The cybersecurity space has been witnessing a significant rally this year, sidetracking the fear that the massive adoption of artificial intelligence (AI) technologies will cannibalize traditional software developers. This space focuses on companies that offer integrated protection against evolving security threats to safeguard applications, networks and cloud computing environments.
Globally, the growing threat of cyber attacks has made investment in this space a "must-have" expense priority for enterprises, benefiting pure-play cybersecurity firms. The Zacks-defined Cybersecurity industry has provided 62.7% returns year to date compared with the broad-market benchmark of the S&P 500 Index’s returns of 10.4%.
At this stage, we recommend three cybersecurity firms with a favorable Zacks Rank for investment in the second half of 2026. The companies are: Fortinet Inc. FTNT, Okta Inc. OKTA and SentinelOne Inc. S. Each of our picks currently carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our three picks year to date.
Image Source: Zacks Investment Research
Two Recent Catalysts
Three major U.S. federal security organizations and several other government agencies internationally issued warnings against possible Russian cyber threats. The agency’s directives issued notification for enterprises (both public and private) to implement strict authentication and data encryption and monitor measures.
These agencies are alarmed that Russia could target networking equipment in critical infrastructure sectors like communications, defense industrial base, energy, financial services, government services and facilities, and healthcare and public health.
On July 14, Arvind Krishna, CEO of International Business Machines Corp. IBM said, on the company’s earnings conference call that its clients are inclining toward capital spending for currently supply-shortened AI infrastructure products like severs, memory and storage.
Krishna said that "rapidly-evolving, industry-wide cybersecurity concerns" forced IBM’s customers to change their priority. A shift toward higher AI infrastructure hardware purchase is forcing these companies to spend more on cybersecurity to protect their networks, systems and equipment.
Fortinet Inc.
Zacks Rank #1 Fortinet is benefitting from a strong product roadmap built on FortiOS 8.0, AI-driven security, next-generation SASE, quantum-safe capabilities and new FortiGate 3500G/400G firewalls. FTNT’s aggressive product roadmap positions the company to capitalize on escalating cybersecurity demands throughout 2026.
FTNT's strategic focus on expanding Unified SASE, Secure SD-WAN, FortiSASE and Security Fabric integration through a single FortiOS operating system creates compelling migration opportunities from legacy competitors.
The network security market is experiencing structural expansion as enterprises prioritize AI, OT, edge security, SASE, cloud protection and vendor consolidation, creating substantial growth runway for FTNT in 2026.
Fortinet has an expected revenue and earnings growth rate of 14.7% and 14.1%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 0.3% over the last 60 days.
Okta Inc.
Zacks Rank #2 Okta operates as an identity partner in the United States and internationally. OKTA offers a suite of products and services used to manage and secure identities. Okta’s expanding portfolio across governance, privileged access, device access, authorization, posture management, and AI-driven threat protection continues to support customer wins and cross-sell.
OKTA is extending its identity layer to secure AI agents and other non-human identities, which management views as a growing source of enterprise risk. Okta for AI Agents became generally available during the first quarter of fiscal 2027, while Auth0 for AI Agents targets builders embedding identity into agent workflows.
OKTA noted these products are still early and not material to results, but AI-agent discussions are already raising Okta’s strategic position with customers and supporting broader platform adoption. OKTA also highlighted that new products represented about 25% of first-quarter bookings and that deals including new products have shown about a 40% ACV uplift, reinforcing the long-term cross-sell potential as agent deployments scale.
Okta has an expected revenue and earnings growth rate of 9.5% and 9.4%, respectively, for the current year (ending January 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 1.1% over the last 60 days.
SentinelOne Inc.
Zacks Rank #2 SentinelOne’s Singularity platform provides AI-native security across endpoint, cloud, identity, data, and AI security through one interface. The automation-led approach of S is expanding enterprise adoption, while emerging solutions now represent about half of ARR.
SentinelOne’s product advances in Purple AI, Prompt Security, AI SIEM, cloud security, and Hyperautomation support a broader platform story. ARR, high-value customers, net new ARR, and RPO continued to rise in the fiscal first quarter. Liquidity and adjusted free cash flow also improved.
Strategic acquisitions like KSG, PingSafe, Prompt Security, and Observo have expanded S’ addressable market. Prompt strengthens generative and agentic AI security, while Observo complements the data and SIEM portfolio. SentinelOne’s partner base is also expanding through MSSPs, incident responders, VARs, hyperscalers, and OEM relationships.
Okta has an expected revenue and earnings growth rate of 9.5% and 9.4%, respectively, for the current year (ending January 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 1.1% over the last 60 days.
SentinelOne has an expected revenue and earnings growth rate of 19.9% and 80%, respectively, for the current year (ending January 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 2.9% over the last 60 days.
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International Business Machines Corporation (IBM): Free Stock Analysis Report
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Okta, Inc. (OKTA): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).