Zscaler ZS and Palo Alto Networks PANW are two cybersecurity giants offering solutions, including secure web gateway, zero trust network access, security service edge (SSE) and cloud access security broking solutions.

Both Zscaler and Palo Alto Networks are capitalizing on the rapid growth of the cybersecurity space, fueled by the rise of complex attacks, including credential theft and abuse, remote desktop protocol attacks and social engineering-based initial access. Per a Mordor Intelligence report, the cybersecurity market is projected to witness a CAGR of 12.63% from 2025 to 2030.

With this robust industry growth forecast, the question remains: Which stock has more upside potential? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.

The Case for Zscaler Stock

Zscaler offers a full range of enterprise network security solutions, such as web security, Internet security, antivirus, vulnerability management, firewalls, and control over user activity in mobile, cloud computing, and Internet of Things environments.

ZS is capitalizing on the growing demand for privileged access security in digital transformation and cloud-migration strategies. Furthermore, Zscaler’s presence across several industry verticals enables it to stay protected from the negative impacts of macroeconomic and geopolitical headwinds.

Zscaler is also integrating artificial intelligence across its offering, giving it a long-term growth prospect. ZS uses AI for real-time anomaly detection, advanced threat correlation, AI-based policy recommendations, AI-based data loss prevention and AI Agents like ZDX Copilot. AI integration has enabled it to detect and mitigate cyber threats more effectively while continuously supporting its users.

These factors have enabled Zscaler to increase its revenues by 23.4% year over year and earnings by 23.8% in the second quarter of fiscal 2025.

Zscaler, Inc. Price, Consensus and EPS Surprise

Zscaler, Inc. price-consensus-eps-surprise-chart | Zscaler, Inc. Quote

The Case for Palo Alto Networks Stock

Palo Alto Networks is a leader in cybersecurity, providing solutions for network security, cloud security and endpoint protection. PANW’s next-generation firewall and advanced threat detection technologies are widely recognized and adopted globally.

PANW’s innovative product offerings, strong customer base and expanding market opportunities in areas like Zero Trust and private 5G security solutions drive its growth potential. Palo Alto Networks' strategic vision and continuous technological advancements make it a compelling long-term investment opportunity.

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For instance, PANW enhanced its Prisma Cloud platform by introducing Prisma Cloud Copilot, which leverages generative AI to simplify security analysts' tasks. This feature enables analysts to understand and respond to user queries in natural language more efficiently. Furthermore, Prisma Cloud recently secured FedRAMP authorization, which will help it attract a growing number of federal agencies.

However, Palo Alto Networks is facing several product order inconsistencies as enterprises are postponing their large IT spending plans due to a weakening global economy amid ongoing macroeconomic and geopolitical issues. As organizations are taking more time in finalizing deals or even rightsizing deals in the current uncertain macroeconomic environment, these pose a concern for PANW.

Palo Alto Networks’ earnings rose 11% year over year and revenues improved 14.3% in the second quarter of fiscal 2025.

Palo Alto Networks, Inc. Price, Consensus and EPS Surprise

Palo Alto Networks, Inc. price-consensus-eps-surprise-chart | Palo Alto Networks, Inc. Quote

Stock Price Performance and Valuation of ZS and PANW

Both stocks have been highly volatile in the past year. However, over the past year, Palo Alto Networks has returned 23.5%, while Zscaler shares have gained 31.7%.Zacks Investment Research

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PANW is trading at a forward sales multiple of 12.29X, way below the Zacks Security industry’s forward sales multiple of 14.11X, over the past year. ZS is trading at a forward sales multiple of 11.84X below both Palo Alto and the Zacks Security industry.Zacks Investment Research

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Conclusion: Palo Alto Networks vs. Zscaler

Both Palo Alto Networks and Zscaler are essential players in the cybersecurity space, but PANW is suffering from near-term macroeconomic headwinds, while ZS is innovating its offerings for long-term growth. Additionally, Zscaler is trading at a discount in comparison to PANW stock, making the stock more attractive at present.

Currently, Zscaler carries a Zacks Rank #3 (Hold), making the stock a stronger pick compared with Palo Alto Networks, which has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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