Top 5 Growth Stocks in Cybersecurity

In this article, we will be taking a look at the top 5 growth stocks in cybersecurity. To read our detailed analysis of the cybersecurity sector, you can go directly to see the Top 10 Growth Stocks in Cybersecurity.

5. Darktrace plc (OTC:DRKTF)

Revenue Growth Over the Past Year as of March 9: 45.73%

Number of Hedge Fund Holders: N/A

Darktrace plc (OTC:DRKTF) is a developer of cyber-threat defense technology solutions in the UK, US, Europe, and internationally. The company is based in Cambridge, UK.

On January 25, Darktrace plc (OTC:DRKTF) shares were upgraded from Equal Weight to Overweight by Morgan Stanley’s George Webb.

Between 2021 and 2022, Darktrace plc (OTC:DRKTF) saw its revenue increase by almost 50% from $285 million to $415 million. At present, the company’s revenue growth rate is amongst the highest in the cybersecurity sector, standing at 45.7% year-over-year as of March 9. In 2022, the company’s gross profit also came in at $370.6 million.

4. Cloudflare, Inc. (NYSE:NET)

Revenue Growth Over the Past Year as of March 9: 48.57%

Number of Hedge Fund Holders: 40

Cloudflare, Inc. (NYSE:NET) is a cloud services provider based in San Francisco, California. The company provides an integrated cloud-based security solution.

Andrew Nowinski at Wells Fargo holds an Overweight rating on Cloudflare, Inc. (NYSE:NET) shares as of February 13.

Over the past few years, Cloudflare, Inc. (NYSE:NET) has maintained its net revenue retention rate consistently above 100%. In 2020, it stood at 114%, and in 2021, it stood at 121%. This indicates that the company generated more revenue from existing customers. In the fourth quarter, the company’s revenue stood at $274.7 million, beating estimates by $632,420.

There were 40 hedge funds long Cloudflare, Inc. (NYSE:NET) in the fourth quarter, with a total stake value of $635 million.

3. Zscaler, Inc. (NASDAQ:ZS)

Revenue Growth Over the Past Year as of March 9: 56.83%

Number of Hedge Fund Holders: 42

Zscaler, Inc. (NASDAQ:ZS) is a systems software company based in San Jose, California. The company operates a cloud security company.

A Buy rating was reiterated on Zscaler, Inc. (NASDAQ:ZS) shares on March 3 by T. Michael Walkley at Canaccord.

Zscaler, Inc. (NASDAQ:ZS) has posted revenue growth consistently for a while, In 2022, the company grew revenues by 62% year-over-year. In 2021, revenues grew by 56% year-over-year, and in 2020, they grew up 42% year-over-year. This shows a clear and consistent trend of revenue growth from the company, representing its financial strength even today.

Zscaler, Inc. (NASDAQ:ZS) was found among the 13F holdings of 42 hedge funds in the fourth quarter. Their total stake value was $540 million.

Artisan Partners, an investment management company, mentioned Zscaler, Inc. (NASDAQ:ZS) in its fourth-quarter 2022 investor letter. Here’s what the firm said:

“Zscaler, Inc. (NASDAQ:ZS) provides cloud-based Internet security solutions. In the quarter, it announced 54% revenue growth and expected growth of nearly 40% in 2023 (ahead of expectations). Despite solid fundamental momentum, shares have underperformed this year as investors have grown concerned about slowing demand for enterprise software as the broader global economy slows. We believe the dual trends of rising security vulnerability and increased enterprise digitization will lead to sustained demand, even in a recession. Cybersecurity remains a top concern for businesses and governments alike as cyberattacks can have devastating financial and reputational consequences. Meanwhile, managing the security needs of legacy on-premise applications, a growing number of cloud-based applications (Office 365, Salesforce, etc.) and a more remote workforce (versus pre-pandemic) make operating IT infrastructures increasingly complex. Give the attractive long-term outlook and depressed valuations, we added to the position.”

2. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)

Revenue Growth Over the Past Year as of March 9: 58.29%

Number of Hedge Fund Holders: 66

CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a provider of cloud-delivered protection across endpoints and cloud workloads, identity, and data. The company is based in Austin, Texas.

Taz Koujalgi at Wedbush holds an Outperform rating on CrowdStrike Holdings, Inc. (NASDAQ:CRWD) shares as of March 8.

CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a leader in the cybersecurity space. As of this March, its customers include about 556 of the Global 2000 and 15 of the top 20 US banks. The company’s market share in endpoint security software stood at 17.7% as of March 8.

Our hedge fund data for the fourth quarter shows 66 funds long CrowdStrike Holdings, Inc. (NASDAQ:CRWD). Their total stake value was $1.6 billion.

Baron Funds, an investment management company, mentioned CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its fourth-quarter 2022 investor letter. Here’s what the firm said:

“CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a market leading cloud-native cybersecurity vendor. Shares declined on the back of a weaker-than-expected earnings report, in which revenue beat Street expectations but net new annual recurring revenue (ARR) slightly missed consensus due to elongated sales cycles that impacted deals with small- and medium-sized businesses (SMB) and phased start dates with larger customers. For example, instead of 100,000 end-points starting on day 1, start 75,000 on day 1 and 25,000 six months later. For fuller context, in the fiscal third quarter, revenue grew 53%, ARR grew 54%, net new ARR was $198 million vs. expectations about $20 million higher, and the business generated 30% FCF margins. Accounting for the net new ARR miss, the company offered conservative initial guidance for fiscal year 2024 (ending January 2024), with ARR growth in the low 30s, subscription revenue growth in the low-to-mid 30s, and FCF margins around the 30% level. While this was a painful reset, CrowdStrike noted its SMB win rates had improved, enterprise win rates remained constant, its gross and net retention rates are at best-in-class levels, and its emerging products were experiencing rapid adoption. Despite short-term weakness, Morgan Stanley’s fourth quarter CIO survey showed security software projects remained the top CIO priority, and our research continues to indicate that CrowdStrike is one of the few true platforms in the security space.”

1. SentinelOne, Inc. (NYSE:S)

Revenue Growth Over the Past Year as of March 9: 114%

Number of Hedge Fund Holders: 38

SentinelOne, Inc. (NYSE:S) is a cybersecurity provider in the US and globally. The company is based in Mountain View, California.

On February 9, T. Michael Walkley at Canaccord initiated coverage of SentinelOne, Inc. (NYSE:S) shares with a Buy rating.

Between October 2021 and October 2022, SentinelOne, Inc.’s (NYSE:S) gross profit increased from $98 million to $233 million, representing a growth of 138% year-over-year. The company’s customers also increased by 55% over the same period.

A total of 38 hedge funds were long SentinelOne, Inc. (NYSE:S) in the fourth quarter, with a total stake value of $731 million.

See also 10 Best Cybersecurity Stocks To Buy Under $20 and 17 High Growth Low PE Stocks.