To The Moon

$Zscaler Inc.(ZS)$ is scheduled to report earnings tomorrow, Tuesday, November 25, 2025, after the market closes. Note that while this is calendar year 2025, Zscaler operates on an offset fiscal calendar, so this report covers Fiscal Q1 2026 (ended October 31, 2025).

Zscaler stock has been under pressure recently, down ~15% in the last month and underperforming the broader cybersecurity sector. This "dampened sentiment" heading into the print can sometimes be a contrarian bullish signal if the company clears a lowered bar, as expectations are not currently euphoric.

Consensus Revenue Estimate: ~$773.4 million (+23.2% YoY)

Consensus EPS Estimate: ~$0.85 (Non-GAAP)

Implied Price Move: The options market is pricing in a swing of approximately ±10% following the report.

Fiscal Q4 2025 Earnings Summary

Report Date: September 2, 2025. Period: Ended July 31, 2025

Zscaler delivered a strong "beat and raise" quarter, helping to alleviate fears of a cybersecurity spending slowdown. While the stock initially wobbled due to headline confusion (see "Lesson Learnt" below), the underlying metrics confirmed durable demand.

• Growth Drivers: The company highlighted strong momentum in "Zero Trust Everywhere" and AI-security products. The 32% surge in Calculated Billings was the standout metric, indicating that despite macro pressure, large enterprises are still signing long-term contracts.

• Profitability: Operating margins remained healthy at ~22%, and Free Cash Flow margins were solid at 24%.

The Guidance Given (Fiscal 2026)

Zscaler provided guidance for the full Fiscal Year 2026 (which we are currently in) that was slightly ahead of consensus, dispelling the "slowdown" thesis.

Q1 FY26 Revenue Outlook: $772M – $774M (vs. consensus of ~$752M).

Full Year FY26 Revenue: $3.265B – $3.284B (vs. consensus of ~$3.21B).

Full Year FY26 EPS: $3.64 – $3.68 (roughly in line with consensus).

Key Lesson Learnt: The "Sandbag" & The "Headlines"

There were two critical lessons for investors from the Q4 2025 report that directly apply to trading the upcoming earnings:

Lesson A: Beware the "Algo-Fakeout" (GAAP vs. Non-GAAP)

Immediately after the Q4 earnings release, the stock dipped sharply before recovering.

Why? Automated trading algorithms read the headline EPS as a "Miss" because they compared the GAAP Loss ($0.11) against the Non-GAAP Estimate (Profit of $0.80).

The Takeaway: Never panic-sell the initial red candle on earnings night. Zscaler reports Non-GAAP (Adjusted) numbers for its "beat," while statutory GAAP numbers usually show a loss due to stock-based compensation. Always verify which EPS number is being cited.

Lesson B: Conservative Guidance is a Feature, Not a Bug

Zscaler management (CEO Jay Chaudhry and CFO Kevin Rubin) are notorious for "conservative guidance," often referred to as sandbagging.

The Pattern: They typically guide for revenue growth that is 1-2% above consensus but likely 3-5% below their internal targets.

The "Tell": In Q4, they guided for FY26 revenue of ~$3.27B. The market viewed this as "prudent" rather than "weak" because Billings grew 32%.

The Lesson: If Zscaler guides "in-line" or "slightly above" tomorrow, do not treat it as a disappointment. The market has learned that ZS tends to raise this number slowly throughout the year. The real signal is in the Billings guidance. If Billings guidance is weak, the stock crashes. If Revenue guidance is "meh" but Billings are strong, the stock holds.

Summary for Tomorrow

Watch Calculated Billings above all else. In Q4, the 32% growth here is what saved the stock and fueled the subsequent rally. If they report Q1 billings growth below 20%, the "growth story" will be questioned regardless of the revenue beat.

Key Metrics to Watch

For SaaS companies like Zscaler, headline revenue and EPS are often less important than forward-looking growth indicators.

Calculated Billings (The "Real" Growth Metric)

Why it matters: Billings represents the actual cash collected from customers, including upfront payments for multi-year deals. It is the best leading indicator of future revenue.

What to watch: Analysts are looking for billings around $615 million. A "beat" here is critical. If Revenue beats but Billings miss, the stock will likely drop.

