A cyberthreat environment that was already only getting more complex has been made even more dangerous with the proliferation of artificial intelligence (AI).
According to feedback from more than 3,500 cybersecurity and business leaders for IBM's Cost of a Data Breach Report 2024, the average cost of a data breach is now $4.88 million. That's up 10% over the past year. So it seems like cybersecurity costs will continue to increase.
"Threat actors are using AI to increase the success of their campaigns," said Nathaniel Jones, the VP of threat research at Darktrace. "Large language models (LLMS) make it easier to conduct research on targets, tailor phishing emails even more granularly and craft emails with more accurate spelling and grammar in a variety of languages."
And it seems like a pretty good bet that demand for cybersecurity solutions will remain robust. Indeed, research from IDC suggests spending will rise at a double-digit pace and reach $200 billion in 2028.
How can investors play this secular trend? Here are six of the best cybersecurity stocks to buy as growth in the industry ramps up.
Data is as of March 4.
- Market value: $12.9 billion
- Analysts' consensus annual EPS growth estimate: N/A
SailPoint (SAIL, $24.00) develops identity security solutions for enterprises. The SailPoint cybersecurity solution provides customers with extensive visibility across an organization.
It manages employees and non-employees, like contractors and partners, as well as machine entities, such as application-level accounts, Internet of Things (IoT) devices and even AI agents. There are also tools to create, control and automate policies.
Identity has become a growing target of cybersecurity threads. According to a survey from the Identity Defined Security Alliance, about 90% of the respondents said they suffered a breach.
SailPoint has shown that its solutions can make a difference, and it continues to gain traction with large customers.
The company reported annual recurring revenue (ARR) of $813.2 million in 2024, up 30% on a year-over-year basis. The number of customers that generate more than $1 million in ARR grew by 67%, and the total customer base is now more than 2,800 strong.
SailPoint completed its initial public offering in mid-February, raising $1.38 billion. So far, the post-IPO performance has been muted. Yet this does provide an attractive entry point for investors seeking the best cybersecurity stocks.
- Market value: $4.8 billion
- Analysts' consensus annual EPS growth estimate: -5.0%
Founded in 1999, Qualys (QLYS, $131.46) is one of the pioneering developers of SaaS for cybersecurity. Its initial focus was on vulnerability management and providing automated scans of local area networks (LANs).
At the time, it was a controversial strategy. The standard approach to cybersecurity was to use hardware systems – like firewalls – for on premises environments.
But leadership at Qualys was convinced the SaaS approach was superior, creating advantages on cost efficiency, scale, real-time monitoring and collaboration.
Over the years, the strategy proved to be spot-on.
Qualys also would go on to build a comprehensive suite of capabilities, like identity management, remediation, compliance assessments and analysis of large IT security data.
Despite all these efforts, Qualys has seen a deceleration in growth. But there is a potential catalyst to get things back on track.
In late 2024, Qualys launched TotalAI, which is focused on addressing the cybersecurity threats of generative AI.
TotalAI handles the OWASP Top 10 most critical risks for LLMs, such as prompt injections, model theft, and the disclosure of sensitive information. TotalAI could help accelerate growth for Qualys.
According to a survey, about 70% of enterprises plan to use LLMs in production within the next year and 40% say that AI model risk is a notable concern. So Qualys is well-positioned among the best cybersecurity stocks.
- Market value: $6.4 billion
- Analysts' consensus annual EPS growth estimate: N/A
Tomer Weingarten cofounded SentinelOne (S, $20.63) in 2013 because he believed cybersecurity solutions were becoming obsolete. They were mostly based on the brute force of pattern matching.
Weingarten imagined a much better approach using AI. It would be more adaptable, and it could learn in real time. The first few years proved to be challenging. His AI-first vision mostly fell on deaf ears.
But, as AI started to gain momentum – accelerated by breakthroughs in deep learning – Weingarten's startup started to get more attention. Customers wanted better approaches and saw SentinelOne as something to take a bet on.
SentinelOne's longtime focus on endpoint protection, detection and response helps it fend off a variety of threats like malware and ransomware. These solutions would ultimately become part of SentinelOne's comprehensive Singularity platform.
In April 2024, SentinelOne launched Purple AI, which leverages LLMs so users can write natural language queries. In practice, it means a security analyst can use the system without having to understand query languages.
