Group 1 - Zscaler Inc. has acquired SquareX to enhance its ZeroTrust capabilities, particularly in browser security through SquareX's Browser Detection and Response solution [1][3] - The financial details of the acquisition have not been disclosed, with further information expected during the Q2-2026 earnings call on February 26 [1] - Following the acquisition announcement, Zscaler's stock experienced a slight decline of 1.2%, closing at $167.33, and has fallen 18.9% year-to-date due to negative investor sentiment towards software companies [4] Group 2 - Analysts maintain a bullish outlook on Zscaler, with a median target price of $320.00, indicating a potential upside of 91.24% from the current stock price [4] - Zscaler is recognized as one of the best beaten-down growth stocks to buy now, despite the recent stock price decline [1]

Core Viewpoint - The article discusses the recent internal rotation in the U.S. stock market, highlighting a shift from a few large-cap stocks leading the market to a broader participation across various sectors, while also addressing the impact of AI on traditional business models and the resulting market volatility [5][7][8]. Market Performance - On Tuesday, the S&P 500 fell by approximately 0.3%, while the Dow Jones Industrial Average rose by about 0.1%, reaching a new historical high [5]. - The equal-weighted S&P index also reached a record high, indicating a shift in market dynamics with around 300 stocks in the S&P 500 rising [7]. Retail Sales Data - The U.S. Commerce Department reported that December retail sales were flat month-over-month, significantly below the expected 0.4% growth, indicating a slowdown in consumer spending [9]. - Core retail sales, excluding autos and gas, even showed a decline, reflecting weakened consumer spending momentum during the holiday season [9]. Interest Rate Expectations - The weak retail data led to a rise in U.S. Treasury prices and a decline in yields, with the futures market increasing the probability of three rate cuts within the year, with two already priced in [9]. - Historical trends suggest that rate cut expectations typically support risk assets, but the current market shows a divergence where rates are falling but stocks are not rising, particularly in the tech sector [11]. AI Impact on Market Sentiment - Market participants are shifting their interpretation of AI's impact from a growth narrative to concerns about short-term disruptions, leading to a "sell first, think later" mentality [12]. - Investors are moving from an "AI is a panacea" mindset to a more pragmatic "performance realization" phase, anticipating greater differentiation between winners and losers in the market [12]. Institutional Perspectives - There is a noticeable divergence in institutional views on the tech sector, with Goldman Sachs warning about the risks of overestimating AI's growth potential and emphasizing the need for actual earnings and cash flow improvements to support tech valuations [13]. - UBS downgraded its rating on the U.S. tech sector from "overweight" to "neutral," citing key risks while still acknowledging the long-term potential of AI [14]. Wealth Management Sector - The wealth management sector has come under scrutiny following the launch of an AI tool by Altruist Corp., which automates tasks traditionally reliant on human expertise, raising concerns about the core revenue models of wealth management firms [17][18]. - The market reacted sharply, with significant declines in stocks of major wealth management firms, indicating fears about the long-term competitive structure of the industry under AI pressure [19][21]. Broader Market Reactions - The sell-off in the market has been attributed to fears that AI tools could undermine the intermediary value of insurance brokers, leading to a significant drop in the insurance brokerage sector [22]. - The recent downturn in the software sector has seen substantial market capitalization losses, with estimates indicating a combined loss of approximately $611 billion across software, financial services, and asset management sectors [26]. Conclusion - The current market environment reflects a transition from viewing AI as a beneficiary narrative to recognizing potential victims, with traditional software companies facing heightened scrutiny and volatility [27]. - The article suggests that this phase serves as a valuation and business model stress test, prompting a reevaluation of which revenue models are based on irreplaceable value versus those reliant on information asymmetry [34].

