While the huge spike in spending on artificial intelligence (AI) has gotten all the investment attention in the technology sector over the past year, that doesn't mean that increased cybersecurity spending went away. In fact, market research company Gartner recently forecasted that cybersecurity spending will increase from $183.7 billion in 2024 to $293.9 billion in 2028 (a 60% increase).
With cyberattacks not going away and spending on combating them set to rise, investors might want to consider buying these two cybersecurity stocks that are likely to access a good portion of that increased spending and confidently holding them for the next decade. Here's why.
1. CrowdStrike
Despite the much-publicized global IT temporary outage it caused last year, CrowdStrike(NASDAQ: CRWD) is still considered to be the leader in endpoint security. Its Falcon platform is widely used by organizations to help protect networks and their endpoints, such as smartphones and computers, from cyberattacks. In 2024, Gartner ranked it as the leader in endpoint security for the fifth straight year, as it beat the field both on the completeness of its vision and its ability to execute.
Recently, more organizations have begun consolidating their cybersecurity, trimming the number of vendors they use down to a few -- or even to just one -- in pursuit of greater efficiency and effectiveness, as well as lower costs.
That trend benefits CrowdStrike, as evidenced by the continued expansion in the number of software modules that its customers are using. As of last quarter, two-thirds of its customers were using five or more of its modules, while 20% were using eight or more. Its Cloud Security, Identity Security, and LogScale Next-Gen SIEM modules in particular have been gaining a lot of traction.
While the IT outage incident (caused by a major glitch in a software upgrade, not an outside attack) had an impact on the company -- it is experiencing extended sales cycles and more deal scrutiny -- CrowdStrike continues to gain new customers and grow sales within its established customer base. Its 115% net dollar retention rate last quarter is evidence of that. CrowdStrike also offered impacted customers what it calls customer commitment packages, which include a combination of new modules, added subscription time, and flexible payment terms to help compensate them for the outage. This may prove to be a selling point to eventually get customers to keep and pay for those modules.
Despite the effect of the outage on its business, CrowdStrike still strongly grew its top line. Last quarter, its overall revenue climbed 29% year over year, with subscription revenue up 31%. Its annual recurring revenue, meanwhile, jumped 27%.
Trading at a forward price-to-sales (P/S) multiple of nearly 18.7 times analyst estimates for its next fiscal year (which begins Feb. 1), CrowdStrike's stock is not cheap. However, based on its leadership in the cybersecurity space, it deserves to trade at a premium.
Image source: Getty Images
2. Zscaler
While CrowdStrike's main focus is on endpoint security, Zscaler's(NASDAQ: ZS) platform centers around zero trust security -- the concept that no individual user nor device should be trusted by default, and as such, that all users' access to various platforms must be verified, authorized, and then regularly revalidated.
Zero trust has been one of the fastest-growing areas of cybersecurity in the past few years. Gartner previously forecast that zero trust network access spending would rise to $4 billion in 2027, which would be a more than 30% compound annual growth rate between 2021 and 2027. More recently, it forecast that the entire identity access management space, which zero trust is a part of, would grow from $17.7 billion in 2024 to $25.4 billion in 2028.
Zscaler reports strong year-over-year revenue growth, including 26% last quarter. Like CrowdStrike, it does a good job of upselling additional modules to its existing customers. Last quarter, its net dollar retention rate was a solid 114%. It is seeing strong uptake of its Zscaler Private Access solution, which gives all users seamless zero-trust connectivity and has been replacing virtual private networks (VPNs). It is also seeing nice traction from its Zscaler Digital Experience, Zero Trust for Branch and Cloud, and AI analytics solutions.
In addition, management sees the data security market as an opportunity; last quarter, Zscaler won a seven-figure deal to protect a customer's Microsoft Copilot data. It believes that Zscaler for Copilots could be a big opportunity.
It's making big strides with federal government clients, too. It is now being used by segments of 14 of the 15 cabinet-level agencies. The government is turning toward zero-trust systems to improve security while reducing costs by eliminating firewalls and VPNs. Management said it sees significant upselling opportunities as a result.
The stock trades at a forward P/S ratio of 9.2 based on estimates for its fiscal 2026 (which ends July 2026). That's a reasonable valuation given Zscaler's growth and opportunities.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike, Microsoft, and Zscaler. The Motley Fool recommends Gartner and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
