Better Cybersecurity Stock: Okta vs. Zscaler

If you spend your workdays in front of a computer, there's a solid chance you're required to keep your company safe from bad actors through either Okta (NASDAQ: OKTA) or Zscaler (NASDAQ: ZS). Both cybersecurity businesses are pure-play leaders in a growing market. They technically serve different niches, but which one is the stronger long-term investment?

Is Okta undervalued?

At the beginning of March, Okta released its full results for the 2026 fiscal year. The cybersecurity company saw a 12% year-over-year increase in revenue. Subscriptions reached nearly $3 billion. Okta also turned operating income from a net loss to a net gain in its latest fiscal year.

Okta's guidance for 2027 is solid, but it shows a declining growth rate, with only 9% revenue growth expected in the coming year. Where remaining performance obligations (RPOs) grew 15% in fiscal 2026, Okta expects that growth to slow to 10% in fiscal 2027.

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The numbers are positive, but there's a real slowdown happening with Okta's revenue. The stock has dropped 30% in the past 12 months. This drawdown potentially makes Okta undervalued right now. The company is facing headwinds as artificial intelligence (AI) poses a significant threat, yet it continues to grow and maintains a strong industry position.

Zscaler's impressive growth

Zscaler's stock is also down over 20% in the past year, but the company's financials are quite promising. In the second quarter of fiscal 2026, Zscaler reported revenue of $815.8 million, an impressive 26% year-over-year increase. Annual recurring revenue also grew 25% to $3.3 billion.

Zscaler revised its full-year 2026 guidance upward and now expects 24% revenue growth. The company's stock is still trading at a premium, as its forward P/E ratio sits above 40. Yet, the decline in the stock price is making the valuation metrics more appealing. Combine that with the expectations of revenue growth, and Zscaler stock is a compelling buy.

Zscaler also hits the "Rule of 40" metric for growing software-as-a-service (SaaS) companies. This rule states that a healthy SaaS business has a combined growth rate and profit margin exceeding 40%. Zscaler is growing efficiently in this regard.

Regarding AI, Zscaler is focused on AI-driven security products. The company isn't working against AI; it's collaborating with it to ensure customer safety.

Which stock wins?

Both stocks are volatile but remain industry leaders. Okta's stock is priced better, but Zscaler's financials demonstrate a superior growth trajectory.

In the long term, Zscaler is the better investment, in my opinion. Okta's decelerating growth is a real concern. As AI disrupts many cybersecurity companies, Zscaler is well-positioned to withstand competition and expand its platform.

Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Okta and Zscaler. The Motley Fool has a disclosure policy.