AI-Native Enterprise Security: Two Stocks Beating The S&P
Thursday, Jul 23, 2026
As cyber threats grow increasingly sophisticated and distributed across multi-cloud environments, enterprise defense requires moving past legacy perimeter hardware. Modern corporate IT budgets continue to prioritize non-discretionary protection, driving demand for scalable, cloud-native architectures that secure users, identities, and workloads in real time.
Rather than relying on outdated hardware appliances, modern enterprises are standardizing on category-defining software platforms built to defend the borderless digital enterprise.
๐ One company pioneered the Zero Trust exchange, securely connecting users directly to applications without putting them on the corporate network.
๐ The other powers an AI-driven unified platform designed to detect, prevent, and stop breaches across endpoints, identities, and cloud workloads.
๐ Both offer cloud-native cybersecurity solutions tailored to address critical enterprise security requirements.
In this edition, we break down Zscaler, Inc. (ZS) and CrowdStrike Holdings, Inc. (CRWD) โ Systems Software versus Systems Software under today's Top cybersecurity stocks backdrop.
Our 1st Stock is
Zscaler, Inc. (NASDAQ: ZS)
Zscaler, Inc. (NASDAQ: ZS) is a cloud-native cybersecurity enterprise operating within the Systems Software sub-industry. The company specializes in cloud security solutions, pioneering Zero Trust architecture to protect enterprise workloads, devices, and users without relying on traditional legacy appliances.
Business Model and Revenue Streams ๐ฆ
Zscaler operates primarily through a subscription-based Software-as-a-Service (SaaS) model. Its flagship platform, the Zscaler Zero Trust Exchange, generates predictable recurring revenue by providing secure access to cloud applications and private corporate resources based on identity, context, and enterprise policies. The business scales as clients expand deployment across remote workforces, branch offices, and cloud infrastructure. By replacing legacy hardware firewalls with integrated cloud-native security, Zscaler cross-sells modules such as Zscaler Internet Access, Zscaler Private Access, and AI-driven threat protection across global enterprise accounts.
Recent Performance and Corporate Developments ๐
Q1 2026 Financial Highlights: ๐ฐ
- Quarter ended April 30, 2026 revenue reached $850.48 million, reflecting a 25.43% YoY increase.
- Reported a quarterly net loss of $13.88 million for the quarter ended April 30, 2026.
- Diluted EPS was -$0.09 for the quarter ended April 30, 2026.
- Trades at a trailing twelve months (TTM) price-to-sales (P/S) ratio of 7.93.
Strategic Initiatives and Mergers: ๐ค
Zscaler continues to accelerate enterprise adoption of its Zero Trust Everywhere platform, driving larger commitments and cross-sell opportunities. The company is actively expanding platform capabilities around AI security, identity protection, and automated threat mitigation to capitalize on rising enterprise AI spending.
Profitability and Fair Value ๐ฏ
In the latest reported quarter ended April 30, 2026, Zscaler generated $850.48 million in revenue, representing a strong 25.43% year-over-year growth rate. However, the company remains unprofitable on a GAAP basis, posting a net loss of $13.88 million and an EPS of -$0.09 for the quarter. The expansion of its Zero Trust platform continues to drive enterprise adoption and larger cross-selling commitments.
Valued at a trailing price-to-sales (P/S) ratio of roughly 7.2x to 7.9x, Zscaler's valuation reflects its premium positioning in SASE and Zero Trust architecture relative to software peers. As trailing GAAP earnings remain negative, valuation relies primarily on sustained top-line momentum and a clear path toward profitability as enterprise security spending resets into CY27.
Analyst Estimates and Ratings ๐
Wall Street consensus leans positive with 26 Buy ratings and 4 Holds, including 2 buy-side upgrades onto Buy or Strong Buy over the past 90 days. The latest street action rates ZS at Overweight. Analysts remain encouraged by enterprise AI adoption driving demand for security platforms, even as recent price action reflects broader market swings.
Investor-Focused Takeaway: Is ZS Right for Your Portfolio?
What to Watch in the Near Term: ๐
- Potential large AI security and SASE platform wins heading into late 2026.
- F4Q'26 Earnings Report and FY27 Guidance release scheduled for September 8, 2026.
- Enterprise macro IT spending and security budget reset trends extending into CY27.
Recommendation:
Zscaler offers strong top-line momentum as enterprise AI adoption drives demand for Zero Trust cybersecurity. However, persistent quarterly GAAP losses and recent price action volatility warrant a measured approach. Investors should balance ZS's ~25% revenue growth against its valuation and timeline to sustainable GAAP profitability.
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Our 2nd Stock is
CrowdStrike Holdings, Inc. (NASDAQ: CRWD)
CrowdStrike Holdings, Inc. (NASDAQ: CRWD) is a cloud-native cybersecurity provider operating in the Systems Software sub-industry. Powered by its AI-driven Falcon platform, the company delivers endpoint, cloud workload, and identity protection. With an average daily volume exceeding 5.8 million shares, CrowdStrike is an institutionally followed cybersecurity leader. Wall Street consensus is favorable with 28 Buy ratings and 1 recent buy-side upgrade onto Buy or Strong Buy in the last 90 days.
