Zscaler's AI Growth So Strong, It Almost Justifies Their Existence

Zscaler, the company that's been trying to make a name for itself in the AI security space, has finally posted some impressive Q1 results, because who doesn't love a good underdog story. With revenue growth acceleration, a robust annual recurring revenue (ARR) increase of 26% year-over-year, and a strong free cash flow (FCF) margin of 52%, it seems like their AI innovation is actually translating into financial growth, and not just a bunch of buzzwords on a PowerPoint slide. The company's AI security adoption is exceeding expectations, with FY2026 ARR guidance raised from $400M+ to $500M+, which is a whole lot of money, but still not enough to make them a household name. Despite the strong Q1, full-year guidance was a bit sluggish, but potential Trump Administration tailwinds might help justify their valuation, because politics. The analyst, Bay Area Ideas, has upgraded Zscaler to Hold, which is financial analyst speak for "we're not entirely sure what's going on, but the numbers look good, so let's not sell just yet."