Motley Fool Money – “Better Buy: Zscaler or Workday?” (December 1, 2025)

Episode Overview

This episode of Motley Fool Money is hosted by Tim Byers, joined by analysts Asit Sharma and Dave Meyer. The main focus is an in-depth comparison of two enterprise software stocks, Zscaler (ZS) and Workday (WDAY), following their recent earnings reports. The team discusses growth prospects, profitability, AI-driven opportunities, and ultimately predicts which company may outperform over the next decade. They also delve into investor psychology as a new “Mindset Monday” feature, sharing practical advice for long-term wealth building.

Key Discussion Points & Insights

1. Zscaler Q1 FY2026 Earnings Review

[00:44–05:24]

• Strong Results:

  • Beat on both revenue and earnings.
  • Annual Recurring Revenue (ARR): up 26% YoY; backlog hits $3.2B.
  • AI security ARR crossed the FY2026 target ($400M) three quarters early, aiming for $0.5B by fiscal end.
  • “Rule of 78” (a playful jab at the usual ‘rule of 40’ metric)—management boasting of high growth plus margin.

• AI Security Innovations:

  • Zscaler was early to highlight prompt injection and malicious AI agents as threats.
  • AI security ARR is now growing 80% YoY.

• Potential Concerns:

  • Forecast slowing revenue growth: FY2026 guide is 22.8–23.5% (down from 26%).
  • Still operating at a GAAP loss; needs to control costs, especially stock-based compensation.

  Quote:

  • “This is a company that in my opinion, is doing very well. They're in a market that needs its technology prowess…Nothing gives me pause about what they said.” – Dave Meyer [02:45]

• Small, Watchable Program:

  • Z Flex: Customers pay for flexible, on-demand service access. $175M total contract value, up 70% QoQ.

2. Workday Q3 FY2026 Earnings Review

[05:24–11:00]

• Results Summary:

  • Non-GAAP Operating Margin: 28.5% (up 215 bps YoY).
  • Operating Cash Flow: up 45% YoY at $588M, indicating strong financial health.
  • AI as a Growth Driver: AI-related products added 1.5 points to ARR growth; 75% of new deals, 35% of expansions were AI-related.
  • Subscription Revenue: up 15% YoY, to $2.244B.

• Challenges & Market Sentiment:

  • AI impact was less than anticipated—a disappointment to markets expecting more significant acceleration.
  • Exposed to government spending—headwinds from shutdowns affect results.
  • Now perceived as a “slow-growth” business, but capable of surprises.

  Quote:

  • “It is very well run, has an amazing balance sheet, amazing cash flow generation. I think Workday outperforms and I think you can probably get somewhere between 10 and 12% annual returns from here, with a lot less volatility.” – Dave Meyer [11:40]

• Opportunities:

  • Workflow automation ‘agents’ anticipated to increase average revenue per unit (ARPU).
  • Solid free cash flow, strong niche, but operates in mature, competitive markets (HCM and ERP).

3. Zscaler vs. Workday: 10-Year Outperformance Predictions

[11:00–14:09]

Dave Meyer’s Take:

• Favors Workday for the next decade:
  • High-quality, stable, financially strong, less volatile.
  • Expected Return: 10–12% annualized.

Asit Sharma’s Take:

• Picks Zscaler for higher potential:

  • Cybersecurity and AI tailwinds, early innovation.
  • Wider return range due to higher risk: 10–15% annualized.
  • Both agree Workday offers lower risk but Zscaler could offer greater upside if it executes.

  Quote:

  • “I’m going to go with Zscaler with a wide range... because of that cybersecurity market that’s ever growing… But it’s not a given. Workday—don't sleep on it.” – Asit Sharma [13:01]

4. Mindset Monday: Behavioral Biases in Investing

[15:23–20:43]

• Three Most-Cited Investor Concerns:
  1. Loss Aversion / Panic Selling: Pain of loss outweighs joy of gains; incl. selling winners too soon and holding losers too long (“disposition effect”).
  2. FOMO & Herd Mentality: Chasing trends or panic-selling with the crowd.
  3. Overconfidence / Confirmation Bias: Trading too often or concentrating too much due to unwarranted certainty.

Asit’s Advice:

• Focus on life affirmation (not just loss aversion).
• Recognize evolutionary roots of risk aversion; survival mindset doesn’t translate perfectly to investing.
• “Think about the future” as antidote to reactive decisions; pause before acting in turbulent markets.
  • “Our lizard brain really wants us to just react and have instant relief, and that's always a mistake.” – Asit Sharma [17:12]

Dave’s Advice:

• The “disposition effect” is most dangerous for long-term investors—cutting winners, holding losers.
• Emphasizes using time as an ally: “Water the flowers, pull the weeds” (David Gardner’s maxim).
  • “The disposition effect…completely knocks out [compounding] because you cut your winners way too early. And then you don’t take capital that’s not working for you and put it into something that is.” – Dave Meyer [19:15]

Notable Quotes & Moments

• On Zscaler’s Innovation:
  “By investing in these [AI security themes] and being early, they're reaping the benefits…Jay Chaudhry, the CEO, is someone with a lot of foresight.” – Asit Sharma [04:33]

• Workday’s Hidden Potential:
  “Here's a company that everyone looks at as being a sort of a sleepy business, but it could surprise some of us with a bit of upside in the coming quarters.” – Asit Sharma [09:14]

• Mindset Reminder:
  “Put a pause between the stimulus and the response. Take a walk. Think about life affirmation…things will probably be there when the dust settles.” – Asit Sharma [18:22]

• Investment Philosophy:
  “If we talk about anything at the Motley Fool, we talk about using time as your greatest ally with great companies.” – Dave Meyer [19:40]

Timestamps for Key Segments

• Zscaler Earnings, Growth, AI Security: [00:44–05:24]
• Workday Earnings, AI Impact, Maturity: [05:24–11:00]
• Prediction: Zscaler vs. Workday (+ Returns): [11:00–14:09]
• Mindset Monday: Behavioral Finance & Practical Advice: [15:23–20:43]

Language & Tone

• Friendly, analytical, candid, and occasionally playful. Frequent investment analogies, practical wisdom, and a spirit of long-term optimism intermixed with healthy skepticism.

Summary Table: Analyst Picks

| Analyst | Pick | 10-Year Return Range | Key Reasons | |---------------|------------|---------------------|------------------------------------------------| | Dave Meyer | Workday | 10-12% | Quality, stability, strong cash flows, low volatility | | Asit Sharma | Zscaler | 10-15% | Faster growth, AI/cybersecurity tailwinds, high potential upside, but more risk |

Takeaway

Both Zscaler and Workday present strong investment cases with different return/risk profiles for long-term investors. While Workday offers stability and proven cash flow, Zscaler's innovation in AI security solutions and leadership in a rising sector could drive higher returns. The segment on behavioral psychology reminds investors to remain self-aware and patient, countering natural biases to maximize wealth over time.