Can You Invest in Arctic Wolf in 2026?

Is Arctic Wolf publicly traded?

Arctic Wolf is a cybersecurity firm that offers security operations as a concierge service that detects advanced threats and manages risks across healthcare, financial services, legal, manufacturing, government, and other sectors.

You can't buy Arctic Wolf stock at the moment since it's privately held. But the company has emerged as one of the potentially biggest cybersecurity stocks that could hit the initial public offering (IPO) calendar in the next year or two.

Cybersecurity stocks have been described as "a red-hot niche of the tech industry," and the sector is expected to grow about 12% annually through 2028, according to Gartner (IT +1.38%). Although Arctic Wolf is far from the only company specializing in managed detection and response (MDR), it's won accolades and registered lightning-fast growth during its relatively short life.

Major investors in Arctic Wolf include Owl Rock Capital, Lightspeed Venture Partners, Viking Global Investors, Neuberger Berman, and the Ontario Teachers' Pension Plan.

As a privately held company, Arctic Wolf isn't required to disclose financial information. However, market research firm Sacra estimated that it was generating annual recurring revenue of $438 million in 2023, a 36% year-over-year increase.

When will Arctic Wolf IPO?

Although it's been on the list of potential initial public offerings for a couple of years, Arctic Wolf doesn't plan to go public just yet. In an interview with the Financial Times, CEO Nick Schneider said the company is waiting to see if interest rates begin to fall and tech stocks start to rise again before launching an IPO. "We're not in a hurry," Schneider told the newspaper.

Alternatives to consider

Here are several alternatives in the cybersecurity sector that potential Arctic Wolf investors might want to consider.

Here are three:

Is Arctic Wolf profitable?

Since it's a privately held company, Arctic Wolf doesn't have to publicly report its financial results. However, it's probably safe to say that it's doing well. Revenues shot up more than 4,300% between 2016 and 2020, and the company has been named by Gartner as the fastest-growing market security vendor by revenue in 2023.

Arctic Wolf has also been named to CNBC's Disruptor 50 list for the last three years, and it's been recognized by Forbes as one of the top 100 private cloud companies. It now has more than 10,000 customers in 30 countries.

ETFs with exposure to Arctic Wolf

Exchange-traded funds (ETFs) make it simple for people to exercise passive investment instead of having to keep a constant eye on their portfolios. ETFs let investors purchase a basket of similar stocks, which not only allows for passive investment but also increases portfolio diversification; generally, the funds invest in enough stocks that disastrous performance by one company won't affect your entire financial world.

Cybersecurity-focused ETFs are becoming more popular. Here are three of the larger ones that offer reasonable expense ratios:

1. First Trust Nasdaq Cybersecurity ETF

The First Trust Nasdaq Cybersecurity ETF (CIBR -0.28%) has $8.6 billion in assets under management (AUM) and a relatively reasonable expense ratio of 0.59%, which amounts to $5.90 in fees for every $1,000 invested. Ten holdings account for more than half of its total assets. The fund's largest holding is Crowdstrike at 8.45%, followed by Broadcom (AVGO -4.15%) at 8%. It also holds Palo Alto (7.6%) and Okta (4.8%).

The ETF is one of the oldest pure-play cybersecurity funds. It was created in 2015, and share prices have more than doubled since then. The fund holds about three dozen stocks that are rebalanced on a quarterly basis.

2. ETFMG Prime Cyber Security ETF

The ETFMG Prime Cyber Security ETF (HACK -0.61%) is also one of the longer-tenured funds focusing on cybersecurity. The fund, which was created in 2014, holds net assets of $2 billion and has an expense ratio of 0.6%.

Broadcom is the fund's largest holding at 8.9%, followed by Cisco (CSCO -1.41%) at 6.3% and Crowdstrike at 6%.

3. Global X Cybersecurity ETF

The Global X Cybersecurity ETF (BUG -0.66%) is one of the newer cybersecurity funds and concentrates heavily on software companies. It has an expense ratio of 0.51% and about $1.03 billion in net assets.

The fund has two dozen holdings, with Okta making up 6.3%. Zscaler (ZS -1.24%) accounts for 6%, and Check Point Software Tech (NASD:CHKP) is third with 5.98%. It's outperformed both the First Trust and ETFMG funds since its 2019 inception.

The bottom line

Cybersecurity is an extremely hot sector at the moment, and Arctic Wolf is poised to take advantage of the trend with its $900 million in funding rounds since 2012. It's now worth an estimated $4.4 billion and appears to be on track toward becoming a hot IPO.

The timing of an IPO, however, is up in the air. As long as interest rates and uncertainty over the economy remain, companies are less likely to go public.

In addition, Arctic Wolf is a tech growth stock with all the benefits and complications of other tech growth stocks; if and when it launches an IPO, its shares could go up very quickly and come down just as quickly. Smart investors will consider cybersecurity stocks as companies that are likely to grow very quickly but remain volatile. As always, a buy-and-hold strategy that emphasizes portfolio diversification is the best course of action.

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