Goldman Sachs Sees AI Driving 2-3% Annual Growth in Cybersecurity Spending

Goldman Sachs analysts project a significant increase in cybersecurity spending driven by enterprise adoption of artificial intelligence, with the effects expected to materialize as early as late 2026. The investment bank now views security companies as key beneficiaries of the AI boom, a shift from previous concerns that the technology posed a risk to the sector.

A New Spending Cycle

According to the Goldman Sachs report, the surge in security budgets related to AI could begin in the fourth quarter of 2026 or the first half of 2027. This timeline represents a two- to three-year lag from the initial wave of enterprise AI adoption, which the firm marks as starting in 2025.

Analysts compared this cycle to the adoption of cloud computing, where it took five years for security spending to grow from less than 1% to between 2-5% of total cloud budgets. Based on this model, Goldman Sachs projects that new AI-related security spending could add two to three percentage points to the cybersecurity industry's overall growth rates through 2028.

Incumbents Hold Key Advantages

The report suggests that this additional security spending will likely favor established market leaders rather than new entrants. Goldman Sachs noted that the core security roadmaps of these companies depend more on machine learning (ML) innovation than on generative AI specifically.

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This gives incumbents an edge, as they possess deep human reinforcement learning feedback loops and extensive labeled datasets that are difficult for new companies to replicate. The analysts also pointed out that leading security firms are actively acquiring new technology assets from well-funded private companies to bolster their capabilities.

Market Impact

Goldman Sachs provided scenarios for several major cybersecurity firms, including Palo Alto Networks (NASDAQ:PANW), CrowdStrike (NASDAQ:CRWD), and Okta (NASDAQ:OKTA). The bank's analysis indicates that all three companies are positioned to grow into their current valuations.

Among the companies mentioned, the report highlighted Okta as having the most potential for additional growth from its current levels, according to the firm's assessment.