Stifel survey shows cybersecurity sector remains resilient despite challenges

Investing.com - Stifel’s latest cybersecurity VAR survey indicates the sector continues to show resilience despite some regional challenges in EMEA markets, according to a note released to clients following the firm’s C2Q25 research. The sector’s strength is particularly evident in companies like Palo Alto Networks (NASDAQ:PANW), which boasts a substantial market capitalization of $133.2 billion and maintains a "GREAT" financial health score according to InvestingPro analysis.

The survey of 39 value-added resellers (VARs) revealed stronger performance for Zscaler (NASDAQ:ZS), Cloudflare (NYSE:NET), and Palo Alto Networks (NASDAQ:PANW), while Okta (NASDAQ:OKTA) and Check Point Software (NASDAQ:CHKP) showed improvement. CyberArk (NASDAQ:CYBR), Varonis, and Tenable maintained stable performance, while Fortinet (NASDAQ:FTNT), CrowdStrike (NASDAQ:CRWD), SentinelOne (NYSE:S), and Rapid7 (NASDAQ:RPD) showed deceleration. PANW’s strong positioning is reflected in its impressive revenue growth of ~14% and its stock trading near its 52-week high. Investors can access detailed valuation metrics and 16 additional ProTips through InvestingPro’s comprehensive research platform.

Data, Identity, Cloud, and Endpoint security emerged as top spending priorities for the quarter, while vulnerability management remained deprioritized. Firewall trends showed improvement quarter-over-quarter, achieving the highest outperformance level in seven quarters, though VARs slightly downgraded aspects of Fortinet’s firewall refresh opportunity.

The survey also indicated a modest shift back toward best-of-breed solutions rather than platform approaches, though customers continue to seek consolidation within identity security. Partners expect cybersecurity budget growth to outpace overall IT budget growth in CY25 and generally expressed more optimism about C3Q25/CY25 expectations compared to 90 days prior.

Stifel highlighted CyberArk and Cloudflare as its favorite names heading into earnings season, noting it recently lowered projections for Palo Alto Networks and Okta, with current price targets supporting Buy ratings across these four companies. Investors should note that PANW’s next earnings report is scheduled for August 25, 2025, as indicated by InvestingPro data, which provides comprehensive analysis through its Pro Research Reports covering 1,400+ top stocks.

In other recent news, Palo Alto Networks has completed its acquisition of Protect AI, a firm focused on securing artificial intelligence applications and models. This acquisition is expected to bolster Palo Alto Networks’ Prisma AIRS platform by integrating Protect AI’s capabilities in areas such as model scanning and AI agent security. In terms of analyst ratings, Stifel has maintained a buy rating for Palo Alto Networks with a price target of $225, though it has slightly revised its fiscal year 2026 revenue growth estimate to 12% from 13%. Goldman Sachs also reiterated a Buy rating, with a price target of $231, citing the company’s potential to meet or exceed expectations for next-generation security annual recurring revenue. UBS, however, has maintained a Neutral rating, with a $200 price target, expressing some concerns regarding the company’s potential growth in subscription and support revenues. Scotiabank (TSX:BNS) continues to rate Palo Alto Networks as Sector Outperform with a $225 price target, noting strong product revenue growth and positive financial performance indicators. The company’s free cash flow targets for fiscal year 2025 appear less risky, and management’s confirmation of future targets is seen favorably by investors.

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