Cybersecurity: A Structural Beneficiary of the AI Revolution

AI Adoption Is Driving a New Era of Cybersecurity Demand

Cybersecurity continues to stand out as one of the most compelling areas within technology, particularly as the rapid adoption of AI creates both new opportunities and new vulnerabilities for businesses. As companies deploy AI agents, expand cloud infrastructure, and connect more systems and data, the attack surface is growing increasingly complex. The result is a growing need for organizations to invest in security regardless of the broader economic environment. We believe this creates a significant and increasingly visible backlog of demand for cybersecurity solutions, making the sector an important part of the broader AI investment cycle.

As AI becomes more deeply embedded across enterprises, cybersecurity is becoming less of a discretionary IT expense and more of a necessary investment to protect increasingly valuable data, applications, and AI infrastructure.

Palo Alto Networks: Cybersecurity Demand Continues to Accelerate

Palo Alto Networks delivered another strong quarter, highlighting the continued strength of enterprise cybersecurity spending and the growing importance of securing AI adoption. Fiscal fourth-quarter revenue increased 34% year over year to $3.41 billion, exceeding expectations of $3.35 billion, while adjusted EPS of $1.02 also surpassed the $0.98 consensus.¹ More importantly, Next-Generation Security ARR, their AI-integrated cyber protection platform, surged 63% year-over-year to $9.1 billion, including nearly $970 million of net new ARR during the quarter.² Remaining performance obligations also surpassed $20 billion for the first time, reaching $21.2 billion, up 34% year-over-year and providing significant visibility into future revenue.³ The company’s platformization strategy is also gaining traction, adding approximately 220 net new platformizations in the quarter, roughly twice the pace of the prior quarter.⁴

Management’s outlook reinforces that this momentum is not simply a one-quarter phenomenon. For fiscal 2027, Palo Alto expects revenue of $14.10–$14.20 billion, representing 23%–24% growth, while Next-Generation Security ARR is expected to reach $11.08–$11.18 billion,⁵ ahead of the $10.9 billion analyst estimate. The combination of strong bookings, a growing contracted backlog and above-consensus guidance points to sustained demand for cybersecurity solutions as enterprises continue to invest in cloud, network, and AI security.

Palo Alto is also positioning itself to capitalize on the next phase of AI-driven cybersecurity. The company’s acquisition of Console, an AI-native platform focused on automating security investigations and responses, should further strengthen Cortex and its ability to use AI to identify, prioritize and address threats more efficiently.⁶ As AI-powered attacks become more sophisticated, organizations will increasingly need to protect the systems, data, and AI agents they are deploying.

CrowdStrike: AI Is Expanding the Cybersecurity Opportunity

Additionally, CrowdStrike delivered a strong quarter, with results underscoring the accelerating demand for cybersecurity as enterprises rapidly adopt AI. Revenue increased 26% year over year to $1.47 billion, ahead of expectations, while adjusted EPS of $0.31 exceeded the $0.29 consensus.⁷ Annual recurring revenue reached $5.84 billion, up 25% year over year, with the company adding a record $333 million of net new ARR during the quarter,⁸ accelerating to 51% year over year, demonstrating that demand is not only remaining strong but continuing to build.

Management also raised its outlook for fiscal 2027, increasing its net new ARR growth guidance by 630 basis points to approximately 34% at the midpoint.⁹ The increase provides further evidence that cybersecurity spending remains a priority for enterprises despite broader uncertainty around technology budgets. As businesses move more workloads, data, and applications into AI-enabled environments, security is becoming increasingly embedded in the technology stack rather than treated as a discretionary expense.

AI is also changing the cybersecurity landscape by making attacks faster, more sophisticated, and potentially more difficult to defend against. The recent capabilities demonstrated by Anthropic’s Mythos model highlight how AI can be used to identify and exploit vulnerabilities that previously may have gone undetected.¹⁰

AI Adoption Is Expanding the Cybersecurity Opportunity

The adoption of AI across corporate America is moving rapidly from experimentation into everyday workflows. Google’s CEO recently noted that roughly 75% of new code at the company is now AI-generated, up from approximately 50% last fall.¹¹ Workday has similarly reported that more than 75% of its software engineers are using AI coding assistance, with AI responsible for more than half of committed code.¹² Robinhood has also said that more than 90% of its employees are already using AI tools in their workflows.¹³ These examples highlight how quickly AI is becoming embedded across businesses and, in turn, increasing the number of applications, systems and data that need to be protected.

At the same time, the cybersecurity threat landscape continues to evolve. Recent attempts by Iranian-linked hackers to target U.S. water systems, telecommunications networks, energy infrastructure, and other critical systems highlight the growing risks facing organizations.¹⁴ While these attacks were unsuccessful, they demonstrate that critical infrastructure remains a target and that cyber threats are becoming an increasingly important national and corporate security issue.

We believe the combination of rapidly increasing AI adoption and a more sophisticated threat environment creates a powerful long-term opportunity for cybersecurity. As companies deploy more AI-generated code and integrate AI deeper into their operations, the potential attack surface expands alongside it, making cybersecurity an increasingly necessary component of technology spending.

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Sources:

1. Bloomberg: As of September 1, 2026 ↩︎
2. Bloomberg: As of September 1, 2026 ↩︎
3. Bloomberg: As of September 1, 2026 ↩︎
4. Palo Alto Networks Earnings Call: As of September 1, 2026 ↩︎
5. Palo Alto Networks Press Release: As of September 1, 2026 ↩︎
6. Bloomberg: As of September 1, 2026 ↩︎
7. Bloomberg: As of August 26, 2026 ↩︎
8. Bloomberg: As of August 26, 2026 ↩︎
9. CrowdStrike Earnings Call: As of August 26, 2026 ↩︎
10. Bloomberg: As of September 1, 2026 ↩︎
11. Google Blog: As of April 22, 2026 ↩︎
12. Workday Earnings Call: As of February 24, 2026 ↩︎
13. Robinhood Earnings Call: As of April 28, 2026 ↩︎
14. NBC News: As of September 2, 2026 ↩︎

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