Forget AI Hype, JPMorgan Says Cybersecurity Will Shine In 2026 — Palo Alto, Zscaler Are Top Picks

Wall Street spent 2025 chasing AI narratives. JPMorgan thinks 2026 will reward something far more practical: cybersecurity. While generative AI wrestles with monetization, security budgets remain locked in, positioning Palo Alto Networks Inc (NASDAQ:PANW) and Zscaler Inc (NASDAQ:ZS) as standout winners. Track PANW stock here. Cyber Risk Moves To The Top Of Board Agendas According to PwC's CEO survey, cyber risk now ranks among the top three threats facing companies over the next 12 months, ahead of technological disruption and labor shortages. That elevation matters because cyber spending is driven by necessity rather than discretion. JPMorgan notes that this urgency creates resilience. Even as companies scrutinize AI budgets, cybersecurity remains a non-negotiable line item tied to operational and reputational risk. Read Also: Why Zscaler Is Emerging As ‘A Larger Winner’ In The ‘AI Revolution’ Rule Of 40 Screens Favor Cyber Leaders That resilience is evident in JPMorgan's Rule of 40 and Rule of X analyses. From early 2024 through late 2025, many cybersecurity names improved their growth-plus-margin profiles while maintaining valuation premiums that other software sectors struggled to defend. In a market where multiples compressed for companies unable to translate growth into profits, cyber leaders largely held their ground. Why Palo Alto And Zscaler Stand Out Within that group, JPMorgan highlights Palo Alto Networks and Zscaler as particularly well-positioned. PANW is viewed as a long-term share consolidator across SecOps, SASE, and cloud security, with free cash flow margins expected to trend toward 40% over time. Zscaler, meanwhile, is benefiting from a structural shift away from legacy network architectures, with accelerating growth, improving backlog, and rising sales productivity supporting further upside. As 2026 approaches, cybersecurity's appeal is simple: growth that clears the quality bar. Read Next: Micron, Palo Alto, Adobe And An Industrial Stock On CNBC’s ‘Final Trades’ Photo: Shutterstock