Effective lightning strike protection for critical aerospace and wind applications requires high electrical conductivity to dissipate current efficiently. However, polymer matrix composites face a challenge due to their inherently insulating nature. While conventional carbon fiber-reinforced composites (CFRP) exhibit electrical conductivity in the planar direction, achieving through-thickness conductivity remains an ongoing challenge. In this work, we have undertaken the fabrication of CFRP interleaved with vertically oriented carbon fibers (Z-fiber) to impart higher electrical conductivity along the thickness direction. Two Z-fiber composite variations are prepared: Z-1 with a single layer of Z-fiber and Z-5 with five interleaved layers and compared with no Z-fiber layer (Z-0) composite. The composite panels were subjected to lab-scale lightning strike tests with a current magnitude of 100 kA. To emulate real-world service conditions, an aerospace-grade paint coating was applied to the composite laminates. Comparative analysis shows Z-1 reduces damage diameter to ∼22 mm compared to Z-0 (∼26 mm), while Z-5 exhibits the least damage (∼16.7 mm), confirmed by optical microscopy. Z-5 demonstrates nine times higher through-thickness electrical conductivity than Z-0, reducing electrical anisotropy substantially. Thermal-electric finite element damage modeling predicts surface damage within 6% of experimental values for both Z-0 and Z-5 composites. Flexural tests post-lightning reveal Z-5 retains 66% flexural strength and 86% modulus, significantly better than Z-0, which retains less than 40% for both properties. This study highlights the efficacy of Z-fiber composites in lightning strike protection, offering improved through-thickness conductivity and mechanical property retention.