Cyberattacks are an ever-present threat for companies both large and small. Hackers are increasing in number and sophistication. No organizations are immune, as the recent widespread breach of multiple U.S. government networks shows.
At the same time, businesses are increasingly asking their employees to work from home and shifting their operations to the cloud. Data and dollars are migrating to the internet, and the need for effective cybersecurity tools is becoming only more critical.
Spending on cybersecurity solutions, in turn, is set to soar to nearly $250 billion by 2023, according to Statista, as businesses and governments desperately seek to strengthen their cyberdefense systems.
If you're searching for a way to profit from this massive global trend, start with these three cutting-edge cybersecurity companies: CyberArk Software (CYBR -0.11%), CrowdStrike (CRWD -1.17%), and Okta (OKTA -0.07%).
CyberArk Software helps companies defend their most critical IT infrastructure. The Israel-based cybersecurity specialist provides privileged access management services, which guard against those who would use insider credentials to penetrate traditional network defenses.
With internal actors responsible for roughly 40% of data breaches, according to McAfee, privileged account security is an increasingly vital part of businesses' cyberdefense plans. More than 50% of the Fortune 500 and 35% of the Global 2000 trust CyberArk to guard their most important IT assets. Investors can expect these percentages to continue to rise in the years ahead.
CyberArk is transitioning to a software-as-a-service (SaaS) model, which is fueling strong increases in recurring revenue and positioning the company to generate higher profits over time. Its annual recurring revenue (ARR) surged 40% year over year to $250 million in the third quarter, and it should continue to rise sharply in 2021 as more businesses implement CyberArk's vital cloud-based cybersecurity tools.
CrowdStrike is also helping to enable the trend toward cloud-based computing. The cloud guardian is a leader in endpoint security, which provides protection at the device level, such as laptops, smartphones, servers, and sensors. CrowdStrike and its shareholders thus stand to benefit from the remote work trend, as well as the growth of the Internet of Things (IoT).
CrowdStrike uses artificial intelligence, machine learning, and behavioral analytics to power its threat detection system. In addition to this advanced technology, CrowdStrike's customers also benefit from valuable network effects. Each new business that joins the platform helps CrowdStrike's threat detection system become more intelligent, thereby strengthening the cyberdefenses of everyone on the network. These dynamics are helping to fuel CrowdStrike's growth. Its revenue soared 86% year over year to $232.5 million in the third quarter, driven by strong customer gains.
Better still, CrowdStrike has a long runway for growth. With the number of IoT devices set to explode to 75 billion by 2025, according to Statista, demand for CrowdStrike's endpoint security services should continue to grow briskly in the coming years.
Like CrowdStrike, Okta is helping to support the work-from-home trend. The identity verification specialist makes it easier and more secure for people to work remotely in the cloud, by giving authorized users the ability to sign in to all of their business applications with a single passcode.
Companies are increasingly turning to Okta for their identity and access management needs. Okta's customer count jumped 27% year over year to 9,400 in the third quarter. Its revenue, in turn, surged 42% to $217.4 million. Its operating cash flow and free cash flow both more than quadrupled, to $43.4 million and $41.6 million, respectively.
Much more growth lies ahead. Okta expects to generate $822 million to $823 million in revenue in fiscal 2021, which ends on Jan. 31. Yet management pegs its total addressable market for workforce and customer identity management services at roughly $55 billion. Okta is poised for exponential growth in the coming decade, and investors who buy shares today should be well rewarded as it fulfills its tremendous expansion potential.