Zacks Industry Outlook Palo Alto Networks, Fortinet, and Okta

For Immediate Release

Chicago, IL – August 7, 2026 – Today, Zacks Equity Palo Alto Networks, Inc. PANW, Fortinet, Inc. FTNT and Okta, Inc. OKTA.

Industry: Security

Link: https://www.zacks.com/commentary/2969533/3-security-stocks-to-bet-on-now-as-industry-trends-show-promise

The Zacks Security industry is experiencing robust demand for cybersecurity products, driven by the increasing need for secure networks and cloud-based applications, especially with the rise of hybrid work environments. This surge in demand is largely due to a significant increase in data breaches, prompting companies to seek comprehensive IT security solutions. The growing need for privileged access security, fueled by digital transformation and cloud migration strategies, is boosting demand for cybersecurity solutions.

Companies, such as Palo Alto Networks, Inc., Fortinet, Inc. and Okta, Inc., are benefiting from these trends. However, the industry's short-term growth prospects may be hampered as organizations delay investments in large and costly technology products due to global economic slowdown concerns, macroeconomic challenges and geopolitical tensions. Increased operating expenses related to hiring new employees and implementing sales and marketing strategies to gain market share are expected to pressure profit margins in the near term.

Industry Description

The Zacks Security industry encompasses companies that provide both on-premise and cloud-based security solutions. These solutions cater to a variety of needs, such as identity access management, infrastructure protection, integrated risk management, malware analysis and Internet traffic management, among others. The industry offers a diverse range of security solutions, many of which can be used interchangeably. 

These solutions are broadly categorized into three types — Computer Security, Cybersecurity and Information Security. Computer Security focuses on safeguarding the software and hardware of computer systems from vulnerabilities. Cybersecurity encompasses areas like web security, network security, application security, container security and information security. Information Security deals with the protection of data in all forms, whether physical or digital.

Major Trends Shaping the Future of the Security Industry

Rising Cyber Threats Drive IT Security Demand: The increasing frequency of cyberattacks is escalating the need for robust security solutions. These threats not only adversely impact individual companies but also pose risks to national security in some countries. Companies in the security industry are actively addressing these issues as there is a growing need for protection against spear phishing, credential-based attacks, account takeovers and ransomware.

Accelerated Digital Transformation Fuels Growth: The shift toward digital transformation and cloud migration is driving the demand for cybersecurity solutions. Sectors ranging from education and entertainment to healthcare are increasingly relying on technology, making them vulnerable to cyberattacks. Public institutions and large companies, as well as smaller organizations with less stringent security measures, are at risk. The deployment of 5G has expanded the Internet of Things (IoT) and artificial intelligence (AI), which, while simplifying operations, will increase cybercrime rates due to greater technological reliance.

Macroeconomic Headwinds May Affect IT Spending: Uncertain macroeconomic conditions and geopolitical issues may lead enterprises to delay significant IT investments. Amid current economic challenges, organizations are likely to conserve cash and reduce spending, which could negatively impact the security market in the short term.

High Operating Expenses Could Hurt Profitability: To remain competitive in the IT security market, companies are continually investing in expanding their capabilities. This includes substantial investments in research and development to enhance product offerings and improve overall security solutions for clients. Firms are heavily investing in sales and marketing, particularly by increasing their sales workforce. These elevated operating expenses, aimed at gaining market share, may reduce profit margins in the near term.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Security industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #68, which places it among the top 28% of nearly 250 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. The industry’s bottom-line estimates for 2026 have moved up to $1.60 from earnings of $1.42 expected a year ago.

Industry Outperforms S&P 500 and Sector

Over the past year, the Zacks Security industry has outpaced the broader Zacks Computer and Technology sector and the S&P 500 composite.

The industry has surged 71.6% during this period, while the broader sector and the S&P 500 have soared 25% and 33.3%, respectively.

Industry's Current Valuation

On the basis of the forward 12-month price-to-sales ratio (P/S), which is a commonly used multiple for valuing Security stocks, the industry is currently trading at 18.27, higher than the S&P 500’s 5.07 and the sector’s 6.65.

Over the last five years, the industry has traded as high as 21.44X and as low as 7.59X, with a median of 12.51X.

3 Security Stocks to Buy

Fortinet: It is a provider of network security appliances and Unified Threat Management (UTM) network security solutions to enterprises, service providers and government entities worldwide. Currently, Fortinet sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fortinet's aggressive product roadmap positions it to capitalize on escalating cybersecurity demands throughout 2026. The rollout of FortiOS 8.0 with AI-driven security, next-generation SASE and quantum-safe capabilities, alongside FortiGate 3500G and 400G firewalls, addresses critical enterprise needs for unified security platforms. Management'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.

Fortinet's ongoing investments in sales capacity, cloud infrastructure and AI capabilities are positioned to generate meaningful operating leverage improvements throughout 2026 and beyond. The company's strategic hiring initiatives completed over recent quarters create productivity advantages as field teams mature and reach full effectiveness. Investments in automation and cloud-native delivery models reduce incremental costs while improving customer experience and retention. The transition toward higher-margin subscription and service revenue streams enhances the profitability trajectory.

The Zacks Consensus Estimate for Fortinet’s 2026 earnings has been revised upward by 7.9% to $3.40 per share over the past seven days. FTNT shares have surged 72.6% over the past year.

Palo Alto Networks: It offers network security solutions to enterprises, service providers and government entities worldwide. The company has been benefiting from continuous deal wins and the increasing adoption of its next-gen security platforms, which are attributable to the rise of the hybrid work trend and the heightened need for stronger security. Palo Alto Networks has continued to innovate, focusing on AI, automation and cloud security, to stay ahead of the competition. Its partnership with NVIDIA to develop AI-driven private 5G security solutions highlights its commitment to emerging technologies and next-generation security demands.

The company’s platformization strategy has also been a game-changer. Instead of relying on one-off product sales, Palo Alto Networks has transitioned to a bundled cybersecurity platform approach, which enhances recurring revenues and customer retention. This strategy ensures financial stability and predictable growth.

The Zacks Consensus Estimate for this Zacks Rank #2 (Buy) company’s fiscal 2027 earnings has remained unchanged at $4.08 per share over the past 60 days. PANW’s shares have soared 110.8% over the past year.

Okta:It is a leading provider of identity security for enterprises. Okta’s prospects benefit from an expanding clientele, driven by an innovative product pipeline and strong demand for Identity solutions. OKTA carries a Zacks Rank #2 at present.

Okta’s strong portfolio includes new offerings such as Okta Identity Governance (OIG), Okta Privileged Access, Okta Device Access, Identity Security Posture Management, Identity Threat Protection with Okta AI, Fine-Grained Authorization, Auth0 for AI Agents and Okta for AI Agents. These new solutions are helping OKTA gain market share and drive top-line growth.

Okta had more than 20,000 total customers at the end of the first quarter of fiscal 2027. Its customers with more than $100,000 in annual contract value (ACV) increased 6% year over year to 5,180.

The consensus mark for Okta’s fiscal 2027 earnings has remained unchanged at $3.83 per share over the past 60 days. Shares of OKTA have soared 50.4% over the past year.

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