With the transition from traditional practices to the latest technologies, rapidly growing demand, and increasing security concerns, the growth prospects of the cloud security market seem bright and lucrative.
Given this backdrop, investors could consider fundamentally robust cloud security stocks CrowdStrike Holdings, Inc. (CRWD - Get Rating), Zscaler, Inc. (ZS - Get Rating), and Check Point Software Technologies Ltd. (CHKP - Get Rating) for substantial returns.
Amidst the rising concerns of cybersecurity, increasing incidents of cyber threats, and organizations prioritizing data protection through the latest technologies, the cloud security market is experiencing robust growth. Also, supporting trends like the adoption of multi- and hybrid cloud environments, integration of artificial intelligence (AI), and the Internet of Things (IoT) are fueling the market.
Gartner projects worldwide IT spending to rise 9.3% in 2025, where spending on software will increase by 14% to $1.24 trillion, compared to an 11.7% rise in 2024, indicating robust trends. Further, a recent survey by Statista revealed that nearly 60% of organizations expect their cloud security budget to increase strongly in the next 12 months.
Rising dependency on cloud security services among organizations has grown significantly owing to its reliability, easy access, and effective risk mitigation solutions. With this, the cloud security software market is expected to reach around $102.59 billion by 2029, expanding at a notable CAGR of 17.6% driven by increasing adoption and efficiency.
Given the industry’s robust outlook, let’s examine the fundamentals of the three Software – Security stock picks, starting with the third choice.
Stock #3: CrowdStrike Holdings, Inc. (CRWD - Get Rating)
CRWD is a global cybersecurity solutions provider. The company’s unified platform offers cloud-delivered protection of endpoints, cloud workloads, identity, and data. It provides corporate endpoint and cloud workload security, managed security, security, and vulnerability management.
On November 7, CRWD expanded its distribution partnership with Ignition Technology, bringing the CrowdStrike Falcon® cybersecurity platform to Ignition’s partner base in Ireland. After success in the UK and Nordics, the companies continued their partnership to drive cybersecurity transformation in Ireland and stop breaches with unified AI-native protection across the enterprise.
On the same date, CRWD launched CrowdStrike AI Red Team Services, reinstating its leadership in protecting the infrastructure, systems, and models driving the AI revolution. With CRWD’s world-class threat intelligence and elite expertise, these specialized services proactively identify and help mitigate vulnerabilities in AI systems.
Amid new threats targeting AI applications, CRWD’s elite services team will aid many customers and help organizations assess their AI security posture to defend against model tampering, data poisoning, and other AI-based threats.
Also, on November 6, CRWD announced the acquisition of Adaptive Shield, a leader in SaaS Security. With this acquisition, CRWD will become the only cybersecurity vendor to provide unified, end-to-end protection against identity-based attacks across the entire modern cloud ecosystem.
The acquisition will position it as the leading provider of comprehensive protection across complex hybrid environments.
For the second quarter that ended July 31, 2024, CRWD’s revenue increased 31.7% year-over-year to $963.87 million. Its non-GAAP income from operations grew 45.7% from the year-ago value to $226.79 million. Non-GAAP net income attributable to CrowdStrike was $260.76 million or $1.04 per share, up 44.9% and 40.5% from the prior year’s period, respectively.
Furthermore, the company’s free cash flow rose 44.3% year-over-year to $272.23 million.
The company provided guidance for the third quarter of fiscal 2025, projecting total revenue between $979.20 million and $984.70 million and non-GAAP income from operations expected between $166.70 million and $170.80 million. Also, non-GAAP net income attributable to CrowdStrike is expected to range from $201.20 million to $205.2 million and $0.80 – $0.81 per share.
For the full year, CRWD expects total revenue of $3.89 billion – $3.90 billion. Its non-GAAP income from operations is set to be $774.70 million – $783.90 million. The company’s non-GAAP net income attributable to CrowdStrike is projected from $908.80 million to $918.0 million and $3.61 to $3.65 per share.
Street expects CRWD’s revenue and EPS for the first quarter (ending April 2025) to increase 20.2% and 2.1% year-over-year to $1.11 billion and $0.95, respectively. Also, the company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
Shares of CRWD have gained 11% over the past month and 68.6% over the past year to close the last trading session at $350.15.
CRWD’s solid fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CRWD has an A grade for Growth and a B for Quality. It is ranked #15 out of 20 stocks in the B-rated Software – Security industry.
