As the adoption of cloud computing continues to rise, securing digital assets has become a top priority for businesses. The growing demand for cloud-based solutions is driving market growth in cybersecurity, with major players like CrowdStrike Holdings, Inc. (CRWD), Zscaler, Inc. (ZS), and Cloudflare, Inc. (NET) leading the way in integrating cloud technology into their offerings.

The cloud security industry is rapidly evolving as businesses and organizations continue to move their data and applications to the cloud. With the rise of digital transformation, cloud security solutions are becoming essential in protecting sensitive data and ensuring secure access across various platforms.

The rate of cloud adoption has surged in recent years, fueled by advancements in internet-based services. The growing adoption of cloud-based solutions across industries has driven demand for security tools to protect business information from external threats. Cloud solutions enable access to software and resources via the internet, overcoming traditional hardware limitations.

The cloud security market is valued at around $30.29 billion in 2023 and is projected to expand at a CAGR of 14.2% to reach $100.07 billion by 2032.

Considering these positive trends, let's delve deeper into Software - Security stocks:

Stock #3: CrowdStrike Holdings, Inc. (CRWD)

CRWD provides cybersecurity solutions through its Falcon platform, offering subscription-based services for endpoint and cloud security, identity protection, threat intelligence, vulnerability management, and AI-driven automation. It also focuses on securing generative AI workloads and enhancing security operations globally.

On December 9, CRWD and SonicWall introduced a new Managed Detection and Response (MDR) service, merging SonicWall’s Managed Security Services with CrowdStrike Falcon's AI-driven Endpoint Detection and Response (EDR) capabilities. This collaboration aims to deliver enterprise-grade cybersecurity solutions to SMBs through Managed Service Providers (MSPs), enhancing scalability and protection.

On November 7, CRWD expanded its partnership with Ignition Technology to distribute the Falcon platform in Ireland, in partner business across the UK and Nordics.

In the fiscal third quarter ended October 31, 2024, CRWD’s total revenue increased 28.5% year-over-year was $1.01 billion. Its non-GAAP income from operations grew 11% from the year-ago value to $194.92 million. In addition, the  non-GAAP net income attributable to CrowdStrike came in at $234.26 million and $0.93 per share, up 17.6% and 13.4% over the prior-year quarter, respectively.

Street expects CRWD’s revenue and EPS for the year ending January 31, 2025, to increase 28.6% and 21.7% year-over-year to $3.93 million and $3.76, respectively. In addition, it surpassed the consensus EPS and revenue estimates in all of the trailing four quarters, which is promising.

Over the past year, the stock has gained 42.7% to close the last trading session at $362.29.

CRWD’s POWR Ratings reflect its robust outlook. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

CRWD has a B grade in Growth and Quality. It is ranked #16 out of 20 stocks in the B-rated Software – Security industry.

Beyond what we have stated above, we also have given CRWD grades for Value, Momentum, Stability, and Sentiment. Get all the CRWD’s ratings here.

Stock #2: Cloudflare, Inc. (NET)

NET provides cloud-based security and performance solutions, including web application firewalls, DNS, content delivery, and zero-trust security services. These offerings are designed to enhance security, performance, and scalability for businesses, developers, and consumers across various platforms like public and private clouds, IoT devices, and SaaS applications.

On November 20, NET announced continued growth in the Mexican market following a year of investment and expansion. The company has enhanced its infrastructure by adding a new data center in Guadalajara, strengthening its integrations with key customers and partners, and building a cross-functional employee base to support its operations in the region.

On October 8, NET announced its acquisition of Kivera, a cloud security, data protection, and compliance platform. This acquisition integrates Kivera’s capabilities with the NET One platform, enabling preventive security controls directly in the cloud deployment process, ultimately enhancing the security, speed, and simplicity of cloud journeys.

NET’s revenue increased 28.2% year-over-year to $430.08 million in the fiscal third quarter that ended on September 30, 2024. Its non-GAAP income from operations came in at $63.47 million, up 49.2% year-over-year. In addition, the company’s non-GAAP net income reached $ 72.58 million, up 31.3% from the same quarter last year, and non-GAAP net income per share was $ 0.20, indicating an increase of 25% from the prior-year quarter.

Analysts expect NET’s revenue for the fiscal fourth quarter (ending December 31, 2024) to increase 24.7% year-over-year to $ 452.06 billion. Its EPS for the same quarter is expected to increase 20.4% year-over-year to $0.18. In addition, it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

Shares of NET have gained 36.1% over the past year and 43.7% over the past six months to close the last trading session at $112.69.

NET’s POWR Ratings reflect its robust outlook.

NET has a B grade in Growth and Sentiment. It is ranked #15 in the same industry.

To access NET’s Value, Momentum, Stability, and Quality ratings, click here.

Stock #1: Zscaler, Inc. (ZS)

ZS is a cloud security company offering solutions like Zscaler Internet Access, Zscaler Private Access, and Zero Trust security for secure access and data protection across cloud environments. It serves various industries, including healthcare, finance, and telecommunications.

On December 17, ZS announced that Nokia Oyj (NOK) would be deploying its Zscaler Zero Trust Exchange platform to improve security, operational efficiency, and cloud capabilities.

On November 12, ZS announced the launch of the industry's first Zero Trust Segmentation solution. It is designed to provide a more secure, agile, and cost-effective way to connect users, devices, and workloads across globally distributed locations.

In the fiscal first quarter ended October 31, 2024, ZS’s revenue increased 26.4% year-over-year to $627.96 million. Its non-GAAP income from operations grew 49.5% from the year-ago value to $134.15 million. In addition, the company’s non-GAAP net income and non-GAAP net income per share stood at $124.26 million and $0.77, up 43.8% and 40% over the prior-year quarter, respectively.

Street expects ZS’s revenue for the fiscal second quarter (ending January 31, 2025) to increase 21% year-over-year to $ 635.17 million. Its EPS for the same quarter is likely tp be $0.69. In addition, it surpassed the consensus EPS and revenue estimates in all of the trailing four quarters.

Shares of ZS have gained 4.9% over the past six months to close the last trading session at $187.38.

ZS’s POWR Ratings reflect its robust outlook.

It has a B grade in Growth and Sentiment. It is ranked #12 in the same industry.

Click here to see ZS’s ratings for Value, Momentum, Stability, and Quality.

What To Do Next?

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CRWD shares rose $0.96 (+0.26%) in premarket trading Monday. Year-to-date, CRWD has gained 41.90%, versus a 25.54% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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