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ZS heads into its fiscal Q1 2027 earnings today with the Street more constructive than it has been in months, even as the company's own guidance disappointed parts of the market on its last print.
The clearest pre-print signal is the wave of target-price increases from analysts. Scotiabank lifted its target to $240 yesterday, the day of the report. Before that, Barclays raised to $220 and RBC Capital to $236, both in the past two weeks. Bernstein went furthest, pushing to $298 in mid-September. The direction is almost unanimously upward: every firm that moved in the past month raised, with only Piper Sandler holding at a neutral stance with a $175 target. The consensus mean of $210 now sits just above the current $201.80 price, but several individual targets already price in 15% to 20% upside from here. That gap has tightened sharply after ZS gained 19% over the past month.
The bull and bear cases are precisely drawn heading into the print. Bulls point to ZPA momentum (around 40% of G2K customers purchased, accounting for roughly 40% of new sales), Security for AI bookings growing 50%-plus quarter-on-quarter, and a Q4 result that included $898 million in revenue, 80% gross margins and a record 24.3% non-GAAP operating margin. Z-Flex produced over $770 million of TCV in the quarter. Bears focus on FY27 free cash flow margin guidance of 23.0% to 23.5%, well below the approximately 27% Zscaler delivered in both FY24 and FY25, as data centre buildout costs consume capital. FY27 ARR growth guidance implies a sharp deceleration in net new ARR, and execution risk around the CRO transition and new initiatives like Agentic SecOps remains real.
Short interest and borrow conditions are not part of the story today. Short interest has drifted lower over the past fortnight to 3.9% of the float, borrow costs are a negligible 0.33%, and availability is extremely loose. There is no meaningful bearish positioning pressure in the lending market.
The most notable ownership development is the Vanguard Group, which filed a 13G/A in March showing its stake had dropped to 0% from 7.2% previously. That represents a material exit by one of the stock's largest passive holders. BlackRock, by contrast, filed a fresh 13G in July disclosing a 5.1% stake. The two largest holders by shares remain co-founder Ajay Mangal at 17.8% and CEO Jagtar Chaudhry at 16.5%, meaning insiders still dominate the register. CFO Kevin Rubin sold roughly $96,000 worth of stock on September 25, all under a pre-arranged 10b5-1 plan and of minimal significance.
On the reaction pattern, the last two prints produced declines: down 1.7% on the day and 5.4% over five days after the September 2026 report, and down 8.3% on the day and 14% over five sessions after the prior quarter. Peer sentiment has improved into this report, with CRWD up 7% on the week and PANW up 8%, suggesting the broader sector backdrop is supportive.
The print will test whether ZS can demonstrate that ARR net new acceleration is genuinely returning, and whether the free cash flow trajectory justifies the renewed enthusiasm that has driven the stock back to within striking distance of analyst targets.
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