Business Model and Revenue Streams ๐ฆ
CrowdStrike operates a software-as-a-service (SaaS) model centered on its unified Falcon platform. The company generates recurring subscription revenue through multi-year module license agreements covering endpoint security, identity protection, and cloud workload defense. Its lightweight agent feeds telemetry into a centralized Threat Graph AI engine, producing high-margin recurring software revenues as clients adopt additional modules. Complementing subscriptions, CrowdStrike generates secondary revenue from professional services, including incident response, risk assessments, and proactive threat hunting. These forensic engagements serve as strategic onboarding channels that drive incremental module adoption across enterprise security teams.
Recent Performance and Corporate Developments ๐
Q1 2026 Financial Highlights: ๐ฐ
- For the quarter ended April 30, 2026, revenue grew 25.57% year-over-year to $1.39 billion.
- Latest reported quarter net income stood at $27.77 million, or $0.0275 per diluted share.
- Shares have recorded a 62.92% price increase over the trailing 1-year period.
- Trailing twelve-month price-to-sales (P/S) stands at 39.66, while TTM P/E reflects past net loss periods.
Strategic Initiatives and Mergers: ๐ค
CrowdStrike recently announced a partnership with AI chipmaker Cerebras Systems to accelerate AI-powered cybersecurity processing speeds. The company also integrated XM Cyber's attack path technology into the Falcon platform to advance exposure management capabilities. Additionally, CrowdStrike completed a 4-for-1 stock split ahead of its upcoming Fal.Con 2026 showcase.
Profitability and Fair Value ๐ฏ
In the quarter ended 2026-04-30, CrowdStrike generated $1.39 billion in revenue, representing 25.57% year-over-year growth, alongside net income of $27.77 million ($0.0275 EPS). The company continues to scale its cloud-native Falcon platform, leveraging strategic integrations like XM Cyber's attack path technology and AI partnerships with Cerebras Systems to capture enterprise market share. From a valuation perspective, CRWD commands a premium tier, trading at a trailing price-to-sales ratio of approximately 39.7x and an EV/EBITDA of 562.1x. Trailing P/E metrics remain distorted due to near-zero GAAP trailing profits while management prioritizes platform expansion. Nevertheless, robust mid-20% top-line growth and positive net income help justify its premium valuation relative to broader software peers.
Analyst Estimates and Ratings ๐
Wall Street maintains a favorable outlook on CrowdStrike, featuring a consensus of 28 Buy ratings and 6 Hold ratings. Over the past 90 days, the stock tracked 1 buy-side upgrade onto Buy/Strong Buy status, supported by solid enterprise demand for AI-driven security platforms.
Investor-Focused Takeaway: Is CRWD Right for Your Portfolio?
What to Watch in the Near Term: ๐
- Q2 FY27 Earnings Release scheduled for August 28, 2026
- Fal.Con 2026 & AI Security Showcase on September 16, 2026
- Strategic execution on Cerebras Systems partnership and XM Cyber integration
- Enterprise cybersecurity spending trends relative to broader software sector market sentiment
Recommendation:
CrowdStrike stands out as a high-growth leader in next-generation cybersecurity, well-positioned to capitalize on machine-driven threat mitigation. However, its high sales multiple demands consistent execution. Investors should balance secular growth potential against valuation sensitivity, watching key platform catalysts.
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Final Take: Zero Trust Networks and AI-Driven Endpoint Defense
Enterprise cybersecurity is no longer about building bigger digital moats โ it's about securing access points and endpoints in a fragmented, cloud-first world. Doing that effectively requires two critical layers: architecture that trusts no connection by default, and intelligent platform protection that stops threats in real time across every device.
That's where Zscaler (ZS) and CrowdStrike (CRWD) stand apart.
๐ Zscaler (ZS) โ The Architecture of Zero Trust Network Access
โ Replaces legacy hardware firewalls with the cloud-native Zero Trust Exchange
โ Highly predictable SaaS revenue scaling as enterprises expand cloud deployments
โ Secures private applications and corporate resources using identity and context
โค Best for: Investors looking for a high-moat cybersecurity pure-play capitalizing on the enterprise transition away from legacy network hardware.
๐ฆ
CrowdStrike (CRWD) โ The AI-Powered Endpoint Security Engine
โ Unified Falcon platform delivering AI-driven defense across endpoints, cloud workloads, and identity
โ Multi-year module licensing model creating deep account expansion opportunities
โ Strong institutional backing supported by dominant consensus Buy ratings and buy-side upgrades
โค Best for: Investors seeking market-leading exposure to endpoint security with strong operating leverage from multi-module platform adoption.
Investor Insight
๐งฉ Want structural network transformation through cloud-native Zero Trust architecture? โ ZS
โ๏ธ Want platform-driven threat intelligence with multi-module land-and-expand economics? โ CRWD
Bottom Line:
Modern enterprise defense doesn't rely on perimeter hardware โ it relies on zero-trust connectivity and real-time endpoint intelligence. Zscaler secures the perimeter-less network by enforcing strict context-based access, while CrowdStrike provides the AI threat engine protecting devices, identity, and workloads. As enterprise IT spending prioritizes mission-critical cloud defense, ZS and CRWD represent two distinct, foundational pillars of modern cybersecurity infrastructure.
Research and education only. Not investment advice. Do your own research.
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