Three Cybersecurity Shares Worth Investing in and Maintaining for the Following Decade
The cybersecurity sector is resilient against economic recessions as businesses seldom decrease their digital security defenses to save a few bucks. Frequent and sophisticated cyberattacks are expected to continue, consequently driving the market's growth for at least the next decade.
According to Fortune Business Insights, the global cybersecurity market is projected to increase at a compound annual growth rate (CAGR) of 14.3% from 2024 to 2032. To gain from this sustained trend, it's beneficial to invest in three sector leaders: Palo Alto Networks (PANW, 1.39%), CrowdStrike (CRWD, 3.36%), and Zscaler (ZS, 2.30%).
A varied industry heavyweight: Palo Alto Networks
Palo Alto Networks ranks among the largest global cybersecurity companies. It operates three primary ecosystems: Strata (for on-site security tools), Prisma (for cloud-based services), and Cortex (for AI tools).
From fiscal 2019 to 2024, Palo Alto's revenue expanded at a CAGR of 23%. It achieved profitability in fiscal 2023 and raised its net income by 75% in fiscal 2024. The growth was primarily due to Prisma and Cortex, collectively referred to as its next-gen security (NGS) services.
Palo Alto's diversification and size make it a balanced means to capitalize on the long-term cybersecurity market growth. Analysts predict its revenue to expand at a CAGR of 15% from fiscal 2024 to 2027. While its net income is expected to drop by 52% in fiscal 2025 due to lapping a one-time tax benefit in fiscal 2024, analysts estimate a healthy CAGR of 25% for the next two years.
Palo Alto faces some short-term challenges due to stronger macroeconomic headwinds affecting bigger contract acquisitions. Regardless, its sticky business model, wide moat, and long-term growth potential should justify its relatively high valuation.
A cloud-focused leader: CrowdStrike
CrowdStrike's primary competitors, including Palo Alto, rely on on-site appliances to install traditional networking security services. These appliances require continuous maintenance, consume a significant amount of power, and can be difficult to upscale as businesses grow. CrowdStrike provides solutions to these issues with Falcon, a cloud-based endpoint security platform that doesn't depend on on-site appliances.
CrowdStrike's demand for cloud-first cybersecurity solutions gained traction, leading to a CAGR of 65% in revenue from fiscal 2019 to 2024 (ending in January 2024). CrowdStrike achieved profitability for the first time in fiscal 2024.
CrowdStrike's growth was driven by expanding its customer base and the rising adoption of its cloud-based modules per customer. The proportion of subscription customers using at least five of its modules doubled from 33% at the end of fiscal 2020 to 66% in the third quarter of fiscal 2025.
From fiscal 2024 to 2027, analysts estimate CrowdStrike's revenue to grow at a CAGR of 24%. Its EPS should escalate at a CAGR of 68%, although it faces macroeconomic headwinds, reputational damage from a flawed Windows update in July 2022, and gradually maturing business.
A scalable zero-trust market leader: Zscaler
Like CrowdStrike, Zscaler primarily offers cloud-based cybersecurity services. However, Zscaler is known for its zero-trust services that treat everyone as a potential threat. Zscaler's revenue grew at a CAGR of 48% from fiscal 2019 to 2024 (ending in July 2024).
Zscaler's stock declined in the previous year over worries regarding its decelerating growth. From fiscal 2024 to 2027, analysts predict its revenue to grow at a CAGR of 21%. While it might make its first annual net profit by the final year, zscaler blames the macro headwinds for enterprise spending, but it also faces competition from bundled zero-trust services in other large endpoint security platforms.
While this slowing growth is disappointing, Zscaler's stock doesn't seem like a standout buy at 10 times next year's sales. However, it could benefit from its early-mover advantage in the cloud-based zero-trust market to build a more substantial and diverse cloud-native platform to contest CrowdStrike and its other competitors. This transformation could turn Zscaler into a market leader in the upcoming decade - thus it might be wise to purchase its stock before that actually occurs.
Investing in Palo Alto Networks (PANW) could be beneficial due to its projected revenue growth at a CAGR of 15% from 2024 to 2027, despite a temporary dip in net income in 2025.
To ensure robust cybersecurity and take advantage of the market's growth, businesses might consider allocating funds towards leaders like CrowdStrike, which offers cloud-based endpoint security solutions, predicted to experience a revenue CAGR of 24% from 2024 to 2027.
