In the first quarter of 2026, the software industry experienced one of its most significant stock corrections in recent years, driven not by current performance but by long-term prospects. According to Goldman Sachs Research, the rise of artificial intelligence (AI) applications has led investors to reevaluate the viability of existing business models and the strength of competitive defenses, often referred to as “moats.” This skepticism has caused a notable selloff in software stocks, raising concerns about the sector’s adaptability in an evolving technological landscape.
Amidst this turmoil, Gabriela Borges, a software sector analyst at Goldman Sachs, suggests that industry leaders could draw valuable lessons from a different tech subsector: cybersecurity. With a long history of contending with hostile digital threats, cybersecurity firms have developed a unique agility to adapt to rapid technological changes and strategic challenges.
Cybersecurity companies have proven particularly adept at leveraging mergers and acquisitions (M&A) to close capability gaps, which has contributed to their robust market performance. As of April 15, US cybersecurity stocks are trading at a 24% premium compared to the broader US software industry when assessed by enterprise value to forward sales. This resilience in the face of constant threats underscores the effectiveness of their business strategies, Borges notes.
“Over the last 10 years, cybersecurity firms have been dealing with existential threats,” Borges explained. “Now they show what good innovation and durable moats look like over time. They set a good bar for the larger software industry.” This high standard raises the question of how software companies can improve their own response to disruptive technologies like AI.
Borges highlighted that the core difference between cybersecurity and other areas of technology lies in their approach to research and development. In cybersecurity, innovation is often more revolutionary than evolutionary, as firms must continuously confront active adversaries. “You can’t just make the same product a little bit faster and a little bit better every year,” she stated. Security firms must constantly prepare for unpredictable security threats, drawing on their battle-tested experience, unlike many software-as-a-service (SaaS) companies which may lack this level of preparedness.
To maintain their competitive edge, cybersecurity firms excel at identifying weaknesses in their product development road maps and recognize when it may be more prudent to acquire emerging technologies rather than develop them in-house. Borges pointed to one leading firm that took 18 months to integrate a startup generating $10 million in revenue. By the time they launched an integrated product, it was scalable and immediately effective for customers, ultimately becoming a cornerstone of a business that has grown to generate over $500 million.
With such successful strategies evident in cybersecurity, Borges argues that software companies should consider similar approaches. “For software companies, we think it makes a lot more sense to have the venture capital community sponsor next-generation innovation rather than depend too much on organically developing new capabilities,” she stated. This shift would allow leadership teams in software firms to select and acquire the most promising technologies from the startup ecosystem.
The implications of adopting these strategies are significant for the software industry, especially as it grapples with the rapid evolution of AI. By fostering a culture of innovation through acquisitions and collaborations, software firms can not only enhance their resilience but also redefine their market positions. As the landscape continues to shift, the lessons learned from the cybersecurity sector could serve as a crucial roadmap for the future of software development.
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