With the transition from traditional practices to the latest technologies, rapidly increasing demand, and increasing security concerns, the growth prospects of the cloud security market appear bright and lucrative.
Given this backdrop, investors could consider primarily strong cloud security stock CrowdStrike Holdings, Inc. (CRWD), and Zscaler, Inc. (ZS), and Check Point Software Technologies Ltd. (CHKP) to get great returns.
Amid growing concerns about cybersecurity, increasing incidents of cyber threats, and organizations prioritizing data protection through the latest technologies, the cloud security market is witnessing strong growth. Supporting trends such as adoption of multi- and hybrid cloud environments, integration of artificial intelligence (AI), and Internet of Things (IoT) are also fueling the market.
Gartner expects worldwide IT spending to rise by 9.3% in 2025, with software spending increasing by 14% to reach $1.24 trillion, compared to an 11.7% rise in 2024, indicating strong trends. Furthermore, a recent survey by Statista revealed that nearly 60% of organizations expect to aggressively increase their cloud security budget over the next 12 months.
The increasing adoption of cloud security services among organizations has grown significantly due to their reliability, accessibility, and effective solutions to mitigate risks. With this, the cloud security software market is expected to reach approximately $102.59 billion by 2029, expanding at a notable CAGR of 17.6% driven by increasing adoption and efficiency.
Given the strong industry outlook, let's examine the basics of the three programs – Security Stock Picks, starting with the third pick.
Stock #3: CrowdStrike Holdings, Inc. (CRWD)
CRWD is a global cybersecurity solutions provider. The company's unified platform provides cloud protection for endpoints, cloud workloads, identity and data. It provides enterprise endpoint and cloud workload security, managed security, security, and vulnerability management.
On November 7, CRWD expanded its distribution partnership with Ignition Technology, bringing the CrowdStrike Falcon® cybersecurity platform to Ignition's partner base in Ireland. Following success in the UK and the Nordics, the two companies continued their partnership to drive cybersecurity transformation in Ireland and stop breaches through unified AI protection across the enterprise.
On the same date, CRWD launched CrowdStrike AI Red Team Services, reestablishing its leadership in protecting the infrastructure, systems and models driving the AI ​​revolution. With CRWD's world-class threat intelligence and elite expertise, these specialized services proactively identify vulnerabilities in AI systems and help mitigate them.
Amid new threats targeting AI applications, CRWD's Elite Services team will assist multiple customers and organizations assess their AI security posture to defend against model manipulation, data poisoning, and other AI-based threats.
Also, on November 6, CRWD announced the acquisition of Adaptive Shield, a leading SaaS Security company. With this acquisition, CRWD will become the only cybersecurity vendor providing unified, comprehensive protection against identity-based attacks across the entire modern cloud ecosystem.
The acquisition will position it as a leading provider of comprehensive protection across complex hybrid environments.
For the second quarter ending July 31, 2024, CRWD's revenue increased 31.7% year over year to $963.87 million. Its income from non-GAAP operations increased 45.7% year over year to $226.79 million. Non-GAAP net income attributable to CrowdStrike was $260.76 million, or $1.04 per share, an increase of 44.9% and 40.5% from the same period of the prior year, respectively.
Furthermore, the company's free cash flow rose 44.3% year over year to $272.23 million.
The company provided guidance for the third quarter of fiscal 2025, forecasting total revenue between $979.20 million and $984.70 million and non-GAAP income from operations expected between $166.70 million and $170.80 million. Also, non-GAAP net income attributable to CrowdStrike is expected to range from $201.20 million to $205.2 million and $0.80 to $0.81 per share.
For the full year, CRWD expects revenue to total $3.89 billion-$3.90 billion. Its income from non-GAAP operations is scheduled to reach $774.70 million – $783.90 million. The company's non-GAAP net income attributable to CrowdStrike is expected to range from $908.80 million to $918.0 million and from $3.61 to $3.65 per share.
Street expects CRWD's revenue and EPS for the first quarter (ending April 2025) to increase 20.2% and 2.1% year over year to $1.11 billion and $0.95, respectively. Also, the company has surpassed consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
CRWD shares have risen 11% over the past month and 68.6% over the past year to close the latest trading session at $350.15.
CRWD's solid fundamentals are reflected in its POWR ratings. POWR ratings are calculated by considering 118 different factors, each perfectly weighted.
CRWD received an A grade for growth and a B grade for quality. It is ranked #15 out of 20 stocks in the B-rated Software – Security industry.
In addition to the POWR ratings we mentioned above, we also have CRWD ratings for Momentum, Value, Stability, and Sentiment. Get all CRWD reviews here.
