In 2025, the cybersecurity sector witnessed a surge in merger and acquisition activity, and analysts anticipate this momentum will continue into 2026. According to TD Cowen’s Shaul Eyal, the prevailing low-interest-rate environment is likely to fuel further consolidation in the industry.
Notable acquisitions from last year include Alphabet’s all-cash purchase of Wiz for $32 billion, Palo Alto Networks’ acquisition of CyberArk for $25 billion, and ServiceNow’s $7.75 billion deal for Armis. Other strategic moves involved Palo Alto acquiring Chronosphere for $3.35 billion, while CrowdStrike made headlines with its acquisitions of Pangea and Onum. Furthermore, Zscaler expanded its offerings by acquiring Red Canary and SPLX, focusing on enhancing its managed detection and response services.
### Strategic Shifts in Cybersecurity
Leading firms like Palo Alto, CrowdStrike, and Zscaler are strategically building comprehensive cloud-based cybersecurity platforms. Analysts highlight a growing trend among organizations to streamline their security purchases, opting for fewer vendors to mitigate complexity and enhance their return on investment. Jefferies analyst Joseph Gallo indicated that this shift is expected to keep cyber demand robust, which may favor larger platform providers and prompt additional mergers of smaller firms.
Recent reports suggest Cisco Systems is eyeing a $2 billion acquisition of Israel-based Axonius, further illustrating the competitive landscape. Cisco previously acquired Splunk for $28 billion, showcasing its commitment to expanding its cybersecurity portfolio.
Despite a strong start in 2025, cybersecurity stocks faced challenges and underperformed compared to the S&P 500, which rose 16% throughout the year. Notable performers included Cloudflare, which soared 83% due to its strong focus on Secure Access Service Edge (SASE) solutions, enhancing security for remote work environments.
Meanwhile, CrowdStrike experienced a 37% gain but struggled in the latter half of the year, mirroring trends for Zscaler, which concluded 2025 with a 24% increase. Okta and Palo Alto Networks saw minimal growth, while Fortinet posted a decline of 16%.
As of early January 2026, the cybersecurity sector ranked poorly within broader industry classifications, prompting analysts to speculate on potential recoveries for key players like Palo Alto Networks.
### The Role of AI in Cybersecurity Evolution
Looking ahead, analysts foresee an increase in artificial intelligence-related acquisitions. Both cybersecurity companies and cybercriminals are expected to leverage generative AI. This technology could significantly enhance the speed of threat detection and response, while also addressing the pressing skills shortage within security operations centers.
JPMorgan’s Brian Essex noted that AI has accelerated the complexity of threats in the cyber landscape, putting more sophisticated tools in the hands of less experienced actors. As enterprise AI initiatives move into production, areas like network security, endpoint protection, and identity management are slated to receive heightened focus.
For those interested in ongoing updates on cybersecurity, artificial intelligence, and cloud computing trends, following industry analysts and experts can provide valuable insights.
