Zscaler's Large Deal Activity Surges: What's Driving This Momentum?
Zscaler, Inc.ZS is seeing strong momentum in large enterprise deals as organizations continue to modernize their cybersecurity infrastructure. Growing demand for Zero Trust security, AI-powered protection and platform consolidation is encouraging customers to sign larger, multi-year contracts, providing the company with better revenue visibility and long-term growth opportunities.
Zscaler delivered a record performance in the third quarter of fiscal 2026. The company closed its highest-ever number of annual contract value deals worth more than $1 million for the fiscal third quarter. Annual recurring revenues increased 25% year over year to more than $3.5 billion, while remaining performance obligations climbed about 30% to nearly $6.5 billion, reflecting a healthy pipeline of future revenues.
The expanding adoption of ZS’ platform is a key driver behind these larger deals. More than 700 enterprise customers are now using Zscaler’s Zero Trust Everywhere framework, up from more than 550 in the previous quarter. Customers are increasingly deploying multiple products, including Zero Trust Users, Zero Trust Cloud, Zero Trust Branch and AI Protect, instead of purchasing standalone security solutions.
Z-Flex is also supporting deal growth. The flexible purchasing program generated more than $480 million in total contract value during the quarter, up more than 60% sequentially. By allowing customers to activate additional products within existing agreements, Z-Flex is increasing upselling opportunities.
With enterprises consolidating cybersecurity vendors and expanding AI deployments, Zscaler appears well-positioned to continue winning larger contracts. This trend should support sustained revenue growth, stronger customer retention and higher recurring revenues over the long term. The Zacks Consensus Estimate for Zscaler’s fiscal 2026 revenues is pegged at $3.33 billion, implying year-over-year growth of nearly 24.6%.
How Do Zscaler’s Rivals Fare in Winning Large Deals?
Two major rivals competing with Zscaler for large enterprise cybersecurity contracts are Palo Alto Networks, Inc.PANW and CrowdStrike Holdings, Inc.CRWD.
Palo Alto Networks’ platformization strategy, which combines network, cloud and security operations on one platform, is helping the company secure larger multi-product contracts and deepen relationships with global enterprises. In the third quarter of fiscal 2026, revenues increased 31% year over year to $3 billion, while next-generation security ARR climbed 60% to $8.13 billion.
CrowdStrike is also gaining traction with large customers through its Falcon cybersecurity platform. In the first quarter of fiscal 2027, ARR reached approximately $5.51 billion, up 24% year over year, while revenues rose 26% to roughly $1.39 billion. The company continues to expand adoption of multiple Falcon modules, increasing average contract values and encouraging customers to standardize on a single cybersecurity platform.
Zscaler’s Price Performance, Valuation & Estimates
ZS shares have plunged 31.3% year to date against the Zacks Security industry’s surge of 64.2%.
Zscaler YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, ZS trades at a forward price-to-sales ratio of 7.49, significantly below the industry’s average of 18.06.
Zscaler Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Zscaler’s fiscal 2026 and 2027 earnings implies a year-over-year increase of 26.2% and 10.7%, respectively. Estimates for fiscal 2026 have remained unchanged over the past 60 days, while fiscal 2027 estimates have been revised upward in the past 30 days.
Image Source: Zacks Investment Research
Zscaler currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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