What Happened?
Shares of cloud security platform Zscaler (NASDAQ:ZS) jumped 4.3% in the morning session after the company revealed its expansion into artificial intelligence security, marked by the simultaneous release of its new AI Security Suite and the 2026 AI Threat Report.
Investors rallied around the announcement of the AI Security Suite, which promised to solve a critical enterprise challenge by securing agentic AI and generative tools without stifling innovation. This product launch was substantiated by the company's threat report, which revealed a ninety-one percent year-over-year surge in AI-related network traffic, underscoring the immediate market need for such governance. The market viewed the developments as confirmation that the company had successfully pivoted its zero-trust platform to become an essential infrastructure layer for the AI economy.
By addressing the growing oversight gap in global enterprises, Zscaler convinced shareholders that it possessed a durable growth engine for the fiscal year.
After the initial pop the shares cooled down to $224.41, up 4.4% from previous close.
Is now the time to buy Zscaler? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Zscaler’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 19 days ago when the stock dropped 4.4% on the news that a broader market rotation out of the technology sector led to profit-taking following a recent rally.
The move was part of a wider trend that saw high-growth technology stocks fall, with the Nasdaq experiencing the sharpest decline among the major indices. Multiple reports indicated that traders were locking in profits, particularly from the artificial-intelligence trade, which had previously seen a strong run-up. This market action represented a shift in investor focus, as money moved out of tech. Defense stocks emerged as the primary beneficiary of this capital shift, surging after President Trump proposed a massive $1.5 trillion defense budget for 2027.
Major contractors rallied on the news, with Northrop Grumman jumping over 10% and Lockheed Martin gaining nearly 8%, providing a counterbalance to the tech slump that kept the S&P 500 flat. The rotation into heavy industry was further supported by a stabilization in energy markets, as crude prices rebounded.
Zscaler is up 1.7% since the beginning of the year, but at $224.41 per share, it is still trading 33.3% below its 52-week high of $336.27 from November 2025. Investors who bought $1,000 worth of Zscaler’s shares 5 years ago would now be looking at an investment worth $1,126.
Microsoft, Alphabet, Coca-Cola, Monster Beverage—all began as under-the-radar growth stories riding a massive trend. We’ve identified the next one: a profitable AI semiconductor play Wall Street is still overlooking.Go here for access to our full report, it’s free.