Many investors have abandoned cybersecurity stocks in the past year or have tried to assess how companies will be affected by artificial intelligence (AI). Evaluating companies and the markets they serve is a smart strategy, but with the recent plunge in many cybersecurity stocks, some investors have been driven to a more dire situation than a simple evaluation.
This has opened up some buying opportunities for long-term investors. There are two cybersecurity stocks that may be worth buying now that investors have been too eager to hit the sell button.
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Palo Alto Networks(NASDAQ: PANW) The established cybersecurity company has taken some big steps to boost its position in the market, including last year’s $25 billion purchase of CyberArk to acquire the company’s top-tier identity and access management security features.
Palo Alto is also looking to AI for growth. Palo Alto CEO Nikesh Arora said last month that the company “sees continued strength in platformization, a trend that is accelerating due to AI — customers are willing to modernize and normalize their cybersecurity stack, they’re adapting to our approach.” Arora added that as more customers adopt AI security, the company will see “a long-term trend.”
The company’s Prisma AIRS artificial intelligence security platform has become a popular tool in its security arsenal, with the number of customers tripling in just one quarter. The company’s second-quarter results showed how much demand for its security products there is, with sales up 15% to $2.6 billion in the year-ago quarter, and earnings down nearly 61% to $0.61 per share.
Management is guiding for continued growth this year, with total sales expected to reach $11.3 billion in 2026, an increase of nearly 23% over last year. What’s more, Palo Alto’s leadership expects the company to continue its high profitability, with a non-GAAP operating margin of 29% for the year.
Investors have been nervous about cybersecurity stocks as they try to figure out how AI will affect them, and that’s helped send Palo Alto shares down 20% over the past year. With such a dramatic pullback despite Palo Alto’s strong position in safety and high profitability, now seems like a good time to pick up some shares of the company.
Microsoft(NASDAQ: MSFT ) It doesn’t break out its cybersecurity sales directly, but estimates for 2025 include security revenue of $37 billion, likely to reach $50 billion annually by 2030, and Microsoft recently said it now has 1.6 million global security customers.
I think Microsoft is in one of the best positions to take advantage of the increasingly complex world of AI threats because its security business is so closely tied to its cloud computing business. is the second largest cloud computing company after Microsoft Azure Amazon with a 21% market share, and continues to gain ground on its competitors. As the AI cloud market grows to nearly $2 trillion by 2030, Microsoft is likely to add more cybersecurity customers as customers lock into the company’s cloud ecosystem.
What’s more, as the AI leader with its Copilot chatbot, Microsoft can apply artificial intelligence to its cybersecurity software and services in a way that other software companies can only dream of. For example, Microsoft recently introduced its Agent 365, an AI agent that enterprise customers can use to manage their existing security services, using the same controls they already use for Microsoft 365 and its Azure cloud. One of Microsoft’s customers is the company’s AI agent to reduce the time it takes to prosecute cyber security threats by 75%.
Sweetening the deal for investors is that Microsoft shares currently have a price-to-earnings (P/E) ratio of just 25, much cheaper than the tech sector’s average P/E ratio of 39. Its shares have been flat over the past year, but with a leading position in security, AI and cloud purchases are big opportunities.
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Chris Niger has no position in any of the listed stocks. The Motley Fool has and offers positions at Amazon and Microsoft. See more information about The Motley Fool page on Facebook The Motley Fool has a disclosure policy.
The 2 Best Cybersecurity Stocks to Buy in March was originally published by The Motley Fool
