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Cybersecurity firms’ earnings set to benefit from growing threat of hacks

CNA – Top United States (US) cybersecurity companies are expected to report another quarter of strong growth as high-profile hacks and a shift in client preference for bigger players with better integrated offerings help support their businesses in a turbulent economy.

Palo Alto Networks, the largest player in the space by market share and valuation, will kick off sector earnings today with what analysts polled by Refinitiv estimate to be a near 24 per cent increase in quarterly revenue.

That compares with growth of almost 26 per cent in the prior quarter and 29 per cent a year earlier, underscoring the resilience in demand for the services, seen as essential despite a wider tech spending slowdown.

“Cybersecurity has become more crucial than ever due to the rapid digital transformation taking place across industries,” said Akshara Bassi, an analyst at Counterpoint Research.

More frequent cases of security threats have also boosted demand. In recent months, Western Digital and the US Transportation Department faced breaches that exposed the information of the memory chipmaker’s customers and 237,000 US government employees.

Worldwide spending on cybersecurity solutions is expected to rise 12.1 per cent to hit USD219 billion in 2023, according to data from market analytics firm International Data Corporation.

Analysts said enterprise customers were also consolidating their cybersecurity software vendors in a bid to reduce the complexity of their operations and safeguard themselves from attacks.

Vendors that are a one-stop shop for cybersecurity solutions help their clients analyse security data better as well as integrate a variety of applications, optimise costs and improve risk management.

Top cybersecurity providers Palo Alto Networks, CrowdStrike Holdings and Fortinet Inc, which offer a range of services including cloud and identity protection, are set to benefit from the consolidation trend, said DA Davidson analyst Rudy Kessinger.

CrowdStrike and ZScaler Inc are expected to report revenue growth of 39 per cent and 45 per cent when they report earnings on May 31 and June 1, respectively.

Check Point Software Technologies and Fortinet Inc reported upbeat results earlier this month as demand for firewall and cloud security products held strong.

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