Summary of Key Points from Citi Research on Cybersecurity Spending Industry Overview - The report focuses on the **enterprise cybersecurity industry**, highlighting trends in spending and investment priorities for the upcoming years, particularly in relation to AI adoption and security measures. Core Insights and Arguments 1. **Budget Trends**: Cybersecurity budgets are expected to improve, with near-term growth sentiment accelerating to **mid-single digits (MSD)** from low-single digits (LSD) over the past two years, indicating a shift towards more robust spending as macro uncertainties dissipate [7][10][8]. 2. **Identity Security**: Identity security has emerged as the top priority for cybersecurity spending, with **83% of CISOs** citing it as a top-three mandate, a significant increase from **11%** last year. This shift is driven by the growing importance of securing AI frameworks [22][19]. 3. **Security Analytics**: Security analytics has jumped to the second position in budget priorities, reflecting a strong push for modernization of Security Information and Event Management (SIEM) systems. **68% of respondents** now prioritize this area, up from **53%** last year [53][50]. 4. **SASE and SD-WAN**: Investments in Secure Access Service Edge (SASE) and Software-Defined Wide Area Network (SD-WAN) are on the rise, with **47% of CISOs** indicating these as top investment priorities, marking a shift away from traditional hardware solutions [40][33]. 5. **AI Implications**: The adoption of AI is driving both an increase in cyber threats and a modest increase in cybersecurity budgets. CISOs are focusing on high-efficacy solutions to manage the evolving threat landscape [81][82]. 6. **Vendor Consolidation**: There is a strong trend towards vendor consolidation in the cybersecurity space, with **15 points YoY increase** in focus on this area. This is partly fueled by the need for comprehensive solutions to address AI-related security challenges [15][17]. 7. **Cloud Security**: Cloud security remains a critical area of investment, with a notable shift in budget allocation towards cloud service providers (CSPs) over traditional cybersecurity conglomerates. **Microsoft** has notably improved its position in this domain [45][48]. Additional Important Insights 1. **Hardware Refreshes**: There is a decline in hardware refresh activity, with many organizations moving towards non-hardware, SASE-first architectures, which could impact traditional firewall budgets [27][32]. 2. **Data Security**: While data security remains a key investment area, it is expected to be monetized by various players, indicating a fragmented market landscape [26]. 3. **Endpoint Security**: AI is revitalizing interest in endpoint security, with a notable shift towards modern solutions that can integrate advanced capabilities [75]. 4. **Machine Identity**: The importance of machine identity is increasing, with **70% of respondents** citing it as critical for their cybersecurity strategies, indicating a growing focus on securing non-human identities [62][63]. This comprehensive overview highlights the evolving landscape of cybersecurity spending, driven by AI adoption, identity security, and a shift towards modernized solutions. The insights provided can guide investment decisions and strategic planning within the cybersecurity sector.

Core Insights - Broadcom (AVGO) and Okta (OKTA) are significant players in the enterprise security software market, with Broadcom offering a wide range of security solutions and Okta focusing on cloud-based identity solutions [1][2] Industry Overview - Gartner projects enterprise spending on cybersecurity software and network security to grow by 14% in 2025, reaching $118.5 billion, driven by demand for Generative AI and cloud adoption [2] - IDC anticipates global cybersecurity spending to increase by 12.2% year over year in 2025, with security software spending expected to grow by 14.4% year over year [2] Company Performance - Broadcom's infrastructure software revenues rose by 25% year over year to $6.6 billion in Q2 of fiscal 2025, accounting for 44% of total revenues [7] - Okta's stock has appreciated 21.1% year to date, benefiting from strong demand for its innovative security products [3][11] Product Innovations - Broadcom has introduced several AI-powered security features, including updates to VMware vDefend and Incident Prediction, aimed at enhancing threat prevention and operational efficiency [9][10] - Okta's new protocol, Cross App Access, enhances security for AI agents and improves user experience by streamlining authorization processes [12][13] Earnings Estimates - The Zacks Consensus Estimate for Broadcom's fiscal 2025 earnings is $6.64 per share, indicating a 36.34% increase over fiscal 2024 [14] - Okta's fiscal 2026 earnings estimate remains steady at $3.28 per share, suggesting a 16.73% growth over fiscal 2025 [15] Valuation Metrics - Broadcom's shares are trading at a forward Price/Sales ratio of 18.55X, significantly higher than Okta's 5.6X, indicating that Okta is currently undervalued [17] - Both companies are considered overvalued based on their Value Scores, with Broadcom rated D and Okta rated F [18] Investment Outlook - Broadcom expects its AI revenues to increase by 60% year over year to $5.1 billion in Q3 of fiscal 2025, although it anticipates sluggishness in other business segments [22] - Okta's strong growth prospects are highlighted by its 20,000 customers and $4.084 billion in remaining performance obligations as of Q1 fiscal 2026 [23] - Okta is rated as a better buy compared to Broadcom, with a Zacks Rank of 2 (Buy) versus Broadcom's 3 (Hold) [24]