Why Zscaler Is Gaining Traction: Insights from Wells Fargo’s Upgrade

At Extreme Investor Network, we pride ourselves on providing cutting-edge investment insights and analysis that helps our readers make informed decisions. Recently, Wells Fargo made headlines by upgrading Zscaler (ZS), a leading player in cloud security, igniting interest among investors. Let’s delve into the reasons behind this upgrade and explore what it means for Zscaler’s future in the hot sector of cloud security.

Wells Fargo’s Upgrade: Key Takeaways

Wells Fargo analyst Andrew Nowinski raised the stakes for Zscaler by upgrading its stock from an equal weight to an "overweight" rating. Alongside this, the price target saw a significant increase from $260 to $385. This reflects not just optimism but also solid strategic thinking. Shares of Zscaler have already skyrocketed by 67% in 2025, indicating strong momentum that savvy investors cannot overlook.

Revenue Projections: An Uptrend on the Horizon

What lies behind this upgraded outlook? According to Nowinski, Zscaler is poised for robust growth in its billing metrics. As we move into FY26, he anticipates a 20%+ growth in billings, primarily driven by improvements in unscheduled billings. These projections underscore Zscaler’s strategy to convert one-time revenues into predictable, scheduled billings in the future.

This kind of transformation is a critical radar for investors, signifying not just growth but long-term sustainability.

The Road to $5 Billion in ARR

An exciting point derived from Wells Fargo’s analysis is Zscaler’s ambitious target of reaching an annual recurring revenue (ARR) of $5 billion by fiscal 2027. This objective is not merely about numbers; it highlights Zscaler’s foresight in enhancing its core product offerings while also making strides in emerging sectors.

For investors, this long-term vision offers a pathway to understanding where the company is headed. Sustaining mid-teens growth in existing products, paired with strong performance in newer initiatives, could be a game-changer. As Zscaler captures a larger market share, it sets itself up for enhanced free cash flow and improved operating margins.

Financial Targets and Performance Metrics

In its Q3 2023 financial results, Zscaler confidently asserted that it is currently meeting—or even exceeding—its long-term financial targets, which include gross, operating, and free cash flow margins. This achievement not only reinforces Zscaler’s commitment to financial prudence but also indicates potential for future upside. Nowinski believes that as the company continues to meet these targets, there is a compelling case for upside in both operating and cash flow margins.

Comparing Zscaler to the Market Leaders

While evaluating investment opportunities, it’s crucial to assess how well a stock stands against its competitors. Nowinski highlighted that Zscaler remains undervalued compared to other best-in-class stocks like CrowdStrike (CRWD). For investors, this presents an intriguing prospect for further multiple expansions based on Zscaler’s trajectory to reach $5 billion in ARR.

If Zscaler can align its growth with its competitors, particularly in metrics such as enterprise value (EV) to sales and EV to free cash flow, investors could see substantial returns in their portfolios.

In Conclusion: Why Zscaler Should Be on Your Radar

With Wells Fargo’s bullish forecast paired with Zscaler’s ambitious growth strategy, it’s clear why investors are taking notice. The intersection of strong billing growth, advantageous financial metrics, and a roadmap towards substantial ARR puts Zscaler in a favorable light.

At Extreme Investor Network, we encourage you to keep Zscaler on your radar as it sets the pace for innovation and growth in the cloud security landscape. Our commitment is to provide you with unique insights and actionable investment strategies that can elevate your investment game. Stay tuned for more updates, and let us guide you through the evolving world of investments.