The tense geopolitical environment and accelerated digitization of the economy are unsurprisingly coming with an increasing number of highly damaging cyberattacks and the momentum is unlikely to slowdown any time soon.

The next growth driver is already visible with the emergence of the Internet-of-Things (IoT), powered by 5G networks. IoT will spark a massive rise in the number of new vulnerabilities as billions of new devices are expected to be connected and to boast smart features in the future, including autonomous vehicles, wearable medical devices, voting machines, smart homes…

Against this backdrop, all companies and organizations face massive intrusion threats, suggesting they will have no choice but to roll out Zero Trust security architectures that combine user identification and access management with device authentication and protection and to massively invest in detection tools and automated response solutions.

Rising data compliance requirements in several parts of the world where governments impose to store and process data locally are another major challenge and opportunity for the cybersecurity industry.

From a financial standpoint, profitability of cybersecurity is lagging that of other software segments but a combination of strong revenue growth and M&A should give a boost to margins and earnings growth and support valuations across the board.

Finally, M&A is adding some spice to the investment case. The growth outlook as well as the cybersecurity industry fragmentation are attracting both private equity firms seeking to extract synergies by combining various cybersecurity assets and Tech companies seeking to offer end-to-end security solutions.


Digital Security: The Calm After The Storm

The cybersecurity sector had a rough ride last week as Palo Alto Networks (a portfolio company), one of the industry leaders, announced an underwhelming billings guidance for both the current quarter (only +2-4%, after +16% in CQ4) and the full year (+10-11% vs +16-17% previously). Amid healthy cybersecurity spending, Palo Alto’s figures clearly came as…

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Digital Security: With The Acquisition Of Splunk, Cisco Emerges As A New Cybsersecurity leader

Eighteen months after initial reports of M&A talks, networking giant Cisco announced the takeover of data analytics and cybersecurity software company Splunk in a massive $28 billion deal (both Cisco and Splunk are portfolio companies). The 32% premium is in line with recent sector transactions and the valuation multiple (6x revenue) is in the low-end…

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Issuer / Rating

UBS / S&P A+

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