Zscaler (ZS)

Zero-trust cloud security (SASE/SSE) — secure cloud/web access delivered from the cloud, replaces VPN

AI exposure 10% — derived from reported segment revenue, not asserted.

Where it sits

Software Stack → Cybersecurity · figures rebased to Q4 FY2026, reported 2026-09-03

ZIA secure internet access leads 2 businesses in this sub-tier that together are 100% of revenue, so Cybersecurity is effectively the whole company rather than one leg of it. Zscaler reports a single segment with no product-line disaggregation, so the internal weighting is an estimate; the placement does not depend on it, since both businesses sit in the same sub-tier.

Reported segments

• Zero Trust Exchange subscription — 100% of revenue

Zscaler (FY2026 revenue $3,353M, +25% YoY; Q4 FY2026 $898.2M, +25%; ARR $3,771M, +25%). Single reportable segment with no product-line disaggregation, so the internal split is an Atlas estimate: ZIA secure internet access about 55% and ZPA private access plus data protection about 45%. Primary B5 Cybersecurity. The disclosure that matters this year is the acquisition contribution: Red Canary added $141M of ARR, so organic ARR grew 20% to $3,630M and organic net new ARR grew 17%, against 25% and 24% reported. FY2027 is guided to $3,908-3,938M of revenue, 16.6-17.5%.

How the 10% is built

• Zero Trust Exchange subscription — 100% of revenue × 10% AI-driven (estimate). AI-driven risk scoring, data protection and agent-traffic inspection are add-on modules within a platform still sold mainly as zero-trust access, and no AI-attached ARR is disclosed

Investment read

Moat. Born-in-cloud zero-trust architecture with enterprise traffic routed through Zscaler's own proxy — moving it is a network-wide project, and a record 24% non-GAAP operating margin in Q4 FY2026 reflects what that position collects. The limit is that the lock-in is no longer converting into expansion at the prior rate: organic ARR grew 20% against 25% reported, and FY2027 is guided to 16.6-17.5%.

Bottleneck / pricing power. Real architectural leverage, weakening at the margin. Non-GAAP operating margin hit a record 24% in Q4 and 23% for the year, with FY2027 operating income guided to grow about 21% on 17% revenue growth. But deferred revenue grew only 19% against revenue and ARR at 25%, and Palo Alto bundling Prisma SASE against firewall renewals is the specific mechanism contesting the attach rate.

Role in the AI stack. The zero-trust cloud-security (SASE/SSE) layer.

Connected companies

• Palo Alto Networks (PANW) — ZS competes with: SASE/SSE — Prisma Access vs Zscaler (Gartner SSE leaders)
• Fortinet (FTNT) — ZS competes with: SSE/SASE — Zscaler vs FortiSASE (Gartner SSE MQ top)
• Cloudflare (NET) — ZS competes with: Zero-trust / SASE — Zscaler vs Cloudflare One
• Cisco Systems (CSCO) — ZS competes with: cybersecurity — Cisco (Splunk/SASE/Hypershield) vs ZS

Others in Cybersecurity

• Palo Alto Networks (PANW)
• CrowdStrike (CRWD)
• Fortinet (FTNT)
• Akamai Technologies (AKAM)

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