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CyberArk (CYBR) Buys Venafi to Fortify Machine Identity Security

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CyberArk Software Ltd. (CYBR - Free Report) has entered into a definitive agreement to acquire Venafi, a leader in machine identity management, from the private equity firm Thoma Bravo in a cash-stock deal worth $1.54 billion.

Per the agreement, CyberArk will pay $1 billion in cash and $540 million in its shares. Both companies’ boards have approved the transaction, which is expected to close in the second half of 2024, pending regulatory approvals and customary closing conditions.

CyberArk aims to merge Venafi’s advanced machine identity management capabilities with its robust identity security solutions, creating a comprehensive platform for enterprise-scale machine identity security.

Growing Importance of Machine Identities

With digital transformation and cloud migration accelerating, the number of machine identities — such as workloads, code, applications, IoT devices and containers — has surged. CyberArk noted that, currently, machine identities outnumber human identities by a ratio of more than 40 to 1. This rapid growth has made machine identities a lucrative target for cybercriminals. To mitigate these risks, machine identities must be discovered, managed, secured and automated, particularly as certificate lifecycles shorten and the need for quantum-ready solutions increases.

Historically, enterprises have prioritized human identity management over machine identities, partly due to the latter's complex lifecycle challenges. However, the exponential increase in machine identities, driven by devices and cloud workloads, has highlighted the necessity of improving machine identity management. Citing a Forrester report, CyberArk revealed that the growth in machine identities will continue to outpace human identities, necessitating advanced and automated management approaches to reduce associated risks.

Synergy of Capabilities

The acquisition combines Venafi’s strengths in certificate lifecycle management, private Public Key Infrastructure, IoT identity management and cryptographic code signing with CyberArk’s expertise in secrets management. This integration will enhance organizations' ability to prevent the misuse and compromise of machine identities, improve security and reduce costly outages. Offering a comprehensive solution for machine identity security that can be deployed as software-as-a-service (SaaS) or hybrid will accelerate risk mitigation for organizations aiming to secure modern cloud environments.

Venafi’s innovative PKI and certificate management solutions, particularly within modern cloud environments, complement CyberArk’s offerings. This acquisition is set to expand CyberArk’s total addressable market by nearly $10 billion, bringing it to approximately $60 billion. This strategic move is expected to significantly enhance CyberArk’s market position and growth potential.

Additionally, Venafi is anticipated to contribute around $150 million in annual recurring revenues and 95% recurring revenues, including SaaS and term-based licenses. The acquisition is projected to be immediately accretive to CyberArk’s margins, with significant revenue synergies through cross-sell, up-sell and geographic expansion.

The acquisition of Venafi by CyberArk represents a strategic alignment to enhance machine identity security at scale. This combined offering is poised to deliver substantial value to shareholders and position CyberArk at the forefront of the rapidly expanding identity security market.

Zacks Rank & Stocks to Consider

CyberArk currently carries a Zacks Rank #3 (Hold). Shares of CYBR have surged 148% year to date (YTD).

Some better-ranked stocks in the broader technology sector are NVIDIA (NVDA - Free Report) , CrowdStrike Holdings (CRWD - Free Report) and Paycom Software (PAYC - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 earnings has been revised 20 cents upward to $24.25 per share in the past seven days, which suggests year-over-year growth of 87.1%. The long-term estimated earnings growth rate for the stock stands at 30.9%. The NVDA stock has soared 91.4% YTD.

The Zacks Consensus Estimate for CrowdStrike’s fiscal 2025 earnings has been revised upward by 2 cents to $3.90 per share in the past 60 days, which calls for an increase of 26.2% on a year-over-year basis. The long-term expected earnings growth rate for the stock is pegged at 22.3%. CRWD shares have risen 36.6% YTD.

The consensus mark for Paycom’s 2024 earnings has been revised upward by 3 cents to $7.68 per share over the past 30 days, which indicates a marginal 0.9% decrease from that reported in 2023. It has a long-term earnings growth expectation of 10.4%. The PAYC stock has declined 12.8% in the YTD period.

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