Zscaler's Long-Term Outlook Reinforces Growth Potential as Execution Remains Key, Morgan Stanley Says

11:25 AM EDT, 10/07/2026 (MT Newswires) -- Zscaler's (ZS) long-term targets underscore its growth potential in cybersecurity but an unchanged fiscal 2027 outlook puts near-term execution in focus after recent departures in the sales team, Morgan Stanley said in a note Wednesday. The company affirmed its guidance for fiscal 2027 at its investor day Tuesday, including continuing to expect annual recurring revenue, or ARR, of $4.396 billion to $4.426 billion. Zscaler's sees a clear path to grow ARR organically to more than $8 billion by fiscal 2031, more than double its current ARR, Chief Financial Officer Kevin Rubin said at the investor day, according to a FactSet transcript. Management also outlined an upside scenario that calls for $10 billion in ARR by 2031 amid faster artificial intelligence adoption. "We were encouraged by the confidence that Zscaler has in their ability to capture the growing cybersecurity opportunity," but the reaffirmed 2027 outlook leaves Morgan Stanley's equal weight rating unchanged as it assesses execution following key sales-leadership changes, the brokerage said. "We look for stronger pipeline creation translating into healthier ARR contribution from new customers, replenishing the future cross-sell opportunity and increasing confidence in (long-term) growth durability," the brokerage said. Last month, the company promoted Ross Tackett to chief revenue officer, effective Oct. 1. Tackett succeeded Mike Rich, who stepped down for personal reasons, Zscaler said in September. Management said in May that two sales leaders departed the company at the end of the fiscal third quarter, according to a FactSet transcript of the quarterly earnings call. A replacement had already been hired, with the company close to hiring for the other role, Rubin told analysts at the time. Zscaler's recent sales departures have exacerbated concerns around competition in the secure access service edge space, Morgan Stanley said. The brokerage increased its price target on Zscaler's stock to $185 from $165. Shares of the company were down 0.5% in Wednesday trading, and have fallen 6.1% this year. Last month, cybersecurity company Palo Alto Networks (PANW) reported fiscal fourth-quarter results above market expectations. In August, CrowdStrike (CRWD) raised its full-year net new ARR outlook amid increasing demand for cybersecurity solutions to address AI risks. Price: 212.50, Change: +0.25, Percent Change: +0.12