Wedbush Names Top Cybersecurity Stocks as AI Reshapes Sector

Wedbush has initiated coverage of the cybersecurity sector with an outperform rating on AI-native platform vendors. The firm takes a positive stance on companies positioned to benefit from platform consolidation while expressing concerns about standalone vulnerability management vendors. Wedbush notes that cybersecurity budgets are being redistributed rather than expanded, with spending concentrated across select platforms. The firm identifies five themes reshaping cyber budget allocation: AI defense across all tech stack layers, platform consolidation driven by 75% of enterprises actively trying to consolidate vendors, data as the new perimeter, observability as infrastructure, and vulnerability management disruption. Wedbush adds that AI workloads generate 10x to 50x the telemetry of traditional apps, creating new monitoring needs.

1. Palo Alto Networks (PANW)

Wedbush assumed coverage with an outperform rating and $400 price target, adding the stock to its Best Ideas List. The firm calls PANW the clearest platformization winner in cybersecurity. The company reported accelerating revenue growth of 34% year-over-year while adjusted free cash flow margins reached 38.4% in FY26, on track to meet its 40%+ target in FY28. Platformized deals grew 78% year-over-year to 2,500, putting PANW on track to hit its long-term target of 4,000 by FY30. Next-generation Security ARR accelerated to 63% year-over-year growth in FY26, up from 32% in FY25. Customers spending $5 million or more increased 45% year-over-year, while those spending $10 million or more grew 50% year-over-year.

In recent news,

Palo Alto Networks reported fourth-quarter fiscal 2026 revenue of $3.41 billion, which exceeded consensus estimates. Following the results, PhillipCapital downgraded the company’s rating to Neutral, while Cantor Fitzgerald reiterated its Overweight rating.

2. Rubrik (RBRK)

Wedbush initiated coverage with an outperform rating and $120 price target, adding the stock to its Best Ideas List. The firm calls RBRK the strongest cyber resilience play in public markets. The company reported growth of 38% year-over-year in its most recent quarter, well above the industry’s mid-teens growth rate, with stable free cash flow generation of $66 million in FY2Q27. Subscription ARR grew 33% year-over-year with large customers accounting for 88% of this growth. Net retention reached 119%. RBRK partners with top cybersecurity companies including CRWD, PANW, ZS, OKTA, and MSFT.

Rubrik announced strong second-quarter fiscal 2027 results, beating consensus estimates on revenue and delivering $96 million in net new subscription ARR. The performance led to price target increases from firms including KeyBanc and BMO Capital.

3. Datadog (DDOG)

Wedbush initiated coverage with an outperform rating and $275 price target. The firm notes DDOG remains the best positioned pure-play for cloud-native and AI-native workloads observability. The company reported accelerating growth to 36% year-over-year in FY2Q26 versus 28% in the prior quarter, marking its sixth consecutive quarter of revenue growth acceleration. Free cash flow margins reached 25% with non-GAAP operating margins of 23%. Customers adopting 8 or more products reached 22% of its customer base, up from 14% in the year-ago period, while customers adopting 10 or more products reached 13%, up from 7% previously.

More recently, Datadog delivered its fifth consecutive quarter of revenue acceleration, with second-quarter revenue rising 36% year-over-year to $1.121 billion, beating consensus estimates.

4. CrowdStrike Holdings (CRWD)

Wedbush initiated coverage with an outperform rating and $250 price target. The firm notes Falcon remains the structural architecture for AI-native endpoint protection. The company reported accelerating ARR growth of 25% year-over-year, with net new ARR up 51% year-over-year and 30% quarter-over-quarter in FY2Q27. Revenue grew 27% year-over-year. Net new ARR accelerated from 32% year-over-year in FY1Q27 to 51% in FY2Q27, with continued net new ARR growth expected to be 34% year-over-year for FY27.

CrowdStrike provided an early fiscal 2028 Net New ARR growth guide of at least 20%, exceeding analyst estimates, and also advanced its long-term ARR milestone targets to reach $10 billion within fiscal 2030.