CrowdStrike vs. Cloudflare: Which Cybersecurity Stock Wins?
The total addressable market (TAM) for cybersecurity solutions is expected to exceed $500 billion by 2030. This means many companies are looking for their share of the pie. Cloudflare Inc. (NYSE: NET) is one of those names. In fact, NET stock is up 80% this year, a full 30 percentage points ahead of CrowdStrike.
The opportunity in this sector can certainly support investors having more than one cybersecurity stock in their portfolio. But if an investor could only choose one, which of these names might be more attractive?
These two cloud-native cybersecurity leaders offer solutions that often appear to overlap. However, their business models, core technologies, and growth trajectories are distinctly different.
CrowdStrike's Falcon Platform Changed the Industry
The core of CrowdStrike's business is its Falcon platform. This allows customers to take an à la carte approach to their cybersecurity needs, using as much or as little of the Falcon platform as they need.
Several legacy security vendors, such as Palo Alto Networks Inc. (NASDAQ: PANW), began pivoting to platform-based models in the mid-2010s. However, CrowdStrike distinguished itself as an early pioneer of a cloud-native security platform. By launching Falcon as an integrated endpoint and threat intelligence solution from day one, CrowdStrike set the standard for how a modern, scalable cybersecurity platform could replace fragmented point products
This platformization model was a key lever that CrowdStrike pulled as it worked to regain customer trust after the 2024 outage. It offered customers the opportunity to use some of Falcon's platform services at no cost for a limited time. The company now expects its goodwill measure to turn into actual revenue in the coming quarters.
Cloudflare Is Taking Aim at the Zero Trust Space
Cloudflare's Cloudflare One suite is a cloud-native platform that combines a range of services delivered from the same infrastructure that powers its CDN and DDoS protection.
While Cloudflare still derives most of its revenue from networking and CDN services, the company is rapidly emerging as a force in Zero Trust security. Its Cloudflare One suite delivers identity, access, and application protection at the edge without relying on traditional firewalls. With one of the largest global edge networks, Cloudflare is well-positioned to scale Zero Trust access with low latency and high security.
Zero Trust remains a relatively small part of Cloudflare's overall revenue, but its freemium, self-serve model gives it a massive top-of-funnel that it can leverage to convert more paid Zero Trust and enterprise security customers over time.
How CRWD and NET Stocks Are Similar and Different
As noted in the introduction, CrowdStrike and Cloudflare are both having strong years. However, both are overvalued when you compare their respective stock prices to analysts' consensus price targets. That suggests both stocks could be ready for significant pullbacks.
So, which stock makes more sense to buy when that dip occurs? That may depend on your investment objectives and risk tolerance.
CrowdStrike is a profitable, large-cap cybersecurity leader with a proven platform and strong customer retention. CRWD stock is better suited for investors seeking quality growth with a slightly lower risk profile.
Cloudflare is still in its high-growth, high-spending phase. It lacks profitability but boasts higher year-to-date returns and a strong vision for Zero Trust dominance. It's better aligned with investors who can stomach volatility in pursuit of long-term upside.
The cybersecurity sector is expanding rapidly, and both CrowdStrike and Cloudflare are well-positioned to benefit. As always, do your own due diligence and consider whether one or both of these cybersecurity leaders deserve a place in your portfolio.
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