The upcoming quarterly earnings reports from two global cybersecurity leaders, Palo Alto Networks Inc. (PANW.US) and CrowdStrike Holdings Inc. (CRWD.US), will provide investors with crucial insights. The reports will shed light on the sustainability of the recent surge in leading cybersecurity stocks and clarify whether the "AI agent storm" ignited by Anthropic represents a significant positive catalyst or a long-term disruptive threat to the fundamental growth prospects of these cybersecurity leaders and global software giants. Palo Alto Networks is scheduled to report its earnings after the U.S. market closes on Tuesday, following a remarkable 57% surge in its stock price last month alone. CrowdStrike will announce its results after the close on Wednesday, with its shares having soared 64% in May. These two cybersecurity leaders have just experienced their best single-month performances on record, reaching new all-time highs after each has gained more than 60% year-to-date in 2026, and both rank among the top 30 performers in the S&P 500 index this year.
This rally has been largely fueled by broad bullish sentiment towards software-focused technology companies perceived as AI winners, such as Snowflake and MongoDB, which have benefited from the AI boom. It marks a significant shift in market sentiment from the start of the year, when cybersecurity stocks and the broader software sector faced widespread declines due to fears that cutting-edge AI agent products like Anthropic PBC's Mythos model could cause major disruption. As the chart illustrates, the performance gap between cybersecurity winners and market laggards has been stark, with top cybersecurity companies' shares surging over the past few weeks.
Jordan Klein, Managing Director at Mizuho Securities, noted, "People have come to their senses and realized, no, this is not going to stop people from buying cybersecurity products. In fact, it might create larger-scale, AI-based cybersecurity product demand." He suggested that if Wall Street sees strong results from Palo Alto and CrowdStrike this week, "the next leg of the bull market is on."
In essence, beyond the latest bullish narrative from NVIDIA CEO Jensen Huang's signal at Computex 2026 that "AI agents need more tools and software," the recent sharp rebound in software stocks like Palo Alto, CrowdStrike, ServiceNow, Salesforce, Adobe, and Workday represents a market repricing. The sentiment is shifting from extreme pessimism that "AI agents will completely disrupt and replace software companies" towards a view that "AI agent systems will amplify software demand and reshape the form of growth-oriented software products."
Earnings to Gauge the Rally's Strength
Currently, most stocks in the global cybersecurity sector are performing strongly, making it a genuine bright spot within the tech investment landscape. The Global X Cybersecurity ETF (BUG) is up 27% year-to-date, with a 37% surge in May alone marking its best monthly performance since its launch in 2019.
In contrast, the iShares Expanded Tech-Software ETF (IGV), which tracks a broader range of software stocks, is up only 1.9% year-to-date in 2026. This is primarily due to a severe downturn in February and March following the "AI disrupts everything" pessimism triggered by Anthropic. However, driven by the recent software stock rebound, the IGV ETF has significantly outperformed the S&P 500 over the past two weeks. Meanwhile, the tech-heavy Nasdaq 100 Index has surged 21% since early January.
To understand how strong earnings and encouraging outlooks can propel these stocks further, one can look at Fortinet Inc. (FTNT.US). Its stock jumped 20% the day after it reported robust quarterly results and raised its billings forecast in early May. Klein views this as a very positive omen for Palo Alto and CrowdStrike, as that report "quickly got people thinking again, you know, that was a really good report, and that could happen to other cybersecurity companies doing similar things."
Wall Street analysts broadly expect CrowdStrike to report a 23% surge in revenue and a 93% jump in net income for its quarter ended April 30. Meanwhile, Palo Alto is projected to achieve 29% revenue growth and 25% net income growth for its April quarter.
The divergence between perceived winners and losers in cybersecurity is stark, as demonstrated by Zscaler Inc. (ZS.US) last week. The security software maker's stock plummeted 32% in a single day—its worst daily performance ever—after issuing a revenue forecast that fell short of expectations.
Bloomberg Intelligence analyst Mandeep Singh wrote in a May 26 report, "Zscaler's product suite lacks identity security capabilities geared toward AI agents, which could limit its ability to secure larger deals." He added, "It also faces lower net retention rates as larger peers, including Palo Alto Networks and Fortinet, offer bundled secure access service edge platforms."
As Singh indicated, leaders in the cybersecurity space are typically the largest companies with the strongest pricing power, viewed as beneficiaries of the AI wave. On the other end are cybersecurity companies investors believe will struggle to capture significant market share. More than a third of the 30 constituents in the BUG ETF are down year-to-date, with some falling sharply. The worst performers, Zscaler, Digital Arts Inc., and Rapid7 Inc., are down between 31% and 42%.
Joseph Gallo, Senior Analyst at Jefferies, wrote in a May 26 report, "The performance gap reflects a general investor preference for best-in-class, large cybersecurity platform leaders that benefit from vendor consolidation and are perceived as more resilient to growth in the face of AI disintermediation and the new wave of enterprise operations driven by AI agents." He added, "Ahead of non-standard quarterly reports, we believe expectations have risen and anticipate the focus will be on AI-related feature innovation and perceived substance."
