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It's no secret that criminals are using AI to streamline computer hacks in hopes of emptying out people’s bank accounts (never has it looked more appealing to stash cash under the mattress!). Cybersecurity executives, meanwhile, are rubbing their hands with glee at the influx of business they expect to get as a result.
“What I see is AI driving structural demand for cybersecurity that compounds, not decelerates,” said CrowdStrike CEO George Kurtz on a conference call Wednesday night. Similarly, on Wednesday Netskope CEO Sanjay Beri said, “The rise of AI is exponentially increasing the pace and potency of attacks and the misuse of sensitive data.…This is the era that Netskope was built for.” Investors have responded, driving up stocks of companies like CrowdStrike and Palo Alto Networks by more than 50% this year. And yet these companies’ growth rates don’t show as much improvement as this boom time in cybercriminality should be creating.
CrowdStrike’s top-line growth accelerated markedly in the April quarter, to be sure, reaching 26%, from 23% in the fourth quarter. But the company forecast a return to 23% growth in the second quarter and a similar rate for the full year, which would be just a percentage point of improvement from last fiscal year. Meanwhile, Netskope’s growth slowed to 28% in the quarter from 32%, the company reported on Wednesday, and the company projected a further slowing in the second quarter. Its stock collapsed more than 20% in after-hours trading, while CrowdStrike fell 10%.
It was a similar story with Palo Alto Networks, which reported on Tuesday that its revenue growth, excluding contributions from recent acquisitions, slowed in the April quarter by a point to 14%. Palo Alto’s stock fell 5.6% today. So what gives?
It may be a bit early to judge things. On Tuesday’s earnings call, Palo Alto Networks CEO Nikesh Arora said a newly introduced “AI Defense” product had drawn a strong reaction from customers, with more than 1,200 “asking to meet us.” Moreover, the company’s annualized revenue from newer technologies is growing 28% excluding the impact of acquisitions, which implies its long-term growth rate should improve—even without the benefit of buying other companies (more on Palo Alto Networks here).
CrowdStrike’s Kurtz also talked up the “deluge of customers” his company heard from after Anthropic announced its Mythos model, which we’re told threatens everyone’s systems. Even assuming the real growth is still to come, it may take a while to show up in the topline. Investors may have gotten ahead of themselves.
About That ‘Record’ SpaceX IPO
Elon Musk’s SpaceX is getting a lot of media attention for its upcoming giant IPO, where as it confirmed Wednesday, it plans to raise $75 billion. Various outlets reported that would be a “record” for IPOs. Indeed, data from Dealogic shows that all the companies that went public in the U.S. last year raised $77.5 billion between them!
But SpaceX’s “record” is looking a bit shabby next to Google’s equity raising this week, which increased by $4.75 billion to $84.75 billion in total, the company said late Tuesday. That includes $34.75 billion of new stock sold earlier this week, $10 billion sold to Berkshire Hathaway and $40 billion still to be sold.
The only difference is that SpaceX will raise its $75 billion in its public debut, whereas Google is selling new stock after being public for two decades. But in terms of tapping the public market for funds, Google’s deals are bigger than SpaceX’s.
In Other News
• Meta Platforms is expanding its AI agent offerings for businesses as part of its broader push to make money from AI products and services. At its Conversations business messaging conference on Wednesday, Meta announced it is bringing Meta Business Agent to Instagram and launching the Meta Business Agent Platform globally.
• Stripe, Visa, Mastercard and Coinbase are planning to form a consortium to issue a new stablecoin, according to people familiar with the matter, seeking to challenge the dominance of Circle and Tether, the two biggest issuers, which make up 80% of market share currently.
• Broadcom reported 48% higher revenue for its second fiscal quarter, ended May 3, as its AI chip revenue jumped 143% to $10.8 billion. The firm projected its topline to expand 84% in the third quarter, driven by even faster growth in AI chips.
Today on The Information’s TITV
Check out today’s episode of TITV in which we unpack our scoop on Meta’s updates to its employee tracking policies.
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