Core Insights - Zscaler has acquired SquareX to enhance its Zero Trust capabilities in browser security for the AI era, allowing organizations to secure any browser on any device without needing third-party browsers [1][4] Company Developments - The acquisition of SquareX aims to redefine browser security by enabling lightweight extensions in standard browsers like Google Chrome and Microsoft Edge, thus eliminating the reliance on traditional VPNs and VDIs [1][3][4] - Zscaler's Zero Trust architecture, exemplified by Zscaler Private Access™ (ZPA™), is designed to provide unmatched security and device posture checks to millions of users, setting a new standard for secure enterprise connectivity [2][4] Industry Context - The shift from legacy VPNs and VDIs to a true Zero Trust architecture is driven by the need for enhanced security in a landscape increasingly threatened by cyberattacks [2][4] - Zscaler's integration with SquareX will allow organizations to secure SaaS and private applications across both managed and BYOD devices, promoting productivity while implementing precise Zero Trust policies tailored to specific risk profiles [4]

Core Insights - Zscaler, Inc. will release its second quarter fiscal year 2026 earnings on February 26, 2026, after market close [1] - An investor conference call will be held on the same day at 1:30 p.m. Pacific time to discuss the earnings results [1][2] Company Overview - Zscaler is a global leader in zero trust security, serving large businesses, critical infrastructure organizations, and government agencies [3] - The company operates over 160 data centers worldwide and utilizes its Zero Trust Exchange™ platform combined with advanced AI to combat cyber threats and policy violations [3] - Zscaler's solutions aim to enhance productivity for modern enterprises by reducing costs and complexity [3]

Group 1 - Zscaler Inc. (NASDAQ:ZS) is recognized as a promising stock within the QQQ index, with Citizens reaffirming a Market Outperform rating and a price target of $355, highlighting strong client retention metrics despite some customers considering downgrades [1] - The typical onboarding duration for network security services is between 50 and 180 days, which leads to significant renewal activity for Zscaler Inc. as companies incur costs with both current and prospective vendors [2] - Mizuho upgraded Zscaler Inc. to Outperform, citing valuation support and the company's strong positioning in the SASE/Zero Trust market, despite concerns regarding near-term growth and a demand for more transparency on organic growth [3]

Group 1 - The stock prices of American cloud companies declined in pre-market trading, with Intuit down by 3%, Adobe down by 2.3%, and Zscaler down by 1.6% [1]

Group 1 - U.S. cloud companies' stock prices declined in pre-market trading, with Intuit down by 3%, Adobe down by 2.3%, and Zscaler down by 1.6% [1]

Group 1 - Intuit shares declined by 3% [1] - Adobe shares fell by 2.3% [1] - Zscaler shares decreased by 1.6% [1]

Shares of Zscaler (NASDAQ: ZS) rose on Tuesday after the cloud protection specialist debuted a suite of new artificial intelligence (AI)-powered cybersecurity tools. As of 1:05 p.m. EST, Zscaler's stock price was up more than 3%. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks » Image source: Getty Images. Cyber sentinels are struggling to defend against AI threats Companies are racin ...

Core Viewpoint - Zscaler has been experiencing a decline in stock performance, with a -5.9% return over the past month, contrasting with the S&P 500's +0.4% and the Zacks Security industry's -1.5% [2] Earnings Estimate Revisions - Zscaler is projected to report earnings of $0.89 per share for the current quarter, reflecting a +14.1% increase year-over-year, although the Zacks Consensus Estimate has decreased by -0.7% in the last 30 days [5] - For the current fiscal year, the consensus earnings estimate is $3.8, indicating a +15.9% change from the previous year, with a notable increase of +16.7% in the last month [5] - The next fiscal year's consensus earnings estimate stands at $4.37, showing a +15.1% change from the prior year, with a slight increase of +0.1% over the past month [6] - Zscaler holds a Zacks Rank 3 (Hold), indicating a neutral outlook based on earnings estimate revisions [7] Revenue Growth Forecast - The consensus sales estimate for Zscaler is $798 million for the current quarter, representing a year-over-year growth of +23.2% [11] - For the current fiscal year, the sales estimates are $3.29 billion and $3.94 billion, indicating growth rates of +23.1% and +19.7%, respectively [11] Last Reported Results and Surprise History - In the last reported quarter, Zscaler achieved revenues of $788.11 million, a +25.5% increase year-over-year, and an EPS of $0.96 compared to $0.77 a year ago [12] - The company exceeded the Zacks Consensus Estimate for revenues by +1.91% and for EPS by +12.94% [12] - Zscaler has consistently beaten consensus EPS and revenue estimates in the last four quarters [13] Valuation - Zscaler is currently graded F on the Zacks Value Style Score, indicating it is trading at a premium compared to its peers [17]