ZS earnings delivered — shorts keep leaving, Street stays bullish

Zscaler posted its September 1 earnings print and the stock fell 5.3% on the day, but the positioning story heading into that release played out almost exactly as flagged — shorts had already stepped back, and the borrow market saw no stress.

Short interest has now dropped to 3.9% of the free float, down 11% on the week and down nearly 24% over the past month. At the start of August, around 8.3 million shares were short; that figure is now closer to 6.2 million. The sustained exit is not a single-day move — it has been a steady unwind across the whole month. Borrow conditions tell the same story. Availability is extraordinarily loose at over 8,200%, meaning there are roughly 82 shares available to borrow for every one currently lent out — the lending pool is essentially untouched. Cost to borrow eased back to 0.37% after a brief midweek spike, well within what any lender would call routine. There is no evidence of short pressure building here. Options positioning, which read more defensively heading into the print with a put/call ratio near the top of recent ranges, has settled slightly — the PCR is 0.80, just under one standard deviation above its 20-day average of 0.79. That is cautious but not alarmed.

The Street was firmly in the bull camp before the print and has not moved since. The consensus is a clear buy, with 26 analysts there. More telling is the target-price action from the past two weeks: JP Morgan raised its target to $215, Barclays lifted to $192 from $170, Wells Fargo went to $210 from $180, and KeyBanc moved to $210 from $185. The mean target now sits at $199, roughly 12% above the current close of $178.37. Bulls point to Zscaler's position in the SASE market, AI-driven product expansion, and a loyal enterprise customer base. Bears flag slowing growth relative to earlier years, intensifying competition from Palo Alto Networks and Netskope, and a valuation that still demands a premium — the PE runs near 36x and the EV/EBITDA is around 23x. Neither of those multiples is cheap for a name where the EPS surprise factor score ranks only in the 19th percentile of the universe.

The factor picture has a few bright spots. Forward EPS momentum is strong — the 12-month forward estimate has been rising fast, ranking in the 89th percentile year-on-year — and 30-day EPS momentum ranks in the 92nd percentile. The ORTEX short score has drifted down from around 39.5 in mid-August to 38.3 now, consistent with the short interest reduction and loosening borrow market. The institutional register is relatively concentrated: co-founder Jagtar Chaudhry holds around 16.6% of shares, and BlackRock filed a fresh 13G in late July disclosing a 5.1% passive stake. Vanguard, notably, filed an amended 13G/A in March 2026 showing its stake had dropped to zero from a prior 7.2% — a meaningful exit by one of the largest passive managers, though the timing of that move predates the recent rally by several months.

Earnings history provides some useful context. The May 2026 print triggered a 20% single-day gain. The prior quarter saw a 31% drop over one day. The September 1 result — a 5.3% decline — sits between those two extremes and looks relatively contained given that volatility record. The next scheduled event is September 3, and the key question coming out of this week is whether the full earnings call commentary — guidance, macro commentary, deal sizes — supports the analyst price-target uplift cycle that has been running through August or gives any of those target lifts a reason to be revisited.