Goldman Sachs Analyst Says Cybersecurity Stocks Are Outpacing Broader Software Sector— 'Set A Good Bar'

U.S. cybersecurity stocks are trading at a 24% premium to the broader software sector, measured by enterprise value to forward sales as of Apr. 15, according to a Goldman Sachs (NYSE:GS) Research report published this week.

Gabriela Borges, a software sector analyst with Goldman Sachs Research, says software industry leaders should look to cybersecurity for inspiration on meeting AI challenges.

“Over the last 10 years, cybersecurity firms have been dealing with existential threats,” Borges said. “Now they show what good innovation and durable moats look like over time. They set a good bar for the larger software industry.”

M&A Discipline And Technical Debt

Goldman Sachs points to strategic mergers and acquisitions as an important competitive advantage.

Borges referenced a company that devoted 18 months to integrating a business it acquired for $10 million, noting that the acquired product has since gone on to produce more than $500 million in revenue.

The analyst also warned investors are increasingly scrutinizing “technical debt” as technology “bolted onto a platform” where code bases differ from core product code, and says, “You can’t build AI tooling on a platform if it lacks structural integrity and is poorly integrated with legacy systems.”

On SaaS model fears, Borges says concerns are overstated, but competitive pressure is real. She distinguishes “good sticky” customer relationships from “bad sticky” ones, which large language models (LLMs) are rapidly eroding.

Separately, OpenAI‘s Chief Operating Officer Brad Lightcap said legacy software companies could emerge as major AI beneficiaries rather than casualties, describing it as a “contrarian opinion.”

Cybersecurity ETFs Performance

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.