Demand for cybersecurity spending is growing, driven by regulatory requirements and rising ransomware attacks. Organizations are investing in this area to cope with the evolving cyber threats. As a result, top cybersecurity stocks have a revenue growth tailwind.

Over the next decade, several factors will fuel increased cyber spending. First, governments and regulators are enacting compliance requirements with regard to cybersecurity. For instance, the Securities and Exchange Commission recently adopted cybersecurity disclosure rules for registered companies.

Secondly, there have been severe cyberattacks on companies that have led to disruptions and financial losses. In September, MGM Resorts International (NYSE:MGM) suffered an attack that led to a $100 million negative impact on Adjusted Property EBITDAR. Another severe attack disrupted production at Clorox (NYSE:CLX), leading to a 23% to 28% sales decline.

Companies are taking note of the severe consequences of lacking a robust cybersecurity defense. Of course, top cybersecurity stocks have the technology to bolster networks and protect data. As cybersecurity demand grows, these stocks will thrive.

Qualys (QLYS)

Qualys (NASDAQ:QLYS) offers a unified cloud platform that delivers IT security, web application security, compliance, asset management, and cloud and container security solutions. Its cybersecurity platform is purely cloud-based, and customers don’t require hardware.

Customers worldwide have been relying on Qualys Cloud Platform for better security outcomes. Today, the company has over 10,000 subscription customers across the globe. Additionally, it counts 70% of Forbes Global 50 and 53% of Global 500 as customers. Due to soaring demand, revenues grew 19% in 2022 and 13% in Q3 fiscal year 2023.

And guess what? Due to the impressive fundamental performance, QLYS stock is soaring. As of this writing, it’s up 60% year-to-date and hit an all-time high on November 22. Despite these gains, more upside lies ahead.

Existing customers continue to adopt its Vulnerability Management, Detection and Response (VMDR) technology, with adoption rates reaching 54% in the third quarter. The company reported wins both in Global 2000 companies and down market. It is also benefiting due to vendor consolidation since its unified platform provides security across on-prem, cloud and multi-cloud environments.

In terms of profitability, Qualys is delivering solid profits and cashflows. In the third quarter, EBITDA was 68.8 million, representing a 48% margin. Also noteworthy is that EBITDA margins improved 400 basis points YOY. Furthermore, management expects full-year margins to be in the mid-40s and free cash flow margins in the mid-30s.

Qualys is well-positioned for future growth, considering its organically integrated cloud-native platform. It is introducing ML and AI-based predictive insight into its platform. Given that these innovations will support further growth, it’s one of the top cybersecurity stocks to buy.

Tenable (TENB)

Among top cybersecurity stocks seeing momentum due to cyber spending, Tenable (NASDAQ:TENB) stands out. The company is uniquely positioned and has benefited from increased public sector spending. It’s a leader in vulnerability management and has created a unified platform for exposure management, Tenable One.

Customers are turning to Tenable for vulnerability management, cloud security, identity security, web app security and attack surface management. Indeed, during the third quarter, the firm added a record number of seven-figure customers. Also, it added 58 six-figure customers alongside the 386 new enterprise platform customer additions.

In terms of new deals, it saw strong demand from U.S. federal customers. Management highlighted the momentum in this segment. As Amit Yoran, the CEO, noted, “Specifically, we experienced increasing strength in the U.S. federal market evidenced by several strategic seven-figure deals that are reflected in our current remaining performance obligations (RPO) growth of 15%.”

Tenable’s prospects in the future are attractive, given its leadership position in operational technology (OT) security and vulnerability risk management. Moreover, it has bolstered its Tenable OT Security to cover entrance security systems, badge scanners, security cameras, HVAC systems, lighting control and programming systems.

From an investment standpoint, analysts are highly bullish on TENB stock. They cite the growth of Tenable One and the company’s dominance in VM markets. Tenable One is gaining traction and grew 100% YOY in the third quarter, representing 20% of new sales. It will drive revenue growth since it has higher selling prices than a standalone VM.

Palo Alto Networks (PANW)

After the recent billings miss, Palo Alto Networks (NASDAQ:PANW) had a selloff but quickly rebounded. Nikesh Arora, the CEO, highlighted that the miss would not affect revenue growth. He pointed to the solid remaining performance obligation at $10.4 billion to array these fears.

Analysts at JP Morgan also agreed that the billings miss was a minor hiccup. In reiterating their “overweight” rating, Brian Essex noted, “We continue to view PANW as one of the best positioned within our coverage to consolidate share within several of the largest and highest priority enterprise security markets.”

Palo Alto Networks is one of the top cybersecurity stocks, considering its leadership in several cybersecurity areas. It provides comprehensive cybersecurity solutions in network security, endpoint security, Secure Access Service Edge (SASE) and cloud security.

According to Frost & Sullivan, Palo Alto is a leader in cloud workload protection. Its Prisma Cloud platform offers comprehensive cloud-native application protection across public, private, hybrid, or multi-cloud environments.

The firm hopes to capitalize on the strong demand for cybersecurity solutions as ransomware attacks increase in frequency. In their Q1 FY2024 earnings release, management guided for annual revenue between $8.15 and $8.20 billion, an 18% to 19% growth rate.

Management also forecasted best-in-class profitability with non-GAAP operating margins ranging from 26% to 26.5%. Additionally, they expect free cash flow margins in the range of 37% to 38%. With top-tier profitability and its next-generation platform driving 8 figure deals, PANW stock is a buy.

On the date of publication, Charles Munyi did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.