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Why cybersecurity companies may keep growing
Organizations rely on digital systems, cloud workloads, user identities and sensitive data. Protecting those assets can support demand for endpoint, network, cloud, identity and data security products, as well as related services. Vendors may also grow by renewing subscriptions, selling more products to existing customers and expanding a platform across a customer’s environment.
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A July 17, 2026 Kiplinger article attributed to Forrester a forecast that global cybersecurity spending would grow at a 14.4% compound annual growth rate through 2029 and exceed $300 billion. That is a forecast reported by a secondary source—not a realized result, and not a prediction that cybersecurity shares will return 14.4% or more. The year of Forrester’s original forecast was not established in that article.
Recurring subscriptions and platform expansion can make revenue more predictable, but neither guarantees customer retention or a competitive advantage. CrowdStrike, for example, describes its Falcon platform as becoming more intelligent as more data is fed into it and calls the resulting benefit a “powerful network effect.” That is the company’s account of its own platform, not independent evidence that its advantage will persist.
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What the company examples show
Reported results illustrate why investors need to look beyond the cybersecurity label. These figures come from different fiscal periods and business models; they are not directly comparable without accounting for those differences.
| Company and business context | Reported period and figures | What to notice |
|---|---|---|
| Fortinet, security vendor | Calendar 2025: revenue of $6.80 billion, operating income of $2.08 billion, operating cash flow of $2.59 billion and free cash flow of $2.21 billion, according to its 2025 Form 10-K. | Revenue growth accompanied by substantial reported operating income and cash generation. Those results describe the business, not whether its shares are attractively priced. |
| CrowdStrike, subscription security platform | Fiscal 2026, ended January 31, 2026: revenue of $4.81 billion, up 22%; ARR of $5.25 billion as of January 31, up 24% from fiscal 2025; free cash flow of $1.24 billion; and GAAP net loss of $163 million, according to its 2026 proxy statement. The proxy disclosed more than 88,000 organizations. | Strong reported growth and free cash flow can coexist with a GAAP loss. Investors should examine the path to GAAP profitability, stock-based compensation and dilution rather than treating ARR or cash flow as a complete picture. |
| Varonis, data security and SaaS transition | Calendar 2025: total revenue of $623.5 million, including $462.6 million of SaaS revenue; operating loss of $146.5 million and net loss of $129.3 million, according to its 2025 Form 10-K. Total revenue grew 13%. SaaS revenue was $208.8 million in 2024. | The SaaS line expanded, but the company remained loss-making in the period. Changes associated with its SaaS transition affect reported comparisons. |
| Datadog, adjacent software example—not a pure-play cybersecurity company | Fiscal 2025: revenue of $3,427.2 million, up 28%; net income of $107.7 million; and free cash flow of $914.7 million, according to its 2025 Form 10-K. | Useful as a broader observability and software-platform example, but it should not be treated as a direct stand-in for a cybersecurity vendor. |
Fiscal calendars matter: CrowdStrike fiscal 2026 ended January 31, Fortinet’s 2025 fiscal year ended December 31, and Zscaler fiscal 2026 ended July 31. Comparing annual growth or margins without aligning periods, business mix and accounting definitions can produce misleading conclusions. Zscaler’s fiscal 2026 filing contains audited financial statements, but a detailed company comparison should use those statements rather than infer results from the filing’s contents page.
How to judge whether a cybersecurity stock is worth considering
A promising market is only one part of an investment case. Compare each company using the same period and definitions where possible, then consider the share price against the business prospects.
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Security vendors are not interchangeable. Identify whether revenue comes mainly from endpoint protection, network security, cloud security, identity, data security, hardware, services or a broader platform. Product mix affects customer needs, competition, margins and how meaningful a reported growth rate is. Palo Alto Networks’ 2025 filing, for instance, discusses technology leadership, customer expansion and vulnerabilities alongside macroeconomic and geopolitical factors.
