Palo Alto, CrowdStrike wrap best quarter ever as AI bolsters demand

It’s been a good quarter for tech stocks and cybersecurity leaders Palo Alto Networks And CrowdStrike Both attended the historic rally.

CrowdStrike and Palo Alto posted their best quarters on record, up 95% and 113%, respectively, between April and June, as new AI tools increased demand for more advanced cyber defenses. These headwinds have allowed the industry to dispel initial concerns that it would be rocked by the demise of software as a service and emerge as a key pillar in the age of artificial intelligence.

Behind this demand are attacks by Mythos-class models that can be used by hackers to reveal software vulnerabilities and launch full-scale attacks. This leaves companies scrambling to strengthen their cybersecurity defenses.

“The Mythos moment proves that the world is realizing that AI needs a cybersecurity ecosystem, starting with the most edge AI labs,” CrowdStrike CEO George Kurtz told analysts on an earnings call earlier this month. “This was a Mythos turning point.”

Over the past few months, CrowdStrike and Palo Alto have positioned themselves at the forefront of the AI ​​cyber race through their Mythos model, which was deemed too powerful to be released to the public.

Both companies gained early access to the model as Project Glasswing partners and were early adopters of OpenAI’s Daybreak. The firms have also attended high-profile meetings between major tech giants and the White House about securing AI in this new normal.

Behind their success lies a bet on agency security and identity access management that began long before the Mythos threats.

Earlier this year, Palo Alto closed its $25 billion mega-acquisition of Israeli identity security company CyberArk, while CrowdStrike also invested in startup SGNL.

Companies that now want to protect their platforms from a multitude of highly skilled AI agents that can launch a cyber attack in seconds are turning to cyber leaders for protection.

“From a product standpoint, they are best positioned to continue gaining market share,” said TD Cowen analyst Shaul Eyal. “There are all the necessary ingredients.”

This demand has already begun to show itself.

Palo Alto CEO Nikesh Arora told analysts last month that more than 1,200 customers have reached out to discuss cybersecurity since Mythos, and the company has held 800 meetings over a six-week period.

CrowdStrike’s Kurtz said this month that its Falcon Shield identity protection platform finished its fiscal first quarter with four times annual recurring revenue growth.

“There is a lot of knowledge on this subject now. [businesses] “We don’t have that, and they prefer to partner with market leaders who have been developing business models for decades,” Eyal said.

The rise to prominence of both CrowdStrike and Palo Alto has also intensified investor scrutiny and raised the bar on earnings expectations.

Earlier this month, both stocks fell after strong results and optimistic AI commentary because good wasn’t good enough for investors who want perfection.

“We are concerned that this disappointment could continue in future quarters if investors hope for further momentum in growth post-Mythos/Glasswing and as a result of regulatory/government pressure,” analysts at Bernstein wrote.