💰 Security, Funded #184 - Zero Trust for AI

Security, Funded provides a weekly analysis of economic activity in the cybersecurity market. This week’s issue is presented together with Material Security.

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Table of Contents

• 😎 Vibe Check

• Market Summary

• 📸 YoY Snapshot

• ☎️ Earnings Reports

• 🧩 Funding By Product Category

• 🏢 Funding By Company

• Funding by Country

• 🤝 Mergers & Acquisitions

• 📚 Great Reads

• 🧪 Labs

Private Markets

• 8 companies from 4 countries raised $198.3M across 7 unique product categories

• 4 companies were acquired or had a merger event for $335.0M across 4 unique product categories

• 100% of funding went to product-based cybersecurity companies

Public Markets

• 3 public cyber companies had an earnings report

• Cyber market moves last week (mostly down bad)

This is a rolling 12-week chart comparing funding and acquisitions each week in a year-over-year (YoY) view between the end of 2023 and the start of 2024 and 2025.

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Earnings reports from last week: CrowdStrike, Okta, Zscaler

CrowdStrike (CRWD)

CrowdStrike delivered another strong fourth quarter, with revenue growing 25% to reach $1.1 billion. This success was driven by the strong adoption of its Falcon platform (most likely from this brilliant marketing campaign) and increased demand for cloud security solutions. CrowdStrike cited over $1 billion in sales on AWS Marketplace (which is mind-blowing alone), and 60% of new business came from channel partners.

While all of that sounds great, nothing is worse for investors than being told the future might not be as good as it is now. CrowdStrike mentioned weak forward-looking guidance and higher-than-expected expenses (from the massive outage last year), and the stock has been down 18% since last week.

Okta (OKTA)

Okta delivered a strong fourth quarter, with significant achievements in product and growth with workforce and customer identity products. Okta launched new products, Okta Identity Governance and Auth0 for GenAI, and a focus on securing the identity space of agentic AI contributed to this success and accounted for over 20% of Q4 bookings.

The strategic focus on the channel and the AWS Marketplace partner ecosystem drove a ton of growth. Okta was optimistic about its forward-looking guidance, expecting 9%-10% revenue growth and continued strong operating margins. Analysts and the market responded positively to Okta’s results.

It’s worth noting that this strong quarter report comes on the heels of a ~300-person layoff announced back in January. 🤔 

Zscaler (ZS)

Zscaler delivered a strong second quarter, with revenue growing 23% to reach $648 million. This success was driven by demand for their Zero Trust solution, especially in the Americas region, which saw a 23% year-over-year increase. Zscaler's ARR grew by 23% to over $2.7 billion, and the net revenue retention rate (NRR) improved to 115%, showing best-in-class upsell strategies.

The focus on Zero Trust and partnerships with global system integrators (GSIs) propelled much of the success. Immediately after the call, the market reacted positively to Zscaler's execution and strategic direction but then tanked along with the rest of the tech market.

Earning reports to watch this coming week: SecureWorks, SentinelOne

• America's Cyber Surrender - The U.S. just hit pause on cyber operations against Russia while gutting its own cybersecurity defenses. Is America walking away from cyber deterrence? This could be the most dangerous shift in U.S. cyber policy yet.

• The Phony Comforts of Useful Idiots - The debate on AI skepticism is limited by shallow dichotomies and obscures nuanced discussions on AI's complexities, implications, and realities.

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Data Methodology and Sources

• All of the data is captured point-in-time from publicly available sources.

• All financial figures are converted to U.S. dollars (USD) when collected.

• Company country locations are pulled from publicly available sources.

• Companies are categorized using our system at Return on Security, and we write all the company descriptions.

• Sometimes, the details about deals, like who led the round, how much money was raised, or the deal stage, might get updated after the issue is first published.

• Let us know if you spot any errors, and we’ll fix them.

About Return on Security

Return on Security is all about breaking down the cybersecurity industry for you with expert analysis, hard facts, and real-life stories. The goal? To keep security pros, entrepreneurs, and investors ahead in a fast-moving field. Read more about the “Why” here.

Feel free to borrow any data, charts, or advice you find here. Just make sure to give a shoutout to Return on Security when you do.

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