The cybersecurity trade has become one of the hottest corners of the technology market in 2026, but Zscaler has not kept pace with some of its biggest rivals.
Now, Freedom Capital chief market strategist Jay Woods says the charts are beginning to tell a different story.
Woods argues that Zscaler’s prolonged period of underperformance may be approaching a turning point, with the stock breaking above a key resistance area and several technical indicators beginning to improve.
His analysis comes as investors pour money into cybersecurity companies amid growing concerns about artificial intelligence, autonomous software and the security risks created by increasingly sophisticated digital systems.
Zscaler’s shares closed at $197.47 on September 17, up from $191.58 the previous session and above the roughly $195 resistance level highlighted in Woods’ technical analysis. The stock closed at $197.31 on September 18.
The move is notable because Zscaler has been one of the relative laggards in a cybersecurity sector that has otherwise delivered powerful gains.
Zscaler Has Been the Laggard in a Hot Cybersecurity Market
The broader cybersecurity industry has benefited from a dramatic shift in the artificial-intelligence narrative.
Instead of focusing exclusively on AI’s potential to increase productivity, investors are increasingly concerned about what happens when AI systems, autonomous agents and increasingly powerful models create new security vulnerabilities.
That has pushed demand expectations higher for companies that protect networks, identities, applications and data.
Axios reported that CrowdStrike and Palo Alto Networks had roughly doubled over the six months through mid-September, while cybersecurity stocks broadly benefited from growing concerns about AI-enabled cyberattacks.
Zscaler, however, has not participated to the same extent.
According to Woods’ analysis, the stock remained roughly 13% lower for 2026 at the time of his CNBC appearance, after previously falling as much as 65% from its 52-week high.
That gap is precisely what has attracted Woods’ attention.
Rather than chasing cybersecurity names that have already experienced major rallies, his thesis focuses on whether a laggard can begin catching up.
The Chart Is Starting to Change
Woods’ argument is based primarily on technical analysis.
On Zscaler’s daily chart, he identified a potential bottoming formation accompanied by improving momentum indicators.
The stock also moved above resistance around $195, a level that Woods considers important for confirming the potential change in trend.
Two indicators are particularly important to his thesis:
Relative Strength Index, or RSI: This measures the speed and magnitude of recent price movements and can help traders identify shifts in momentum.
Moving Average Convergence Divergence, or MACD: This compares moving averages to identify potential changes in trend and momentum.
According to Woods, both indicators had turned more constructive as Zscaler pushed through the $195 area.
But technical confirmation is not the same thing as a guaranteed breakout.
The stock would still need to hold above important levels for Woods’ scenario to remain intact.
The $165 Level Could Become the Line in the Sand
Woods also points to approximately $165 as an important support zone.
That area is significant because Zscaler’s rising 50-day and 200-day moving averages were converging there, according to his analysis.
In technical trading, a sustained move above resistance followed by a successful test of support can strengthen the case that a previous downtrend is changing direction.
For Zscaler, that would mean the stock could potentially transition from being one of cybersecurity’s laggards into one of the companies participating more fully in the sector’s rally.
But a break below important support would weaken that interpretation.
Woods Sees a Possible Path Toward $250-$265
If Zscaler can sustain the breakout, Woods sees a potential move toward $250 to $265.
At the time of the analysis, that represented roughly 25% to 30% upside from the stock’s recent levels.
Woods also identified $225 as another important potential milestone.
A move to that level would bring Zscaler back to approximately breakeven for the year, based on the levels discussed in the CNBC report.
Those are technical targets, however — not company guidance and not guarantees of where the stock will trade.
That distinction is particularly important in a volatile technology market.
The Fundamental Story Is Improving Too
The chart is only part of the story.
Zscaler’s latest financial results provide a stronger fundamental backdrop for the technical argument.
The company reported fiscal fourth-quarter revenue of $898.2 million, up 25% year over year.
Annual recurring revenue also increased 25% to $3.77 billion, while net new ARR rose 24% during the quarter.
Zscaler also reported a record 24% non-GAAP operating margin for the quarter.
For the full fiscal year, revenue reached approximately $3.35 billion, up 25%, while non-GAAP operating income increased to $767.1 million.
That gives investors something beyond a chart.
The company is still growing at a substantial rate while expanding operating profitability.
Zscaler Is Betting Big on AI Security
Artificial intelligence is also becoming increasingly central to Zscaler’s strategy.
CEO Jay Chaudhry said AI represents one of the company’s biggest opportunities, arguing that businesses will need ways to secure users, workloads, branches and autonomous AI agents.
Zscaler is positioning its platform around several areas, including Zero Trust SASE, Agentic SecOps, data security and security for AI.
That strategy puts Zscaler directly in the middle of one of the biggest debates in technology.
