Harsh Chauhan, The Motley Fool

Fri, Jun 6, 2025, 4:30 AM5 min read

• Cybersecurity specialist Zscaler has already clocked 60%-plus gains so far in 2025.

• Its latest quarterly results gave the stock a nice boost thanks to its improving growth.

• While the stock looks expensive right now, growth-oriented investors can still consider it.

• 10 stocks we like better than Zscaler ›

Shares of Zscaler (NASDAQ: ZS) have defied the broader stock market weakness in 2025 by registering impressive gains of 62% to investors so far this year, and it looks like this impressive rally is here to stay following the release of the company's latest quarterly results.

On May 29, the cybersecurity specialist reported results for its fiscal 2025's third quarter (ended April 30). Both revenue and earnings topped consensus estimates, and the company also raised its full-year forecast. Zscaler stock shot up nearly 10% on the day following its earnings release.

But is there more upside in store for Zscaler following its impressive run this year? Let's find out.

Zscaler's top line jumped 23% year over year in the previous quarter, while its earnings increased by 18%. The slower growth in Zscaler's bottom line last quarter can be attributed to the company's focus on aggressively bringing new products to the market to capture a bigger share of the end-market opportunity. Zscaler says that its new offerings are "optimized for faster go-to-market rather than margins," and the company will focus on enhancing its margins once they scale up.

The company's strategy of prioritizing market share gains is going to reap rewards in the future as it is helping the company bolster its revenue pipeline. This is evident from the 30% year-over-year growth in its remaining performance obligations (RPO) last quarter to almost $5 billion. RPO refers to the total value of a company's contracts that are yet to be fulfilled at the end of a quarter. So, the stronger growth in this metric when compared to Zscaler's revenue is proof that it is winning contracts at a faster pace than it is fulfilling them.

After all, the total contract value of Zscaler's bookings in the previous quarter was more than $1 billion. Also, the company's RPO is nearly double the revenue it has generated in the past four quarters, which indicates that there is a strong likelihood of its growth rate getting better in the future. An important thing to note is that just over a third of Zscaler's annual recurring revenue of $2.9 billion now comes from emerging cybersecurity niches.