In this piece, we will take a look at the 12 best performing cybersecurity stocks in 2023. If you want to skip our overview of the cybersecurity sector and how it might be one of the most important moving forward, then take a look at the 5 Best Performing Cybersecurity Stocks in 2023.
The ubiquity of technology in the modern day world and the exponential growth in global data generation have created their own set of problems. When compared to just a handful of decades back, critical institutions such as banks and defense companies have now shifted to the digital domain, and while this removes them as a target of traditional criminals, it also exposes them to cyber vulnerabilities that can cause billions of dollars in losses simply through a handful of clicks.
Naturally, these risks have also created their own set of problems which require constant digital vigilance and protection. This is part of the cybersecurity industry, which has risen to become one of the most valuable in the world. For instance, consider the relatively obscure cyber insurance market. A report from the financial firm Moody's took a look at the cybersecurity industry in September 2023. It shares that between 2019 and 2023, as global cyber attacks grew exponentially, organizations and businesses grew their spending in this area by 70%. Additionally, they also started to take out cyber insurance as a precaution against the damages from the potential disruptions. The growth in uptick in cyber insurance has made Moody's estimate that the global cyber insurance premiums will nearly triple from their 2023 value of $12 billion to sit at $33 billion in 2027.
These days, cybersecurity has once again jumped into the spotlight of global finance. This is because China's biggest bank, the Industrial and Commercial Bank of China (ICBC) was attacked by hackers in November 2023 in an event that shook global markets. The ICBC's American division, ICBC Financial Services, was targeted through what industry experts dub a ransomware attack. In such attacks, hackers either lock their target's computer systems or steal confidential information with the purpose of extorting money. The attack came during the same period when 30 year U.S. Treasury Bonds were auctioning, and some believe that the disruption might have affected the bond market as some trades that went through ICBC were affected.
For ICBC, it's possible that the latest cyberattack might also have disrupted its operations to an extent. This is because according to a Reuters report, the American ICBC unit saw a $9 billion capital injection from its Chinese parent help pay The Bank of New York Mellon Corporation (NYSE:BK) for unsettled trades. This $9 billion is directly related to the cyber attack since ICBC Financial Services was unable to pay BNY Mellon for settled trades as its systems went down according to Reuters' sources. Now, the bank has shifted to the 2000s as its employees are using USB sticks to transfer data as they await the results of a cyber security investigation.
Shifting gears to focus on the broader cyber security sector once again, like other industries, artificial intelligence is also playing an important role in this industry. The very nature of AI makes it a perfect value addition technology for cyber security. This is because, at its heart, AI is fundamentally a complex mathematical equation that generates outputs based on a set of inputs. This equation also called a model, trains a model to generate outputs with new data by using existing data. So why is this suitable for cybersecurity? Well, firms can leverage AI in cybersecurity by training models through data from previous attacks to create autonomous systems that can detect if an attack is ongoing based on certain readings. This provides companies and users with a critical capability in the risk management framework, as it increases their lead time for an attack and allows them to prepare mitigation and response strategies.
The advantages offered by AI to cybersecurity are also on the mind of the management of one of the world's biggest cybersecurity companies, CrowdStrike Holdings, Inc. (NASDAQ:CRWD). During the firm's second quarter of fiscal year 2024 earnings call, its management touted the benefits offered by AI and shared details of an upcoming AI offering that is one of the few pureplay offerings in the cybersecurity sector.
Falcon is a platform that brings the benefits of generative AI to life for every SOC, CISO, CXO and enterprise. We do it with proprietary threat data, and we do it with industry-leading AI expertise. Charlotte AI is the engine powering our portfolio of generative AI capabilities across the platform, utilizing CrowdStrike's high-fidelity data advantage. Charlotte AI helps Falcon users of all skill levels to do more in the platform by automating workflows, which fuels module adoption and reduces the mean time to detect and respond. The net benefit to customers from our pioneering use of AI in a single platform is faster results, better security outcomes and lower overall cost, ushering in a new era of machine speed security. We showcased Charlotte AI earlier this month at Black Hat where we're the only vendor of consequence to showcase a live, not PowerPoint, demo of generative AI in action.
So, it looks like cybersecurity has a strong future ahead of it even as broader cloud spending sees belt tightening due to high inflation. This might be the right time to see which cybersecurity stocks were 2023's best performers, and in our list, the top three are Quick Heal Technologies Limited (NSE:QUICKHEAL.NS), Fastly, Inc. (NYSE:FSLY), and CrowdStrike Holdings, Inc. (NASDAQ:CRWD).
