Investors are about to get a read on the durability of the soaring rally in cybersecurity stocks when two of the industry’s major players report earnings in the coming days.
Palo Alto Networks Inc., whose shares leaped 57% last month alone, releases its results after the market close on Tuesday. CrowdStrike Holdings Inc., which soared 64% in May, reports on Wednesday. Both stocks are coming off their best months ever, trading at records after gaining roughly 60% in 2026, and are among the 30 top performers in the S&P 500 Index this year.
The gains are being fueled by broad enthusiasm for technology companies that are deemed artificial intelligence winners. And it marks a shift in sentiment from the start of the year, when cybersecurity shares broadly slumped on fears about potential disruption from Anthropic PBC’s Mythos model.
“People came to their senses and realized, no, this is not going to stop people from buying security, it actually could create more demand for security,” said Jordan Klein, managing director at Mizuho Securities USA. If Wall Street sees solid numbers from Palo Alto and CrowdStrike this week, “it’s going to be off to the races.”
Palo Alto shares fell as much as 4.4% in early trading Tuesday, while CrowdStrike shares shed 3.2%.
Much of the cybersecurity group is running hot right now, making it one of the true bright spots in the tech landscape. The Global X Cybersecurity ETF, ticker BUG, is up 23% this year, adding about $280 billion in market value, after surging 37% in May, its best month since it was launched in 2019. By comparison, the iShares Expanded Tech-Software ETF, ticker IGV, is down 1.3% in 2026, as software shares slump. The tech-heavy Nasdaq 100 Index has gained 21% since the start of January.
To see how strong earnings and an encouraging outlook can further juice these stocks, look at Fortinet Inc. Its shares shot up 20% on the day after its early May earnings as the company raised its billings forecast. That bodes well for Palo Alto and CrowdStrike, Klein said, since the report “brought people back very quickly thinking, you know, this was a great print and that could happen at other companies that do what they do.”
Analysts expect CrowdStrike to post 23% revenue growth and a 93% leap in net income in its most recent quarter, which ended April 30. Palo Alto, meanwhile, is expected to show 29% revenue growth and a 25% rise in net income in its April 30 quarter.
The divide between perceived winners and losers among cybersecurity stocks is stark, as Zscaler Inc. demonstrated last week. The security software maker gave a weaker-than-expected revenue forecast, and the stock tanked 32% the next day, its worst session ever.
“Zscaler lacks identity security for AI agents in its suite, which may limit larger order closing,” Bloomberg Intelligence analyst Mandeep Singh wrote in a May 26 note. “It also faces lower net retention rates as larger peers including Palo Alto Networks and Fortinet offer bundled secure access service edge platforms.”
To Singh’s point, the leaders in cybersecurity generally are the largest companies with the most pricing power and that are seen as benefiting from AI. At the other end of the spectrum are firms that investors think will struggle to gain market share. More than a third of the 30 companies in the BUG ETF are in the red this year, some significantly so, with the worst performers Zscaler, Digital Arts Inc. and Rapid7 Inc. losing between 36% and 46%.
“The performance gap reflects a preference for best-of-breed, large cap platform leaders who benefit from vendor consolidation trends and are viewed as more durable amid AI disintermediation,” Jefferies analyst Joseph Gallo wrote in a note dated May 26. “Heading into off-quarter prints, we think expectations have risen and believe focus will be on the tangibility of AI.”
Of course, regardless of whether the reports are strong, the extremity of Palo Alto’s and CrowdStrike’s recent rise could put a lid on the stocks. Even a beat-and-raise could spur selling if investors see it as an opportunity to take profits on their gains from the last month.
Luke Rahbari, a portfolio manager of the Rational Equity Armor Fund, which holds Palo Alto shares, isn’t expecting the earnings to trigger any market blowouts like Dell Technologies Inc.’s 47% surge in the last two sessions based on strong demand for its AI servers. But he does think top cybersecurity companies will boost their outlooks, and possibly raise prices, given the power they have now.
“I don’t think any of these cybersecurity names are going to have the kind of pops you saw from Dell,” he said. “What they’re doing is super important in what’s going on and I think they’ve got a really great moat in what they’re doing. Cybersecurity’s so important now — and getting more important.”
Tech Chart of the Day
A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts.
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
More Fixed Income Topics >
