Jay Chaudhry 2.5 2 ideas

Zscaler stock is down ~36% YTD and fell further despite beating revenue estimates, driven by concerns over billings and AI disruption. The CEO argues that AI "Agents" will become the new users needing security (expanding TAM), but the market interprets AI as a threat to seat-based pricing (fewer human employees = fewer seats). Until ZS proves it can monetize "machine users" at the same rate as humans, the multiple will compress. WATCH. Wait for the "AI Agent" revenue thesis to show up in billings before catching the falling knife. If the CEO is right, the stock is massively oversold; if the market is right, churn will increase.

"I'm scratching my head and say where did market get it wrong? ... We have a Rule of 62... We know AI agents are coming for every employee. There'll be 50 to 100 agents... The best way to secure AI agents is Zero Trust technology." The market is selling ZS based on short-term ARR (Annual Recurring Revenue) concerns, ignoring the company's elite efficiency (Rule of 62). The CEO argues that the market is underpricing the next massive secular tailwind: the explosion of AI agents. Since these agents act like employees and need secure access to apps, the total addressable market for Zscaler's Zero Trust platform is set to multiply exponentially, making the current sell-off a misunderstanding of future demand. Long ZS as a contrarian play against the post-earnings sell-off, betting that the "Agentic Era" will drive a new wave of cybersecurity spending. Continued deceleration in ARR growth, market rotation out of high-multiple SaaS stocks, or competitors effectively capturing the AI agent security market.