12 Best Performing Cybersecurity Stocks in 2023
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Our Methodology
To compile our list of the best performing cybersecurity stocks of 2023, we ranked the 39 biggest cyber security companies that trade on U.S. and global exchanges by their year to date share price gains as of November 11, 2023.
Akamai Technologies, Inc. (NASDAQ:AKAM) is an American firm that provides cloud, web, and mobile based cybersecurity platforms. The firm has consistently beaten analyst EPS estimates in five of its latest quarters as well as grown its EPS for most of these.
During Q2 2023, 29 out of the 910 hedge funds tracked by Insider Monkey had held a stake in Akamai Technologies, Inc. (NASDAQ:AKAM). Peter Rathjens, Bruce Clarke, and John Campbell's Arrowstreet Capital is the firm's largest shareholder in our database since it owns a $171 million stake which comes via 1.9 million shares.
Along with Fastly, Inc. (NYSE:FSLY), Quick Heal Technologies Limited (NSE:QUICKHEAL.NS), and CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Akamai Technologies, Inc. (NASDAQ:AKAM) is one of the best performing cybersecurity stocks in 2023.
11. Darktrace plc (LON:DARK.L)
Year To Date Share Price Gains: 31.67%
Darktrace plc (LON:DARK.L) is a British firm headquartered in Cambridge, the United Kingdom. The firm is facing a lot of heat these days as a related company Autonomy is alleged to have misrepresented financial figures during its sale to HP leading HP to write off its value. Darktrace plc (LON:DARK.L)'s CEO has refused to travel to the U.S. to act as a witness in a lawsuit covering this, and there are worries she might be compelled to testify in the U.K. instead.
Rapid7, Inc. (NASDAQ:RPD) is an American firm that provides cloud based cybersecurity services. The firm's third quarter of 2023 earnings testified to the growth in the cybersecurity industry since Rapid7, Inc. (NASDAQ:RPD)'s revenue jumped by 13% annually.
After digging through 910 hedge funds for their June quarter of 2023 investments, Insider Monkey discovered 34 Rapid7, Inc. (NASDAQ:RPD) investors. Out of these, the biggest investor is Steve Cohen's Point72 Asset Management due to its $87.7 million investment.
CyberArk Software Ltd. (NASDAQ:CYBR) is an Israeli cybersecurity firm headquartered in Petah Tikva, Israel. The firm scored a win in November 2023 when the Glasgow Caledonian University selected its identity management platform to better protect against cyber attacks.
As of June 2023, 28 out of the 910 hedge funds profiled by Insider Monkey had bought the firm's shares. CyberArk Software Ltd. (NASDAQ:CYBR)'s largest shareholder in our database is Robert G. Moses's RGM Capital courtesy of its $193 million stake.
Cloudflare, Inc. (NYSE:NET) is one of the most well known cybersecurity companies in the world. It allows websites to protect against online attacks along with providing other services. The shares are rated Buy on average and analysts have set an average share price target of $70.13.
By the end of this year's second quarter, 38 out of the 910 hedge funds tracked by Insider Monkey had invested in Cloudflare, Inc. (NYSE:NET). Hamilton Helmer's Strategy Capital owns the biggest stake among these, which is worth $94 million and comes via 1.4 million shares.
Varonis Systems, Inc. (NASDAQ:VRNS) is a global cybersecurity firm that provides security products that manage network events in real time to detect any breaches or threats. The firm expanded its support for Microsoft Corporation (NASDAQ:MSFT)'s Office 365 platform in November 2023 by adding new features to protect against malicious emails.
Out of the 910 hedge funds part of Insider Monkey's database for 2023's June quarter, 25 had held a stake in the firm. Varonis Systems, Inc. (NASDAQ:VRNS)'s largest hedge fund shareholder is Gil Simon's SoMa Equity Partners through its $93.2 million investment.
Qualys, Inc. (NASDAQ:QLYS)'s cybersecurity products serve the needs of a diverse set of industries such as healthcare and insurance. It made a big announcement in October 2023 by revealing a complete set of cybersecurity products for small businesses that use Amazon.com, Inc. (NASDAQ:AMZN)'s Amazon Web Services (AWS) platform.
By the Q2 of 2023 end, 26 hedge funds out of the 910 surveyed by Insider Monkey were Qualys, Inc. (NASDAQ:QLYS)'s shareholders. The company's biggest investor in our database is Terry Smith's Fundsmith LLP as it owns 658,407 shares that are worth $85 million.
Qualys, Inc. (NASDAQ:QLYS), Quick Heal Technologies Limited (NSE:QUICKHEAL.NS), Fastly, Inc. (NYSE:FSLY), and CrowdStrike Holdings, Inc. (NASDAQ:CRWD) are 2023's best performing cybersecurity stocks.
