Investing.com – The cybersecurity sector is expected to see improving fundamentals in 2025, given continued demand for platform-based solutions, according to Goldman Sachs.
Companies like Fortnite Inc (NASDAQ:), CrowdStrike Holdings Inc (NASDAQ:), and Cloudflare Company (NYSE:) saw big gains in 2024, with stock increases of 63%, 37%, and 31%, respectively.
These leaders have been rewarded for their platform-driven approaches, which align the CIO's increasing focus on total cost of ownership and vendor consolidation. Despite this, point product companies love Okta company (NASDAQ:) and Zscaler (NASDAQ:) lagged, with shares down 12% and 17%, respectively.
Goldman Sachs upgraded Cloudflare Inc (NYSE:) to “buy” with a price target of $140, given continued improvements in sales productivity and growing momentum in AI-driven developer services. She expects a 28% upside for the stock, supported by new monetization opportunities in edge computing and AI inference.
While Check Point (NASDAQ:) was downgraded to 'neutral' due to expected EPS growth pressures in 2025. While the company is expected to benefit from a refresh cycle and additional investments under new leadership, Goldman warned that meaningful revenue growth could… Not achieved until 2026.
Other notable forecasts include Fortinet, which maintains a “buy” rating with 20% upside potential. The company is well positioned to benefit from the improvement in the firewall modernization cycle, with analysts highlighting the extensive cross-selling opportunities that Fortinet offers in its networking portfolio.
The cybersecurity sector exits 2024 trading at a 25% premium to the broader software industry based on enterprise value-to-sales multiples. This assessment reflects favorable long-term growth drivers for the sector, including increased risk of hacking, increased regulatory scrutiny, and the adoption of advanced artificial intelligence technologies.
While the sector is expected to grow by 9% annually in 2025, down slightly from 2024, the report notes that slowing trends are stabilizing. This is likely to pave the way for positive revenue changes in the coming quarters.
GS cited potential competitive pressures from hyper-agile companies like Microsoft (NASDAQ:) and Google (NASDAQ:), which are expanding their security offerings. The report also noted geopolitical and macroeconomic uncertainty, especially in key markets such as Europe.
However, the broader outlook for the industry remains optimistic.
As cybersecurity companies navigate a volatile macro environment, companies with strong platform strategies and diversified offerings appear better positioned to excel in 2025 and beyond.
