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Investing.com -- Jefferies upgraded Varonis Systems (NASDAQ:VRNS) to Buy and highlighted Palo Alto Networks (NASDAQ:PANW), Zscaler (NASDAQ:ZS), CyberArk, and SailPoint as its top cybersecurity picks for the second half of 2025, citing resilient sector spending and growing demand tied to generative AI adoption.
Cybersecurity budgets are expected to hold steady at around 12% of overall software spending, Jefferies said in a 150-page deep dive.
While growth may moderate from past outperformance, the firm sees continued tailwinds from rising security threats and enterprise demand for integrated platforms.
Jefferies turned bullish on Varonis, calling it a well-positioned small-cap levered to AI-driven data governance needs. It said recent checks have improved and sees 2025 targets as "very achievable."
The firm set a price target of $65, implying 10.6x estimated 2026 revenue.
For long-term investors, Jefferies continues to back PANW, citing platform strength and strong free cash flow outlook, even as near-term billings slow. Zscaler, a leader in zero-trust network security, is seen benefiting from sales efficiency gains and cloud security adoption.
CyberArk is viewed as a top 2025 idea on elevated demand and margin upside, while SailPoint is expected to outperform in identity management with 20%+ ARR growth forecast from FY26 to FY28.
Jefferies noted cybersecurity stocks have outperformed broader software and equity markets so far in 2025, but said valuations are elevated and expects a more measured second half.