BTIG Analyst Downgrades Zscaler Stock to 'Neutral'

Cites competitive pressures and softer customer demand outlook for the cybersecurity firm.

Apr. 10, 2026 at 1:28pm

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A cinematic close-up of a complex network of metal pipes, gears, and valves representing the internal infrastructure of a modern cybersecurity platform. The image is highly detailed, textured, and industrial in style, evoking a sense of the technical complexity and security backbone of cloud-based security solutions.The downgrade of Zscaler stock reflects growing concerns about the cybersecurity firm's ability to maintain its market position and growth momentum in the face of intensifying competition.San Jose Today

Zscaler (ZS) shares fell sharply after BTIG analyst Gray Powell downgraded the cloud security company's stock to 'Neutral' and removed it from the firm's top picks list. Powell cited mounting competitive threats from Cloudflare and Netskope, as well as challenges in acquiring new customers and achieving profitability.

Why it matters

Zscaler has been a high-flying cybersecurity stock, but the BTIG downgrade highlights growing concerns about the company's ability to maintain its market position and growth momentum in the face of intensifying competition and a softer demand environment.

The details

In his research note, Powell pointed to feedback from industry contacts indicating that near-term demand for Zscaler's services remains stable, but the outlook for the next 6-12 months is more subdued. Competitors like Cloudflare and Netskope were identified as posing notable threats, while firewall vendors were also doing a better job upselling existing customers on their SASE capabilities. Additionally, Powell noted that newer Zscaler platform offerings like Zero Trust Cloud, CASB, and RBI received mixed-to-negative feedback from contacts.

  • Zscaler stock is down about 48% so far in 2026 versus its January high.
  • BTIG issued the bearish note on Zscaler on April 9, 2026.

The players

Gray Powell

A senior analyst at BTIG who downgraded Zscaler stock to 'Neutral' and removed it from the firm's top picks list.

Zscaler

A San Jose-headquartered cloud security company whose stock has been a high-flyer but is now facing growing competitive pressures and a softer demand outlook.

Cloudflare

A competitor to Zscaler that was identified as posing a notable threat to the company's market position.

Netskope

Another competitor to Zscaler that was cited as a mounting competitive threat.

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What they’re saying

“While near-term demand remains stable, feedback on the next six to 12 months was rather subdued.”

— Gray Powell, Senior Analyst, BTIG

“Industry contacts pointed to mounting competitive pressures and a softer environment for acquiring new customers, which could weigh on future growth.”

— Gray Powell, Senior Analyst, BTIG

The takeaway

The BTIG downgrade of Zscaler stock highlights the growing challenges the cybersecurity firm faces in maintaining its market position and growth momentum as competition intensifies and the demand environment softens. Investors will be closely watching to see if Zscaler can navigate these headwinds and continue to deliver strong results.