Palo Alto Networks is a well-rounded play on the booming sector.
Zscaler’s focus on internal threats will pay off.
SentinelOne is carving out a niche in AI-driven cybersecurity services.
Over the past few months, the Trump administration's tariffs on America's top trade partners has boosted uncertainty in the economy and in the markets, driving some investors to seek out tariff- and recession-resistant stocks to ride out the storm. Some popular safe havens these investors turned to include the consumer staples, utility, defense, insurance, and healthcare sectors. However, investors tend to overlook the cybersecurity sector, which is also well-insulated from recessions and tariffs because companies won't shut off their digital defenses to save a few bucks.
Last month, I highlighted three cybersecurity leaders that are worth buying and holding for at least the next decade: the cloud-native leader CrowdStrike, the privileged access management leader CyberArk, and the proactive security services provider Tenable. Today, I'll add three more resilient security stocks to that list: Palo Alto Networks(NASDAQ: PANW), Zscaler(NASDAQ: ZS), and SentinelOne(NYSE: S). Here's what you need to know about these three buy-and-hold candidates.
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1. Palo Alto Networks
Palo Alto Networks is one of the world's largest cybersecurity companies. It serves more than 80,000 enterprise customers worldwide, including nine of the Fortune 10 companies. It splits its ecosystem into three main platforms:
Strata for its on-premise network security services.
Prisma for its cloud-based security services.
Cortex for its AI-driven threat detection tools.
Most of Palo Alto's recent growth has been driven by Prisma and Cortex, and it's been locking in its customers with a "platformization" strategy -- which integrates new niche services into its platform to drive smaller stand-alone cybersecurity competitors out of the market. That sticky strategy should widen its moat, increase its pricing power, and drive its long-term growth.
From fiscal 2019 to fiscal 2024 (which ended last July), Palo Alto's revenue grew at a compound annual growth rate (CAGR) of 23%. It also turned profitable on a generally accepted accounting principles (GAAP) basis in fiscal 2023, and its net income rose nearly sixfold in fiscal 2024.
Analysts expect its revenue and adjusted EPS to both rise 14% in fiscal 2025. It isn't cheap at 51 times its forward adjusted earnings, but it's still well-poised to grow over the next decade.
2. Zscaler
Zscaler, like CrowdStrike, only provides its cybersecurity tools as cloud-native services, which are easier to maintain and scale than on-premise appliances. But instead of providing a wide range of security services, Zscaler mainly develops "zero trust" tools which treat everyone -- including a company's CEO -- as a potential threat. It now serves more than 7,500 customers, including 30% of the Forbes Global 2000, and secures over 500 billion transactions daily.
From fiscal 2019 to fiscal 2024 (which ended last July), Zscaler's revenue rose at a CAGR of 48% as its adjusted net income increased at a CAGR of 76%. For fiscal 2025, analysts expect its revenue to grow 23% -- but its adjusted EPS is expected to slip 3% as it grapples with a higher tax rate, tougher competition, and choppier macroeconomic headwinds.
But over the long term, Zscaler should continue growing as more companies focus on internal threats like corporate spies and disgruntled employees. Its stock might seem pricey at 65 times its adjusted forward earnings, but I believe this niche player still has plenty of room to expand.
3. SentinelOne
SentinelOne is an AI-driven cybersecurity company that serves more than 11,000 customers worldwide. It believes its Singularity platform, which is completely powered by AI algorithms, can counter threats more quickly, efficiently, and accurately than teams of human analysts.
SentinelOne operates Singularity across a mix of on-premise and cloud-based services. It claims that the hybrid approach shields it from internet outages.
It's grown like a weed since its IPO in 2021. Its revenue more than doubled annually for three consecutive years -- fiscal 2021, fiscal 2022, and fiscal 2023 (which ended in January 2023) -- and rose 47% in fiscal 2024 and 32% in fiscal 2025. Its business is gradually maturing, but it still maintained an impressive dollar-based net revenue retention rate of 110% in fiscal 2025.
Analysts expect its revenue to rise 23% in fiscal 2026 as it remains unprofitable by both GAAP and non-GAAP measures. It still faces some tough competitive challenges, but it trades at just 6 times this year's sales. Assuming it continues to scale up its business and impress investors with its AI-driven services, it could head a lot higher over the next 10 years.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and Zscaler. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.