Stock #2: Zscaler, Inc. (ZS)
ZS operates as a global cloud security company. The company provides the Zscaler Internet Access solution, which allows users, workloads, IoT devices, and OT devices to securely access externally managed applications. They also offer the Zscaler Private Access solution, designed to provide access to managed applications hosted internally in data centers and private or public clouds.
On November 12, ZS introduced the industry's first Zero Trust segmentation solution to provide a more secure, flexible and cost-effective way to connect users, devices and workloads across and within globally distributed branches, factories, campuses, data centers and public spaces. Clouds.
The company's new solution prevents lateral movement from ransomware attacks, reducing spending on firewall and infrastructure.
On October 15, ZS and Okta announced four new integrations created to accelerate the Zero Trust transformation for their joint customers. With this comprehensive, context-sensitive security, companies help customers reduce risk, improve user experience, and enable cross-domain response through shared telemetry and threat intelligence.
During the fourth quarter ending July 31, 2024, ZS revenues increased 30.3% year over year to $592.87 million. Its total non-GAAP earnings rose 31% from a year ago to $481.04 million. The company's income from non-GAAP operations of $127.54 million reflects growth of 48.3% year over year.
Furthermore, the company's non-GAAP net income was $140.60 million and $0.88 per share, up 39.4% and 37.5% from the prior-year quarter, respectively.
According to its guidance for the first quarter of fiscal 2025, ZS expects revenue of $604 million to $606 million. It expects its income from non-GAAP operations to be $114 million-$116 million and its non-GAAP net income to be between $0.62 and $0.63.
Also, for the full fiscal year 2025, the company expects revenue of about $2.60 billion to $2.62 billion. Non-GAAP income from operations ranges from $530 million to $540 million. Non-GAAP net income per share is scheduled to range between $2.81 and $2.87.
For the first quarter ending October 2024, analysts expect ZS's revenue to increase 21.9% year over year to $605.61 million. For the fiscal year (ending July 2025), the company's revenue is expected to grow 20.5% year over year to $2.61 billion. Furthermore, the company has surpassed consensus revenue and EPS estimates in all four trailing quarters.
The stock is up 5.3% over the past month and 11.3% over the past six months to close the last trading session at $200.94.
ZS's promising outlook is reflected in its POWR ratings. The stock has a B for Growth and Sentiment. In the same industry, ZS is ranked #14 out of 20 stocks.
To access additional ratings of ZS for Momentum, Stability, Value and Quality, click here.
Stock #1: Check Point Software Technologies Ltd. (CHKP)
Headquartered in Tel Aviv, Israel, CHKP develops, markets and supports a range of products and services for IT security worldwide. It provides multi-level security architecture, cloud, network, mobile, endpoint intelligence, and IoT solutions.
On November 20, CHKP unveiled the new Check Point Quantum Firewall R82 (R82) and additional innovations for the Infinity Platform. The new R82 delivers new AI engines, post-quantum cryptography, and accelerated DevOps with greater simplicity of data center operations. The new solution will prevent real-time threats and empower customers.
During the third quarter ended September 30, 2024, CHKP's total revenues increased 6.5% year over year to $635.10 million, of which security subscription revenues increased 11.5% year over year to $276.90 million. The company's non-GAAP operating income grew 1.9% year over year to $274 million.
Additionally, the company's non-GAAP net income and EPS were $255.40 million and $2.25, indicating increases of 5.4% and 8.7% from the prior-year quarter, respectively.
Analysts expect CHKP's revenue for the fourth quarter (ending December 2024) to increase 5.3% year over year to $698.43 million. The consensus EPS estimate of $2.65 implies an upside of 3.3% year over year. Furthermore, the company topped consensus revenue and EPS estimates in three of the trailing four quarters.
CHKP stock has risen 16.4% over the past six months and 24.1% over the past year to close the latest trading session at $176.83.
CHKP's POWR ratings reflect its bright prospects. The stock has an overall rating of B, which equates to Buy in our rating system.
The stock has a grade for quality. CHKP is ranked #7 out of 20 stocks in the B-Rated Software – Security industry.
Click here to access additional CHKP ratings (Growth, Sentiment, Value, Stability, and Momentum).
What do you do next?
Get this special report featuring 3 low-priced companies with huge upside potential even in today's volatile markets:
3 stocks will double this year>
Want more great investment ideas?
3 stocks will double this year
CRWD shares were trading at $354.18 per share on Thursday morning, up $4.03 (+1.15%). Year to date, CRWD is up 38.72%, versus a 25.98% rise in the benchmark S&P 500 over the same period.
About the Author: Rukumari Saxena
Rajkumari began her career as a writer, but gradually shifted her focus to financial journalism, leveraging her educational background in commerce. Fascinated by the interaction between business and economic shifts in stocks, she aspires to develop as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. more…
