Zscaler, Palo Alto, Cisco Face Slowdown In Key Cybersecurity Market

One of the fastest growing markets for cybersecurity stocks — Secure Access Service Edge, or SASE, — has slowed down, says Dell'Oro Group. That's not good news forZscaler (ZS), Palo Alto Networks (PANW) and some other companies.

In the June quarter, the SASE market climbed 9.7% to $2.3 billion, said Dell'Oro Group. Meanwhile, in the year-earlier period, the SASE market jumped 37% to $2.01 billion. In the March quarter of this year, the SASE market rose 23%.

"While the SASE market has felt the effects of economic uncertainty, the fundamentals remain strong," said Mauricio Sanchez, a Dell'Oro analysts in a report.

"We anticipate a rebound in the coming year as enterprises shift from short-term caution to longer-term investment in cloud-based security and networking solutions."

Cybersecurity Stocks: SASE Leaders

He added that "single-vendor SASE solutions have emerged as a clear winner."

Zscaler, Cisco Systems (CSCO), Palo Alto Networks, Broadcom (AVGO), Fortinet (FTNT) and Netskope are among the biggest SASE vendors.

SASE involves two critical technologies. Security service edge (SSE) refers to creating a unified security system for a network.

The other technology, software-defined wide area networking, also known as SD-WAN, focuses on maintaining an efficient and secure network and serves as a replacement for private telecom services going to branch offices.

The SASE market took off in 2020 as businesses scrambled to maintain their corporate networks after the sudden shift to remote work during pandemic lockdowns. Many companies, such as Amazon.com (AMZN), are requiring employees to return to offices full-time.

Cybersecurity stocks rank No. 134 out of 197 industry groups tracked by IBD.

Zscaler stock has retreated 22% in 2024. Palo Alto stock has advanced 15% while Fortinet stock has climbed 29%. Cisco stock is about even.