Test the quality of growth
Look at reported revenue growth alongside recurring revenue or ARR, renewals, deferred revenue and customer or module expansion. Ask whether growth reflects existing customers buying more, new customers, price changes, an acquisition or a shift in how revenue is recognized. Varonis’s SaaS transition is a reminder that a fast-growing recurring-revenue line may not be directly comparable across periods.
Check earnings, cash flow and dilution together
Review GAAP operating income and net income, operating cash flow and free cash flow. Then examine stock-based compensation, acquisition-related expenses, deferred revenue, share-count changes and any revenue-recognition changes. Free cash flow can be informative, but it does not erase a GAAP loss or tell you how much existing shareholders may be diluted.
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Assess financial flexibility and execution
Consider cash, debt, acquisition commitments and infrastructure needs. Also ask whether the company can retain customers, maintain products, respond effectively to vulnerabilities and integrate acquisitions without disrupting its business. Palo Alto Networks’ 2025 filing described an announced CyberArk acquisition; that filing alone does not establish the transaction’s later status or updated terms.
Compare valuation with realistic expectations
A good company can be a poor investment if its share price already assumes faster growth or higher margins than it ultimately achieves. Relevant measures can include enterprise value relative to sales, earnings or free cash flow, interpreted in light of growth, margins, dilution and risk. Pull share prices and estimates on the same date before comparing companies. The company filings and figures summarized here do not provide a synchronized current valuation comparison, so they cannot establish that the sector is cheap or expensive today.
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Risks that can weaken the investment case
- Competition and pricing: Fortinet identifies competition, customer demand, renewals and pricing among the factors that affect results. Strong demand across a sector does not prevent vendors from losing customers or facing pressure on contract terms.
- Budget scrutiny and buying delays: Varonis reported tighter budgets and greater scrutiny of enterprise spending in a higher-inflation, higher-interest-rate environment. Security may be important, but buyers can still delay procurement or reconsider spending.
- Technology failures and trust: Product vulnerabilities, service problems or a failure to keep pace with threats could damage customer confidence and renewal prospects. Palo Alto Networks identifies vulnerabilities and continued technology leadership as relevant success factors.
- Uneven paths to profitability: CrowdStrike and Varonis reported GAAP losses in the periods cited even as they reported growth and, in CrowdStrike’s case, positive free cash flow. A recurring-revenue story should not substitute for scrutiny of profitability and share-based compensation.
- Acquisition and integration risk: Acquisitions may broaden a product range or customer base, but can also bring costs, integration challenges and execution risk. Treat announced deals as pending until their status is verified from current company disclosures.
- Valuation risk: If investors have priced in exceptional growth, even a growing business may disappoint the market by growing more slowly or taking longer to improve margins.
A practical checklist before investing
- Define the exposure. Identify the company’s main security categories and whether it is a focused vendor or a diversified software business.
- Read the latest filings. Check the relevant Form 10-K or proxy for fiscal-year dates, revenue mix, risk factors, profitability and cash flow; do not assume figures from different fiscal calendars line up.
- Reconcile growth with economics. Compare revenue and recurring-revenue measures with GAAP results, free cash flow, stock-based compensation and dilution.
- Evaluate execution risks. Consider customer renewals, pricing, product quality, competitive pressure and any acquisition commitments.
- Use dated market data. Gather current share prices and comparable valuation measures on a common date, and test whether the expected growth and margins justify the price.
- Check portfolio fit. Consider concentration in a single company, existing technology exposure, time horizon and ability to tolerate volatility. A diversified investment changes company-specific exposure, but does not eliminate sector or market risk.
So, are cybersecurity stocks a good investment?
Cybersecurity demand can provide a durable growth opportunity, but there is no single answer for every company or investor. Fortinet’s reported profitability and cash generation, CrowdStrike’s rapid growth alongside a GAAP loss, and Varonis’s growth during a loss-making SaaS transition show why business quality must be assessed company by company. Whether any of those businesses is a good investment at a particular moment depends in part on valuation and portfolio fit. The evidence summarized here does not include synchronized current share prices or valuation multiples, so it cannot support a current buy-or-sell verdict. This is general investment education, not personalized financial advice.
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