidance that moved higher.
In other words, this was not a fundamentals blowup. It was a valuation reset.
The company reported strong revenue growth, expanding margins, and accelerating demand in its AI-related security offerings. Remaining performance obligations jumped meaningfully, signaling that contract momentum remains healthy. None of that stopped investors from taking profits and reassessing how much they want to pay for premium growth.
That disconnect is the entire story here.
The Business
Zscaler sells cloud-native security that replaces the old perimeter-based model. Instead of trusting devices or networks, it verifies every user, app, and connection before granting access. That approach fits how work actually happens now: remote, hybrid, cloud-first, and increasingly automated.
The platform sits between users and applications, enforcing security policies in real time. That makes it sticky. Once traffic runs through it, pulling it out is disruptive.
The company operates at the intersection of zero trust security and secure access service edge. Both are large, growing markets, driven by rising cyber threats and the steady dismantling of traditional network boundaries.
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Why The Stock Pulled Back Anyway
This was not about missed numbers. It was about expectations.
Zscaler traded for years as a near-perfect growth story. High revenue growth, expanding margins, and a massive total addressable market kept the multiple elevated. When interest rates stayed higher for longer and investors demanded more discipline, the market started to compress valuations across high-multiple software.
Even strong performers were not spared.
Once the stock started to slide, technical pressure kicked in. Oversold signals piled up. Momentum traders exited. Options positioning added fuel to the move. None of that changed the business, but it changed the narrative.
What The Fundamentals Actually Say
This is where the story gets interesting.
Growth Is Still Real
Revenue continues to grow north of 20% year over year. That is not slowing materially. It is not best-in-class acceleration, but it is durable, enterprise-grade growth at scale.
AI Security Is Already Material
Annual recurring revenue tied to AI-related security products has already crossed hundreds of millions and is tracking ahead of internal expectations. This is not a slide deck promise. It is booked revenue.
The Pipeline Is Expanding
Remaining performance obligations jumped at a faster rate than reported revenue. That usually means future growth visibility is improving, not deteriorating.
Margins Are Strong
Gross margins sit comfortably in the mid-70% range. That gives the company room to invest while still marching toward longer-term operating leverage.
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Why Management Is Leaning Into Agentic AI
One of the more underappreciated moves recently was the company’s push into securing autonomous AI agents. These systems act like users and applications at the same time, creating new security gaps that traditional tools were not built to handle.
Zscaler is extending its zero trust architecture to cover those workflows. That matters because it keeps the platform relevant as enterprise software evolves.
This is not about chasing buzzwords. It is about defending the control plane as automation increases.
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What Investors Are Debating Now
The disagreement is not about whether the company is strong. It is about how much growth deserves to be paid for.
Bulls argue the pullback priced in too much fear. The platform remains central to enterprise security, the pipeline is healthy, and AI-related demand adds an incremental growth lever.
Skeptics point to competition, budget scrutiny, and the possibility that growth normalizes at a lower rate over time. If that happens, the multiple may never return to prior peaks.
Both views can be right in different time frames.
The Setup In The Stock
At current levels, the stock trades well below its highs but still reflects confidence in long-term relevance. This is not a distressed valuation. It is a recalibrated one.
That creates a cleaner risk-reward profile than existed a year ago:
The downside is more limited if execution stays solid
The upside comes from continued growth plus any re-rating as confidence rebuilds
This is not a deep value play. It is a high-quality growth name with less perfection priced in.
What Needs To Go Right From Here
For the stock to work over the next 12 to 24 months, a few things matter most:
Growth Holds Above The Low-20% Range
Any sharp deceleration would reopen the valuation debate.AI Security Continues To Scale
This is the incremental growth engine that can surprise to the upside.Sales Efficiency Improves
Programs like flexible contract structures need to shorten cycles and expand deals.Margins Stay Disciplined
Investors want growth, but not at the expense of control.
If those boxes stay checked, the stock does not need heroics to perform.
How I’d Frame A Position
This is not a chase. It is also not a wait-for-collapse situation.
A core position makes sense for investors who want exposure to enterprise security with real growth and long-term tailwinds. Volatility should be expected, but the business fundamentals support patience.
Adding aggressively only makes sense if the company continues to beat and raise while sentiment stays cautious. That combination does not last forever.
Trimming would be warranted if growth slips materially or if spending ramps without a clear payoff.
The Bigger Picture
Cybersecurity is not discretionary. It does not go away in slowdowns. It just gets scrutinized more closely.
Zscaler has already proven it can grow through tougher conditions. The recent pullback was about valuation discipline, not structural damage.
When the market stops obsessing over where the stock used to trade and refocuses on where the business is heading, this setup looks a lot more straightforward.
Bottom Line
This is a premium business that went through a valuation reset without losing its growth engine. The company is still expanding, still winning enterprise deals, and still positioning itself for the next phase of AI-driven complexity.
That does not guarantee smooth upside. It does suggest the recent drawdown did more to improve the risk profile than to weaken the story.
For long-term investors, that distinction matters.
Action Recap
✅ Core Position: Fits investors seeking durable cybersecurity growth with real scale
✅ Add On Strength: Continued beats, rising AI-related ARR, stable margins
⚠️ Watch Closely: Growth deceleration, competitive pricing pressure, sales efficiency
🧭 Mindset: This is a quality compounder, not a momentum trade
That's our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out.
Best Regards,
—Noah Zelvis
Tech Stock Insider