A recession could be looming. As economic uncertainty prevails, businesses generally cut back on spending. However, the demand for cybersecurity products and services remains strong despite economic concerns beginning to negatively impact other parts of the tech sector. This has led to the belief that the cybersecurity industry may be recession resilient.

For example, in late August, Cisco Systems Inc., a networking and communications giant, revealed that its security business accelerated faster than any other segment and increased $100 million above what analysts were expecting. The company’s CEO, Chuck Robbins, announced that it will be staffing up its security segment and raising its prices to keep up with rising costs.¹

Cybersecurity spending is on the rise as more businesses are prioritizing cybersecurity. Cybersecurity incidents can shut down businesses for an exorbitant amount of time, create immense financial disruptions, and impact customer loyalty.

According to a survey conducted by Travelers Co., 59% of businesses are worried about cyberthreats and 57% of businesses are concerned about economic uncertainty. One of the main reasons why cybersecurity is a top concern for businesses is because more small businesses are becoming targets of cyber criminals. A recent report by Hiscox states that companies with an annual revenue between $100,000 to $500,000 are just as likely to be targeted as companies with an annual revenue between $1.0 million and $9.0 million.

Ransomware attacks are also increasing. The report states that 19% of the responding businesses reported ransomware attacks—up from 16% a year ago. Of those businesses targeted by ransomware attacks, two-thirds of them paid the attackers.²

Zscaler’s Positive Outlook

Zscaler, Inc. continues to see solid demand for its flagship Zero Trust Exchange platform. The CEO of the company, Jay Chaudhry, said in an earnings release that demand remains decent despite macroeconomic headwinds.

While Zscaler provides a rosy outlook, analysts are giving rave reviews to the company. According to Andrew Nowinski, an analyst at Wells Fargo, the recent financial results stood out among other cybersecurity firms and had the strongest guidance. It’s believed that Zscaler is purpose-built for exactly the type of economic environment currently in place. It can simplify cybersecurity infrastructure for its clients and, at the same time, lower costs.³

IronNet’s New Cybersecurity Solution

IronNet, Inc., a solutions provider for cyberattacks, recently launched a new solution named IronRadar. This solution is designed to automatically update customers’ cybersecurity tools with malicious indicators for adversary infrastructure. It had a 98% accuracy during the six months of testing.

IronRadar fingerprints a server using an innovative process and establishes if it’s a command and control (C2) server while the servers are being stood up. This could take place even before the cyberattack is initiated. At its core, IronRadar enhances data and updates proactively to block adversarial infrastructure.⁴

Investing in the Cybersecurity Industry with CYBR ETF

If you’re looking to invest in a cybersecurity ETF, consider Canada’s first cybersecurity ETF, Evolve Cyber Security Index Fund (TSX Ticker: CYBR). CYBR ETF invests in global companies involved in the cyber security industry. For more information, visit the fund page here: https://evolveetfs.com/product/cybr/.

CYBR ETF Portfolio Strategy and Activity

For the month, Zscaler Inc. made the largest contribution to the Fund, followed by Fortinet Inc., and Cyberark Software Ltd. The largest detractors to performance for the month were Gds Holdings Ltd., followed by Darktrace Plc and Okta Inc. By weight, the Fund’s largest geographic exposure was to the United States, followed by Israel and Canada.

For the latest information on cybersecurity investing and industry updates on related investment products, sign up for our weekly newsletter here.

 

Sources:

1. Novet, J., “Why cybersecurity stocks are beating the market,” CNBC, September 1, 2022; https://www.cnbc.com/2022/09/01/cybersecurity-stocks-are-beating-the-market-in-a-volatile-economy.html.
2. Gosselin, K., “Cyberattacks a top concern across all business sizes, economic uncertainty a close second, new survey shows,” TechXplore, September 27, 2022; https://techxplore.com/news/2022-09-cyberattacks-business-sizes-economic-uncertainty.html.
3. Krause, R., “Zscaler Results Top Wall Street Estimates, Thanks To Cloud Growth,” Investor’s Business Daily, September 9, 2022; https://www.investors.com/news/technology/zscaler-stock-zscaler-earnings-zs-stock-q22022.
4. “IronNet Launches IronRadar to Automatically Block Adversary Infrastructure,” IronNet Inc., September 29, 2022; https://ir.ironnet.com/news-events/press-releases/detail/69/ironnet-launches-ironradar-to-automatically-block-adversary.

 

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