Annual Recurring Revenue (ARR) & Net Retention Rate (NRR)

NRR: This measures how much existing customers are spending compared to last year. It has historically been strong (above 120%), but has recently trended closer to 114-115%.

Red Flag Zone: If NRR drops below 110%, it signals that upsells (selling more modules to existing clients) are slowing down, which is a major risk to their valuation.

Guidance (Fiscal Q2 & Full Year 2026)

The Deal Breaker: In the current market, even a "triple beat" (Revenue, EPS, Billings) will be punished if management offers weak guidance for the next quarter.

Focus: Watch for Full Year FY26 revenue guidance to be raised above $3.28 billion. Anything less will be viewed as a disappointment.

Zscaler (ZS) Price Target

Based on 42 analysts from Tiger Brokers app offering 12 month price targets for Zscaler in the last 3 months. The average price target is $329.81 with a high forecast of $390.00 and a low forecast of $215.00. The average price target represents a 19.93% change from the last price of $275.01.

Short-Term Trading Opportunities

The Volatility Play (Implied vs. Actual)

Market Expectation: Options pricing suggests a ~10% move (up or down) by Friday.

Historical Reality: In recent quarters, ZS has realized an average move of roughly 7.2%.

The Opportunity: The market is pricing in more volatility than Zscaler has typically delivered recently. This suggests that selling volatility (e.g., Iron Condors) could be profitable if the stock moves less than expected, capitalizing on "IV Crush" (the drop in option premiums after the event). However, this is high-risk if they drop a bombshell announcement.

ZS implied volatility (IV) is 61.0, which is in the 96% percentile rank. This means that 96% of the time the IV was lower in the last year than the current level. The current IV (61.0) is 16.5% above its 20 day moving average (52.3) indicating implied volatility is trending higher.

Technical Levels for Swing Traders

If you are trading the stock directionally post-earnings, watch these key levels:

Bull Case (Relief Rally): If the stock pops, it faces immediate resistance at $290 - $295 (near the 50-day Moving Average). A break above $300 would confirm a short-term trend reversal.

Bear Case (Breakdown): Support is sitting at $267 - $270. If earnings are poor and it breaks this floor, the next major support level is the 200-day moving average around $260.

The "Sector Sympathy" Trade

Palo Alto Networks (PANW) recently reported solid numbers but saw its stock fall due to high expectations. Zscaler is entering its earnings with lower expectations than PANW did. If Zscaler reports strong numbers, it could trigger a sharper relief rally because the "bad news" is arguably already priced in.

Risk: High. Zscaler is a "high beta" stock that swings violently.

Bias: Neutral-Bearish price action going into the print, but Constructive on the potential for a bounce if Guidance is merely "maintained" rather than cut.

Technical Analysis - Exponential Moving Average (EMA)

We have seen how Zscaler have also been affected by the broad market pullback with one of the reason being the fear of an AI bubble, and ZS have been trading below the 50-day period and barely staying above the 200-day period.

So there might be a chance of strong recovery if ZS could provide an earnings that show that ZS have a strong billings growth, this could help to turn this stock around.

I will be monitoring ZS on Monday (24 Nov) to see if can find price action to get ZS cheap.

Summary

Zscaler reports on Tuesday, November 25, 2025, after market close. The stock has declined ~15% over the last month, creating a "lowered bar" scenario. This dampened sentiment means a "good enough" report could trigger a relief rally, as bad news is partially priced in.

Key Metrics to Watch

Calculated Billings: The single most important metric. Analysts are looking for ~$615 million. If revenue beats but billings miss, the stock will likely fall.

Net Retention Rate (NRR): Watch for stabilization. A drop below 110% would signal a worrying slowdown in upsells.

Guidance: To sustain a rally, management must raise Full Year FY26 revenue guidance above $3.28 billion.

Trading Implications

Implied Volatility: Options markets are pricing in a ±10% move, though recent earnings moves have averaged only ~7.2%.

Technical Levels:

• Upside: A solid beat faces resistance at $290. Breaking $300 signals a reversal.

• Downside: Immediate support sits at $267. A guidance miss could flush the stock to the 200-day moving average near $260.

Bottom Line: Ignore the initial headline EPS. The trade depends entirely on Billings growth and whether management raises the full-year outlook.

Appreciate if you could share your thoughts in the comment section whether you think Zscaler could provide a strong billings growth to get back investors confidence to turn things around.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.