To put things into perspective, experts predict that the cost of cybercrime will reach $10.5 trillion annually by 2025. That’s a massive number, considering that most cyberattacks can be prevented with better detection.
In response to these challenges, companies deploying technologies to combat malicious attacks are experiencing significant growth. The global cybersecurity market was $222.6 billion in 2023 and will grow at a compound annual growth rate (CAGR) of 12.3% until 2030.
One primary driver of this growth is AI, and its benefits are twofold. First, AI can be harnessed to detect potential cyber threats in a large volume of data in real time. Second, AI can identify areas requiring greater security controls through machine learning. This will help companies implement better prevention strategies while lowering costs.
As a result, companies actively incorporating AI in their cybersecurity offerings have become indispensable to businesses. Consequently, this has made them a wealth-generation channel for investors seeking long-term returns.
CrowdStrike (CRWD)
The increase in cybercrime has sparked interest in cybersecurity stocks for long-term growth. Leading the charge is CrowdStrike (NASDAQ:CRWD), whose shares surged over 173% this year. Several factors contribute to its success.
The first is a unique ‘pay for what you pick’ business model that has proven extremely successful. This approach allows customers to consolidate and customize modules to suit their needs on the platform. According to CrowdStrike, nearly 28% of its customers have adopted seven or more modules.
The second is its commitment to operating with a cloud-native architecture. CrowdStrike’s Falcon Horizon platform leverages automation and AI to identify threats across multi-cloud applications, thereby reducing cyberattack costs. Additionally, it allows users to manage workloads across cloud platforms through a single console.
This forward-thinking approach has paid off for the company. In its recent earnings report, revenue rose 33% to $921 million, with subscription revenue up 34% year-over-year (YoY). Revenue guidance for the full year was also raised by 30%.
As a leader in the cybersecurity space, CRWD trades at a premium valuation and is not a bargain buy. However, investors willing to hold the stock will find it to be one of the top cybersecurity stocks for long-term growth. The company was recently added to the S&P 500.
Palo Alto Networks (PANW)
Another company making waves in the cybersecurity space is Palo Alto Networks (NASDAQ:PANW). While the company is well known for its advanced firewall technology and cybersecurity solutions, Palo Alto’s Unit 42 gives it a competitive edge. Unit 42 is a team of world-renowned threat researchers that help federal agencies assess readiness and mitigate cyber risks. This research capability allows the company to gather valuable data and refine its risk mitigation strategies.
The success of Palo Alto’s cybersecurity services was evident in its most recent earnings report. Revenue was up 15% YOY to $2 billion, and EPS came in at $1.32 over the estimated $1.26. However, shares fell 9% following weak billing guidance. Billing for the fiscal year will land in the $10.13 billion to $10.18 billion range, below the $10.19 billion estimate.
But despite the decline, PANW stock remains fundamentally strong. The company has exhibited consistent growth over the years, and its array of AI-powered cybersecurity solutions will serve as a catalyst for continued expansion.
The recent dip presents a great buying opportunity for investors looking to get behind cybersecurity stocks for long-term growth.
Cloudflare (NET)
A third name on this list of cybersecurity stocks to buy for long-term returns is Cloudflare (NYSE:NET). The company has embraced the role of GenAI in its offerings, proving it to be a useful tool in combating cyber attacks. Cloudflare’s services include a content delivery network (CDN) that stores cached copies of websites closer to the site’s visitors for easier access and a tool to help organizations combat bot-based attacks.
Clouflare’s recent earnings report underscored the success of its offerings. Revenue in Q1 was up 30% YOY at $378.6 million. Adjusted EPS came in at 16 cents, surpassing an estimate of 13 cents. The company hopes to keep this momentum going through Q2, with revenue ranging between $393.5 million and $394.5 million.
Looking ahead, Cloudflare is well-positioned to thrive in an AI-focused cybersecurity environment. The company maintains a successful partnership with Apple (NASDAQ:AAPL), providing security enhancements for its users. Cloudflare’s technology will also help encrypt AI queries in Apple’s new Private Cloud Compute (PCC).
The company’s promising prospects make this a good stock to add to your portfolio for long-term returns.
On the date of publication, Divya Premkumar did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Divya has a background in finance and accounting and has worked in FP&A roles at Fortune 500 companies. She is an avid reader and enjoys writing on a variety of topics including stocks, crypto, blockchain and global policy.