Is Cybersecurity as a Service Becoming Allot's Core Growth Engine?

Core Insights - Allot Ltd. (ALLT) is experiencing significant growth in its Cybersecurity as a Service (SECaaS) business, which is now the primary driver of revenue growth for the company [1][10] - In Q3 2025, SECaaS annual recurring revenues (ARR) increased by 60% year-over-year, contributing approximately 28% to Allot's total revenues, up from 21% in the same quarter last year [1][10] - Management anticipates that the SECaaS revenue share will approach 30% by the end of 2025 [1] SECaaS Growth Drivers - The growth in SECaaS is primarily attributed to Tier-1 telecom customers who have recently launched the service and are adding more subscribers [2] - New subscriber additions and increasing attach rates are driving this growth, with adoption rates expected to improve over two to three years post-launch, supporting steady ARR growth [2] Strategic Partnerships - In January 2026, Allot entered a partnership with Compax Venture to utilize its NetworkSecure and OffNetSecure platforms, enabling Mobile Virtual Network Operators (MVNOs) to offer cybersecurity services [3] - This partnership expands Allot's SECaaS distribution beyond traditional mobile operators, enhancing recurring subscription revenues [3] Revenue Quality Improvement - The increased contribution from SECaaS is enhancing revenue quality, with recurring revenues rising to 63% in Q3 2025, compared to 58% in the same quarter last year [4] - The SECaaS business is becoming central to Allot's revenue model, which is expected to support growth in upcoming quarters [4] Competitive Landscape - Allot competes with established companies in the network traffic management and cybersecurity sectors, including Check Point Software (CHKP) and Palo Alto Networks (PANW) [5] - Check Point Software focuses on hybrid network security with its Quantum Firewall Software, while Palo Alto Networks has partnered with IBM to enhance quantum-safe security solutions [6][7] Stock Performance and Valuation - Allot's shares have increased by 14.1% over the past six months, contrasting with a 20.7% decline in the Zacks Internet - Software industry [8] - The company trades at a forward price-to-sales ratio of 4.53, which is lower than the industry average of 5.03 [12] - The Zacks Consensus Estimate for Allot's 2026 earnings indicates a year-over-year increase of 24.3%, with estimates revised upward by 3 cents in the past 60 days [15]