So far, the customer response has been quite positive. In fact, during the latest quarter, the company raised its fiscal 2025 revenue guidance to 32%. And this estimate may be conservative.
SentinelOne has announced several partnerships to distribute Purple AI, including one with Lenovo, the world's largest PC manufacturer. The company plans to bundle Singularity and Purple AI on new enterprise PC shipments.
"The attached rate of Purple AI across all eligible endpoints doubled compared to Q2," said Weingarten during SentinelOne's fiscal 2025 third-quarter earnings call. "Purple is one of the fastest-growing solutions in SentinelOne's history and will continue to drive meaningful growth into the future."
- Market value: $4.6 billion
- Analysts' consensus annual EPS growth estimate: 17.8%
In 1988, when Renaud Deraison was only 17 years old, he created an open software project called Nessus. It was a full-blown vulnerability scanner.
From the start, Nessus saw a large number of downloads. A few years later, Deraison would cofound Tenable (TENB, $38.14) with Nessus at the heart of the business.
He's continued to build on that solid foundation. Tenable has entered other categories like cloud-native application protection platform (CNAPP) solutions and cloud infrastructure entitlement management (CIEM).
Ultimately, the company's product focus would converge on exposure management and developing systems that take a proactive approach to cybersecurity by providing comprehensive visibility into potential vulnerabilities.
Tenable's acquisition of Vulcan Cyber in February is a key strategic investment in exposure management.
The combination will allow for consolidating data into a single hub, which will be a part of the Tenable One platform. Ultimately, it will boost visibility on potential threats and enable more effective use of AI.
Tenable's top line has looked a little lackluster lately. But bolstering exposure management applications should provide a revenue boost.
And the company enjoys strong customer loyalty and market penetration. More than half of its customers are Fortune 500 companies, and the remainder includes Global 200 enterprises and major government agencies.
Solid long-term fundamentals and continuing investments in scalable operations should support long-term growth and make Tenable one of the best cybersecurity stocks to buy.
- Market value: $122.1 billion
- Analysts' consensus annual EPS growth estimate: 13.9%
In early 2024, Palo Alto Networks (PANW, $190.43) CEO Nikesh Arora, introduced his "platformization" strategy.
"Platformization" was based on Arora's belief that customers had to manage too many point solutions. His breakthrough idea was that companies wanted to consolidate on fewer vendors.
Fewer vendors would allow for improved integration, more cohesive user interfaces and lower costs.
Wall Street was skeptical of Arora's plan, mostly due to his willingness to give away some of his solutions in the bundle. Would there be enough to make up for the shortfall?
Well, it appears these worries were overblown. Platformization has driven larger deals with customers. In its latest quarter, Palo Alto Networks supported 74 contracts at over $5 million, up 25% year over year. There were 32 at more than $10 million, up 52%.
This has made a difference for total revenue, which increased by 14% to $2.3 billion. So far, Palo Alto has completed roughly 1,150 platformizations among its top customers.
There's much more runway left for the growth, as the sweet spot for this strategy is about 5,000 customers. And that makes PANW one of the best cybersecurity stocks to buy.
- Market value: $24.3 billion
- Analysts' consensus annual EPS growth estimate: 8.4%
In 1993, Gil Shwed, Marius Nacht and Shlomo Kramer cofounded Check Point Software Technologies (CHKP, $220.26). It was the perfect time to start a cybersecurity company – the dawn of the internet revolution.
The company capitalized by building pioneering firewall systems for network security. Check Point has continued to focus on innovation and now has several cybersecurity platforms.
They include Quantum Network Security (firewalls and security gateways), CloudGuard Cloud Security (protection across cloud systems), Harmony Endpoint Security (security for devices) and Infinity Unified Management (a centralized security system).
Despite its evolving solutions, Check Point has seen somewhat sluggish growth over the past couple of years. Sales grew by about 6% to $2.565 billion in 2024.
But management has been making major changes. A key part of the update is, of course, AI. And Check Point has seen traction with its Infinity AI Copilot.
Based on generative AI, Innfinity AI helps automate complex security tasks and allows for proactive threat detection. And tests indicate it can reduce by up to 90% the time needed to perform common tasks.
Check Point has also been using generative AI to streamline its own operations, including product design and customer experience.
As the internet was a catalyst for growth in the company's early days, generative AI may provide a boost for CHKP in the current era. And that's why it's one of the best cybersecurity stocks to buy.
