Cato Networks Hits $350M Revenue Run Rate as Security Startups Race to Prove AI Advantage

Cato Networks Hits $350M Revenue Run Rate as Security Startups Race to Prove AI Advantage

Cato Networks, the cloud-based network security startup, surpassed $350 million in annual recurring revenue in 2025, marking 43% year-over-year growth as enterprises accelerate security spending amid the shift to AI-powered infrastructure.

The milestone, announced Tuesday, positions the Israeli-founded company as one of the faster-growing players in a cybersecurity market increasingly defined by how vendors incorporate—and defend against—artificial intelligence. For finance leaders navigating security budgets, the announcement underscores a broader question: which cybersecurity bets will pay off as AI reshapes both the threat landscape and the tools meant to stop it.

CEO Shlomo Kramer told CNBC the company has an "aggressive plan" to gain market share in 2026, betting that enterprises moving workloads to the cloud will consolidate their security spending with vendors that can handle AI-era threats. "We are gaining some scale and becoming a more significant player in [the networking security] market," said Kramer, who co-founded Check Point Software and was an early investor in Palo Alto Networks—giving him unusual credibility in a sector crowded with promises.

The $350 million ARR figure comes just months after Cato announced it had crossed $300 million, suggesting the company is accelerating rather than plateauing. For context: annual recurring revenue tracks the value of subscription contracts normalized over 12 months, making it the standard metric for SaaS companies trying to demonstrate momentum to investors (and, eventually, public market analysts).

What's interesting here isn't just the growth rate—it's the timing. Cato's announcement arrives as public cybersecurity stocks have slid on fears that new AI tools from companies like Anthropic could automate security tasks currently handled by expensive enterprise software. The worry, in plain terms: if an AI agent can scan code for vulnerabilities or detect anomalous network traffic, do CFOs really need to keep writing eight-figure checks to legacy security vendors?

Kramer's pitch is that Cato is on the right side of this disruption. The company has been incorporating AI to automate security tasks and enhance threat detection—essentially arguing that the AI transformation creates more demand for its cloud-native architecture, not less. Whether that holds up depends on a bet that's hard to verify from the outside: that Cato's AI features are genuinely differentiated, rather than the same large language model wrappers every vendor is now bolting onto their products.

For finance leaders, the subtext matters more than the headline number. Cybersecurity budgets are under pressure to prove ROI, and the AI wave is forcing a reckoning: consolidate with vendors that can handle multiple security functions, or continue managing a patchwork of point solutions that may or may not survive the next technology shift.

Cato's growth suggests at least some enterprises are choosing consolidation. The company's cloud-based approach—combining network security, secure access, and threat prevention in a single platform—appeals to CFOs tired of reconciling invoices from a dozen different security vendors. The question is whether 43% growth can continue as larger competitors like Palo Alto Networks and Zscaler push their own AI-enhanced platforms.

The revenue milestone also raises the inevitable question of an IPO, though Cato has not announced plans. At $350 million in ARR and accelerating growth, the company is approaching the scale where public markets become a realistic option—assuming those markets regain their appetite for high-growth cybersecurity names.

What to watch: whether Cato can maintain this growth rate through 2026, and whether the "AI is helping business" narrative holds up under scrutiny from customers actually using the tools. The demo is always better than the deployment.