In addition to the POWR Ratings we’ve stated above, we also have CRWD ratings for Momentum, Value, Stability, and Sentiment. Get all CRWD ratings here.
Stock #2: Zscaler, Inc. (ZS - Get Rating)
ZS operates as a global cloud security company. The company provides Zscaler Internet Access solution, which allows users, workloads, IoT, and OT devices to have secure access to externally managed applications. It also offers Zscaler Private Access solution, which is designed to provide access to managed applications hosted internally in data centers and private or public clouds.
On November 12, ZS introduced the industry’s first Zero Trust Segmentation solution to deliver a more secure, agile, and cost-effective means to connect users, devices, and workloads across and within globally distributed branches, factories, campuses, data centers, and public clouds.
The company’s new solution prevents lateral movement from ransomware attacks, cutting firewall and infrastructure spending.
On October 15, ZS and Okta announced four new integrations created to accelerate their mutual customers’ zero-trust transformation. With this end-to-end, context-aware security, the companies are helping customers reduce risk, improve the user experience, and enable cross-domain response through shared telemetry and threat intelligence.
During the fourth quarter that ended July 31, 2024, ZS’ revenue increased 30.3% year-over-year to $592.87 million. Its non-GAAP gross profit rose 31% from the year-ago value to $481.04 million. The company’s non-GAAP income from operations of $127.54 million reflects growth of 48.3% year-over-year.
Furthermore, the company’s non-GAAP net income totaled $140.60 million and $0.88 per share, up 39.4% and 37.5% from the prior year’s quarter, respectively.
As per its guidance for the first quarter of fiscal 2025, ZS projects revenue of $604 million to $606 million. It expects its non-GAAP income from operations to be $114 million – $116 million and its non-GAAP net income per share between $0.62 and $0.63.
Also, for the full year fiscal 2025, the company expects revenue of approximately $2.60 billion to $2.62 billion. Non-GAAP income from operations ranges from $530 million to $540 million. Its non-GAAP net income per share is set to be at $2.81 to $2.87.
For the first quarter ended October 2024, analysts expect ZS’ revenue to increase 21.9% year-over-year to $605.61 million. For the fiscal year (ending July 2025), the company’s revenue is expected to grow 20.5% year-over-year to $2.61 billion. Moreover, the company has surpassed the consensus revenue and EPS estimates in all of the trailing four quarters.
The stock has gained 5.3% over the past month and 11.3% over the past six months to close the last trading session at $200.94.
ZS’ promising outlook is reflected in its POWR Ratings. The stock has a B grade for Growth and Sentiment. Within the same industry, ZS is ranked #14 of 20 stocks.
To access additional ratings of ZS for Momentum, Stability, Value, and Quality, click here.
Stock #1: Check Point Software Technologies Ltd. (CHKP - Get Rating)
Headquartered in Tel Aviv, Israel, CHKP develops, markets, and supports a range of products and services for IT security worldwide. It offers a multilevel security architecture, cloud, network, mobile devices, endpoint information, and IOT solutions.
On November 20, CHKP unveiled the new Check Point Quantum Firewall Software R82 (R82) and additional innovations for the Infinity Platform. The new R82 delivers new AI engines, post-quantum encryption, and accelerated DevOps with greater simplicity for data center operations. The new solution will prevent against zero-day threats and empower customers.
During the third quarter that ended September 30, 2024, CHKP’s total revenues increased 6.5% year-over-year to $635.10 million, of which its security subscription revenues were up 11.5% year-over-year to $276.90 million. The company’s non-GAAP operating income grew 1.9% from the year-ago value to $274 million.
Additionally, the company’s non-GAAP net income and EPS came in at $255.40 million and $2.25, indicating increases of 5.4% and 8.7% from the prior year’s quarter, respectively.
Analysts expect CHKP’s revenue for the fourth quarter (ending December 2024) to increase 5.3% year-over-year to $698.43 million. The consensus EPS estimate of $2.65 indicates a 3.3% rise year-over-year. Further, the company topped the consensus revenue and EPS estimates in three of the trailing four quarters.
CHKP’s stock has surged 16.4% over the past six months and 24.1% over the past year to close the last trading session at $176.83.
CHKP’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has an A grade for Quality. CHKP is ranked #7 out of 20 stocks in the B-rated Software – Security industry.
Click here to access additional CHKP ratings (Growth, Sentiment, Value, Stability, and Momentum).
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