Dive Brief:

• The global network security market recovered from a sustained slide in growth, reaching $5.9 billion in revenue in the second quarter, Dell’Oro Group said in a Wednesday report. 
• Network security revenue grew 6% year over year in the quarter, breaking a streak of six consecutive quarters of declining growth. Yet, the market’s growth rate is still down from double-digit increases it experienced in 2022 and 2023.
• “After numerous quarters of year-over-year growth decelerations, Q2 represented a change in direction,” Mauricio Sanchez, senior director of enterprise security and networking research at Dell’Oro Group, said via email.

Dive Insight:

The network security market’s rebound arrives as heightened levels of malicious activity are targeting firewalls, the largest product segment in the market.

Network devices are common targets for financially-motivated and nation-state linked attackers. Vulnerabilities in devices sold by Barracuda, Citrix, Fortinet, Ivanti, and Palo Alto Networks during the last couple years. This week, attackers are actively exploiting a critical vulnerability in SonicWall OS, the software powering the security vendor’s firewalls.

“The recurring attacks on security infrastructure act as a double-edged sword for the market,” Sanchez said.

Attacks drive increased attention and enterprise spending, a heightened demand that benefits vendors, but they also lead some enterprises to abandon traditional solutions altogether, Sanchez said.

In the second quarter, network security revenue growth was largely driven by cloud-native security tools and virtual firewalls. Virtual firewall revenue jumped 22% year over year to $420 million in the quarter, according to Dell’Oro Group’s research.

Network security spending surged during the pandemic, then growth rates declined as enterprises tightened spending due to economic uncertainty and macro concerns about a recession.

Hardware-based solutions, including physical firewalls, continue to drag on the market’s performance. Physical firewall sales declined 1% year over year to $2.8 billion, the report found.

“This stark contrast in growth rates within a single product category underscores how enterprises consistently favor flexible, cloud-native security solutions to address their evolving needs,” Sanchez said in the report.

Total Q2 revenue for physical and virtual firewalls increased 1.5% to $3.2 billion, the report found.

Palo Alto Networks maintained a commanding 29% share of the firewall segment in the quarter, and remains the leading vendor of both physical and virtual firewalls. The next closest competitors, Cisco and Fortinet, each ended the quarter with a 15% share of the overall firewall segment, according to Dell’Oro Group.

The research firm’s latest forecast, released in late July, expects the network security market to hit $40 billion by 2028, including more than $19 billion in firewall sales.