As companies deploy AI agents capable of interacting with applications and data, security becomes more complicated.
Instead of protecting only human employees accessing corporate systems, security teams increasingly have to account for software agents that can make decisions and perform actions on their own.
That potentially expands the number of identities, devices, applications and workloads that cybersecurity platforms need to protect.
The Company Is Forecasting Continued Growth
Zscaler’s own fiscal 2027 outlook also points to continued expansion, although at a slower rate than fiscal 2026.
The company expects full-year fiscal 2027 revenue of approximately $3.908 billion to $3.938 billion, representing growth of roughly 16.6% to 17.5%.
It forecasts annual recurring revenue of $4.396 billion to $4.426 billion, or approximately 16.6% to 17.4% growth.
Zscaler also expects non-GAAP operating income of $924 million to $932 million.
The guidance indicates that management expects the business to remain profitable on a non-GAAP basis while continuing to grow.
But it also shows that investors are paying for a company whose growth rate is expected to moderate.
A Major Sales Transition Has Been Part of the Story
Another reason Zscaler has lagged some peers is its transition in sales strategy.
Bernstein analyst Peter Weed said Zscaler is emerging from a shift toward a more relationship-based sales model, a transition that initially affected some customers.
He argued that the process could become more stable as the new sales approach begins producing results.
That provides another possible explanation for why investors have been less enthusiastic about Zscaler than some competitors.
A company can report strong revenue growth and still see its stock underperform if investors believe future growth will be harder to achieve.
The question now is whether the company’s financial results and new sales strategy can convince the market that the earlier execution concerns are fading.
Wall Street Is Also Watching the Stock Differently
The technical case from Woods arrives alongside a separate shift in analyst sentiment.
Bernstein’s Peter Weed recently raised his Zscaler price target to $298 from $224 while maintaining an Outperform rating, according to Yahoo Finance’s compilation of analyst actions.
Weed’s fundamental argument is different from Woods’ chart-based approach, but the two views converge on an important point:
Zscaler’s previous underperformance may have created a different setup from the cybersecurity companies that have already experienced enormous rallies.
Weed has also highlighted Zscaler’s customer retention and sales-model transition as factors supporting his view.
That does not eliminate the risks.
It simply means the investment debate is shifting from whether Zscaler can grow to how much of that growth is already reflected in its valuation.
The Cybersecurity Rally Has an AI Twist
The timing of Zscaler’s potential turnaround is particularly interesting because the cybersecurity rally itself has been fueled by fears surrounding AI.
Axios reported that investors have increasingly treated cybersecurity as a beneficiary of the risks created by AI adoption.
The logic is relatively straightforward.
The more companies deploy AI systems, the more sensitive data, applications and infrastructure they expose to potentially new attack methods.
That creates additional demand for tools designed to protect those systems.
The trend has already benefited major cybersecurity names.
Barron’s reported that CrowdStrike and Palo Alto Networks surged sharply on September 14, while Zscaler and other software-security companies also advanced.
Zscaler’s challenge is to turn that sector-wide enthusiasm into a sustained rerating of its own shares.
But Technical Breakouts Can Fail
There is an important risk in Woods’ thesis.
A stock moving above resistance does not guarantee that a new long-term uptrend has begun.
Technology shares can be particularly sensitive to interest rates, valuation changes, earnings expectations and shifts in investor appetite.
Zscaler’s own financial outlook warns that macroeconomic conditions, competition, rapidly changing technology, sales-cycle length, customer retention and the development of new products could materially affect its results.
The company also remains unprofitable under generally accepted accounting principles.
Zscaler reported a $63.2 million GAAP net loss for fiscal 2026, despite generating $704.2 million in non-GAAP net income.
That difference matters because investors evaluating high-growth software companies often look at both adjusted profitability and GAAP results.
The Bigger Question: Can Zscaler Catch the Leaders?
The cybersecurity sector has already delivered a dramatic rotation.
CrowdStrike, Palo Alto Networks and other major names have benefited from the surge in interest surrounding AI-related security threats.
Zscaler’s story is different.
It has strong recurring revenue growth, expanding operating margins and an increasingly AI-focused product strategy.
But its stock has spent much of 2026 lagging the broader cybersecurity trade.
Now the technical picture is beginning to change.
Woods sees the break above approximately $195 as a potentially important signal, with $165 serving as a key support level and $250-$265 representing his longer-term technical target if the breakout holds.
Meanwhile, the company is entering fiscal 2027 with billions of dollars in recurring revenue, continued double-digit growth expectations and a growing focus on securing AI systems.
That creates the central question for investors:
Was Zscaler simply the cybersecurity stock that got left behind — or was the market quietly setting up the next leg of its story?
The answer will depend on whether the technical breakout survives and whether Zscaler can convert its strong operating performance into the sustained growth investors are expecting.
