What happened

Shares of FireEye (NASDAQ:FEYE), CrowdStrike (NASDAQ:CRWD), and Zscaler (NASDAQ:ZS) increased 48.7%, 34.3%, and 27%, respectively, during December, according to data from S&P Global Market Intelligence. All three stocks surged after revelations came out of a massive cyber-hack affecting dozens of companies and government agencies, which are believed to have come from Russian intelligence.

In mid-December, it was revealed that hackers had exploited a software update from network management software company SolarWinds (NYSE:SWI). Some of the winning companies mentioned above were directly involved in uncovering the attack, while others were recruited to help fix the problem.

A hooded man presses a  transparent wall in front of him which  illuminates.

Image source: Getty Images.

So what

FireEye was the first company to become involved, as it discovered the problem when attackers stole some of its Red Team diagnostic tools, which FireEye uses to mimic attacks on its clients. That initially caused FireEye's stock to fall. However, FireEye then discovered the highly sophisticated hack of the SolarWinds Orion software update. FireEye's stock then skyrocketed, as investors thought its discovery of the attack and potential unique insights into it could give it an edge.

Of course, the attack put a new spotlight on cybersecurity, which lifted many companies in the sector. Most notable outside of FireEye was CrowdStrike, which had already been one of the best stocks this year. In response to the attack, SolarWinds deployed CrowdStrike, which has come to disrupt the endpoint protection segment of the market with its novel AI-powered software model. It may have also helped that CrowdStrike itself was attacked but was able to thwart the attempt.

Finally, Zscaler, which like CrowdStrike is also a new-age, cloud-oriented cybersecurity firm, saw its stock rise not only because of the SolarWinds hack; it also reported impressive earnings at the beginning of the month. Last quarter, Zscaler logged an impressive 52% revenue growth rate and an even better 61% growth in billings, which incorporates upfront payments for future revenue. Adjusted (non-GAAP) operating profits also improved to $19.7 million, up from $3.7 million in the year-ago quarter.

Now what

The SolarWinds hack has only shown the urgent need for modern cybersecurity solutions to be deployed at all major corporations and government agencies. It has been reported that SolarWinds, a large network monitoring company, had been ignoring cybersecurity as a top priority for years before the attacks.

If SolarWinds has been behind the curve, a lot of other companies were also slow to upgrade their cyber-defenses. That means strong demand for best-of-breed cyber names like CrowdStrike and Zscaler should continue into 2021 and beyond.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.