Cybersecurity stocks are great long-term investments for three simple reasons. First, most companies won't shut off their digital defenses to save a few dollars. Second, they're largely immune to tariffs and trade wars. Lastly, cyberattacks aren't getting any easier to contain.
Therefore, most investors should own a few reliable cybersecurity stocks. Let's take a look at three of them -- Fortinet (NASDAQ: FTNT), CyberArk(NASDAQ: CYBR), and Cisco Systems (NASDAQ: CSCO) -- to see why they might be great stocks to hold for the next decade.
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1. Fortinet
Fortinet, which serves more than 860,000 customers and offers a broad portfolio of over 50 enterprise security products, is one of the world's top cybersecurity companies. It originally developed next-gen firewalls, which added network filtering tools to traditional firewalls, but it subsequently expanded its ecosystem into a "Security Fabric" of on-premise and cloud-based security services.
Fortinet develops its own custom chips optimized for its hardware and software. It claims the difference enables its systems to operate more efficiently than competing platforms that use off-the-shelf components. It expects the convergence of the cybersecurity, networking, and hybrid cloud markets to drive its long-term growth.
From 2014 to 2024, Fortinet's revenue grew at a compound annual growth rate (CAGR) of 23% as its earnings per share (EPS) increased at a CAGR of 54%. From 2024 to 2027, analysts expect its revenue and EPS to increase at a CAGR of 14% and 11%, respectively.
Fortinet's near-term growth might be affected by competition, messy macro headwinds, and increased spending on new chip designs. Its stock might also seem pricey at 47 times this year's earnings, but it should remain a reliable bellwether of the cybersecurity sector for the foreseeable future.
2. CyberArk
CyberArk, which serves nearly 10,000 customers across 110 countries, is one of the world's leading privileged access management (PAM) companies. Instead of countering external threats, its PAM software tackles internal threats, like corporate spies and disgruntled employees, by locking down their compromised systems.
CyberArk already controls about 38% of the PAM market, according to Morgan Stanley. Persistence Market Research expects that market to expand at a CAGR of 21.4% from 2024 to 2033 as more companies fortify their internal defenses.
From 2014 to 2024, CyberArk's revenue increased at a CAGR of 26%. From 2024 to 2027, analysts expect its revenue to grow at a CAGR of 24%. They also expect it to turn profitable in 2026 and quadruple its net income in 2027. It might not seem like a bargain at 13 times this year's sales, but it should still have plenty of room to run over the next decade.
3. Cisco Systems
Cisco is one of the world's largest networking hardware and software companies. But it's also one of the world's largest cybersecurity companies. Its security division, which it expanded through a long list of acquisitions, generated $5.08 billion in revenue in fiscal 2024 (which ended last July) and accounted for 9% of its top line.
While Cisco still generates most of its revenue from networking hardware, it integrates its cybersecurity services -- including its threat detection service ThreatGRID, cloud access security broker Cloudlock, and unified access platform Duo Security -- into those systems. Its acquisition of Splunk also significantly expands its arsenal of network observability services.
From fiscal 2020 to fiscal 2024 (which ended last July), Cisco's revenue grew at a CAGR of 2% as its adjusted EPS rose at a CAGR of 4%. It maintained that stable growth even as supply chain headwinds disrupted its networking hardware sales in fiscal 2021 and fiscal 2022.
Analysts expect Cisco's revenue and EPS to grow at a CAGR of 5% and 9%, respectively, from fiscal 2024 to fiscal 2027 as it profits from the expansion of the AI, data center, and security markets. It's still reasonably valued at 25 times this year's earnings, pays a forward yield of 2.6%, and remains an attractive blue chip play for investors who value stability over aggressive growth.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cisco Systems and Fortinet. The Motley Fool has a disclosure policy.