Of course, regardless of the strength of their earnings, the recent extreme gains for Palo Alto and CrowdStrike could limit further upside, no matter the results or future outlook. Even with results and guidance that exceed expectations, investors might view it as an opportunity to take profits on the past month's gains, potentially triggering significant selling.
Luke Rahbari, Portfolio Manager at the Rational Equity Armor Fund, which holds Palo Alto stock, does not believe these earnings reports will trigger the kind of explosive market reaction seen with Dell Technologies Inc., whose stock soared 47% over two recent sessions on continued strong AI server demand expansion. However, he does expect top cybersecurity companies to raise their outlooks and potentially even increase prices, given their current strong position. He stated, "I don't think you're going to see the kind of pop in these cybersecurity companies that you saw in Dell." He added, "What they're doing is incredibly important in the context of this AI agent wave sweeping through enterprise operational models. I think they have a very strong, long-term moat in what they do. Cybersecurity is so important now—and getting more important—which means the cybersecurity giants are only going to get stronger."
Software Sector Panic Receding?
The recent rebound in software stocks, led by Palo Alto, CrowdStrike, ServiceNow, Salesforce, Adobe, and Workday, essentially represents a market shift. It's moving from the extreme pessimism of "AI will replace or disrupt a software company" to a repricing based on the view that "AI will amplify software demand and reshape software product forms." The cybersecurity sector is the prime example: the BUG cybersecurity ETF is up about 27% this year, with a 37% gain in May marking its best monthly performance since its 2019 inception.
The "AI disrupts everything" panic triggered early this year by Anthropic's Cowork AI agent and the subsequent Mythos model hasn't completely vanished, but its meaning has evolved. It has shifted from "AI will eliminate all cybersecurity and software demand" to "AI will reshape the structure between winners and losers." For instance, Mizuho's Jordan Klein believes investors have realized AI won't stop enterprises from buying security software and may instead create more security demand. Jefferies also noted the market's preference for large platform leaders that benefit from vendor consolidation and are more resilient in an environment of AI disintermediation.
The recent global market rally in "wrongfully sold-off assets" is also a core driver behind the strong gains for cybersecurity giants and the broader software sector. A prime example is ServiceNow Inc. (NOW.US), a software company focused on optimizing digital workflows, which has surged over 50% since May. ServiceNow and similar software giants resemble "tech/software stocks wrongfully sold off due to perceived AI spillover costs" rather than typical "big AI disruption losers," largely falling into the category of "assets wrongfully sold off due to AI wave fears or AI disruption panic."
The broader global software stock rebound, besides being driven by the "wrongfully sold-off asset rally" and the spillover effect from the strong recovery trajectories of Palo Alto and CrowdStrike, is fueled by three positive catalysts. First, earnings from software giants like Snowflake and MongoDB reinforced the signal that "AI is still driving enterprise IT spending," leading the market to believe data, cloud, automation, and essential enterprise workflow software will benefit long-term. Second, Jensen Huang's signal at Computex that "AI agents need more tools and software," combined with narratives around RTX Spark and AI PCs, has led investors to reprice the AI monetization potential of software platforms like ServiceNow, Salesforce, and Adobe. Third, software stocks fell too deeply earlier in the year, and crowded short positions are beginning to unwind, creating clear positioning repair and short-squeeze effects.
Analysis suggests that narratives around AI PCs and local/edge AI agents related to NVIDIA and Microsoft are also positively driving software stocks like ServiceNow, Adobe, and Asana. The widespread adoption of AI PCs could potentially increase the daily automated usage frequency of these software products through on-device AI models.
The "AI disrupts everything" theme hasn't disappeared; it has transformed from indiscriminately depressing software valuations to strictly screening which companies can turn AI into revenue and which will be marginalized by it. Companies like Palo Alto, CrowdStrike, ServiceNow, and Salesforce, if they can embed AI into security operations, identity governance, customer service, sales, IT processes, and enterprise data platforms—and demonstrate simultaneous improvements in net retention rates, bookings, margins, and AI product revenue—will be revalued by the market as AI beneficiaries. Conversely, companies with single product modules, lacking platform bundling capabilities, and unable to adapt to AI agent security and enterprise workflows will still face valuation discounts.
In other words, software stocks are not returning to the old "everything rises" SaaS bull market. Instead, they are entering a new phase of "winner-takes-most for AI-powered software operational flow platforms." From an AI engineering and industrial logic perspective, the label "AI loser" is too simplistic. What is truly vulnerable to AI disruption is point-solution software lacking workflow stickiness, data moats, system access points, and compliance/audit capabilities. Conversely, platform software that can embed AI into core enterprise processes and become the layer for Agent orchestration and governance is more likely to benefit from AI. Companies like Palo Alto, CrowdStrike, Snowflake, and ServiceNow are more likely to fall into the latter category. When AI Agents perform tasks within an enterprise, they require access to ticketing, customer, permission, knowledge base, approval workflow, and logging systems. These elements won't automatically disappear with more powerful models; instead, they become more critical.
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