‘Tech’ gets more than its share of headlines and hype, and rightfully so. Technology stocks have been major drivers of the market’s gains over the past few years, and everyone is interested in following the leaders. But tech is a broad word; it includes a wide range of categories – which brings us to cybersecurity software.
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A recent note from Morgan Stanley’s software team points out the obvious: that cybersecurity is both an essential segment and an expanding opportunity for growth-minded investors.
Explaining the situation, and the high potential in cybersecurity stocks, the team writes: “Security spend will continue to grow share of IT budgets as threat surface grows, attacks grow in velocity and regulatory environment picks up. Cybersecurity is a ~$270bn market expected to grow at a ~12% CAGR from ’25-’28, making it one of the fastest growing, scaled markets within software. Additionally, surveyed CIOs continue to indicate that cybersecurity spending will grow ~50% faster than software spend as a whole, with it remaining the most defensive area of IT spend. With AI further expanding the attack surface and threat vectors, we see more opportunities for this sector to grow faster than most IT categories.”
With cybersecurity tagged as the leading edge for software growth, MS’s software analysts go on to tap several stocks as potential winners in the field. We’ve opened up the TipRanks database to look up the broader Wall Street view on two of the cybersecurity stocks that the banking giant is bullish on. Let’s take a closer look.
Okta, Inc. (OKTA)
First on the list is Okta, a $16 billion company focused on identity security. Okta provides solutions for both human and non-human identity verifications, including secure processes for agentic AI. The company’s products and services are designed to help the firm’s customers protect system users, employees, and business partners with improved security, while enhancing efficiency.
Okta provides online identity security for both workforces and developers, protecting digital systems from all sides. On the workforce side, the Okta Platform secures identifications and access for employees, contractors, and their various partners. The processes are kept simple, and Okta boasts that its reduced complexity and risk is scalable to enterprises of all sizes. On the developer side, the Auth0 platform simplifies authentication and authorization processes for customer identity, allowing users to build apps and experiences that are secure, and can still meet customers’ evolving needs.
The company has built on its long experience in identity security to develop Okta AI, its newest platform. Okta AI is purpose-built to integrate into the company’s workforce and customer identity clouds, allowing real-time actions based on the latest data and insights. By integrating AI technology into the platform, Okta enhances security, promotes higher productivity, and improves the user experience at the end. By the numbers, Okta AI has proven to cut bot traffic by 90% in 90 days, and to block 79% of automated login attempts.
Turning to the financial side, we find that Okta’s last quarterly report, covering fiscal 2Q26, showed a top line of $728 million, beating the estimates by $16 million and growing 13% from fiscal 2Q25. The company’s earnings came to 91 cents per share by non-GAAP measures, 6 cents per share better than the forecast. Looking ahead to the fiscal third quarter, Okta is predicting revenue in the range of $728 million to $730 million, well above the $723.1 million expected on Wall Street.
When we look at the Morgan Stanley view, 5-star analyst Keith Weiss lays out the company’s success and potential. He writes, “While Okta’s expansion into Identity Governance (OIG) and Privileged Access Management (PAM) are still in earlier innings, the former launched in North America in August 2022 and is now a >$100 million ACV business (>$400 million when including LCM and Workflows) with 1,300 customers. To that point, OIG is only ~7% penetrated within the company’s existing base, highlighting a meaningful upsell opportunity over the next 12-24 months.”
Zooming out, the analyst points out the growth of Okta’s AI features as key attractive features for investors to consider, adding to the above, “Outside of OIG and governance more broadly, the adoption of AI agents requires the need to secure interactions between non-human identities and Okta’s Auth for GenAI solution provides developers with the ability to implement authentication processes as well as other safeguards such as Fine Grained Authorization for RAG to ensure correct document retrieval within customers GenAI applications.”
Weiss goes on to rate OKTA shares as Overweight (i.e., Buy), and his $123 price target implies a 34% upside in the next 12 months. (To watch Weiss’s track record, click here.)
This stock’s 32 recent analyst recommendations include 19 to Buy, 11 to Hold, and 2 to Sell, all adding up to a Moderate Buy consensus rating. The shares are currently priced at $91.96 and their $118.89 average target price indicates room for a 29% share price gain by this time next year. (See OKTA stock forecast.)
Zscaler (ZS)
The next cybersecurity stock we’ll look at here, Zscaler, takes a ‘zero trust’ approach to the field. Zscaler uses AI technology to provide more secure and efficient digital security systems, allowing real-time security across all networks, including IoT and OT connections. The Zero Trust platform allows users to unify their security efforts, avoiding the complexity of interlocking security measures on networks and devices, and doing away with separate firewalls. Zscaler can provide security at any scale, making its platform applicable to any organization. Customers can manage and supervise access and use, segment and secure devices, and discover and classify new devices or approaching threats.
The company’s Zero Trust platform is equally applicable to cloud computing systems, where it provides workload security, with consistent protection against threats and for data. The unified platform has proven to be a cost-effective shield for hybrid cloud architectures, permitting lateral movement while stopping unauthorized access.
Zscaler’s success with its cybersecurity approach is clear from the company’s scale. In the 18 years since its founding, Zscaler has grown into a ~$44 billion leader in its field. The platform handles more than 500 billion daily transactions and prevents over 9 billion daily incidents and policy violations. Major customers, such as GE and Siemens, report large benefits in faster user experiences and cost reduction in infrastructure.
In a move that should interest investors, Zscaler earlier this year announced its intent to acquire the online security provider Red Canary – and just last month, the companies together announced that the acquisition had been completed. The move brings Red Canary’s capabilities in exposure management and agentic AI threat management into Zscaler’s platform. The financial details of the acquisition were not disclosed.
On Zscaler’s financial side, the company recently released its results for fiscal 4Q25, the quarter ending on July 31. The company’s top line in the final quarter came to $719.2 million, growing 21% year-over-year and beating the forecast by over $12 million. The bottom line, reported as a non-GAAP EPS, was 89 cents, 9 cents per share better than had been expected. Zscaler’s annual recurring revenue (ARR) was up 22% year-over-year, to hit $3.02 billion.
Checking in again with Weiss, who also covers ZS, we find the analyst taking a generally upbeat stance. He is impressed by Zscaler’s ability to execute and writes of the company, “We think ZS could cement itself as the next true platform (along with PANW and CRWD), as they continue their growth trajectory in the $34bn SASE market (growing at 24% CAGR) and move beyond network security with Red Canary acquisition (helping AI story). With SASE being only 47% into organizations today, but seeing upwards of 47% penetration by 2027, provides a meaningful tailwind to the name… Zscaler trades at 0.7x EV/26e Rev/g, only 0.1x greater than the average of Cybersecurity, which given better positioning to growth opportunities, leaves us favoring the name.”
Weiss’s Overweight (i.e., Buy) rating is accompanied by a $320 price target that suggests a one-year upside potential for the stock of 12%.
Overall, there are 35 recent analyst reviews here, and the 30-to-5 split favors Buy over Hold, giving the stock its Strong Buy consensus rating. The shares are priced at $286.66 and the average target price, $ 328.35, implies that a gain of 14.5% lies ahead in the coming year. (See ZS stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.