Written by: Matt Britzman | Hargreaves Lansdown
Alphabet's (Google) acquisition of Wiz for around $32bn represents one of the largest deals in the cybersecurity sector to date.
Founded in 2020, Wiz has quickly become a major name in the cybersecurity sector, specialising in cloud security solutions adopted by major businesses.
This prospective deal highlights the increasing significance of cybersecurity in our progressively digital world. As cyber threats grow more advanced, the need for effective, scalable security solutions becomes more pressing.
From ransomware attacks to state-sponsored hacking, businesses across various sectors need to re-evaluate their digital defences.
The global cybersecurity market is on a robust growth trajectory.
Estimates suggest the market, valued at $172bn in 2023, could reach $563bn by 2032, driven by the widespread adoption of cloud services, stricter regulations, and the rising frequency of cyber threats.
So with this in mind, what does Google acquisition of Wiz mean for investors?
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Google buys Wiz for $32bn – what it means for investors
Alphabet’s move to buy Wiz follows a failed attempt last year, likely held back by a tough US regulatory environment.
Under the previous administration, large tech deals often struggled to gain approval. With new leadership now in place, this marks the first major test of whether regulators are becoming more open to big acquisitions.
Wiz is a fast-growing cybersecurity company that helps businesses keep their cloud systems safe. It was founded in 2020 by former Microsoft executives and has quickly attracted some of the biggest companies in the world to use its products.
Wiz’s platform scans cloud systems for potential risks like security gaps or weak spots, helping companies fix issues before they become problems.
The software doesn’t need to be installed, making it easy for large organisations to adopt, and it works across different cloud providers.
For Alphabet, bringing Wiz into the fold would strengthen the security tools it offers through Google Cloud. That’s important because many businesses are moving more of their operations online and need stronger protection against growing cyber threats.
Adding Wiz’s technology could help Google Cloud stand out from its bigger rivals and give customers more reasons to stay and spend. It’s a move that supports Alphabet’s wider push in its growing cloud services arm.
Wiz is expected to generate around $1bn of annual recurring revenue (ARR) next year, which puts the price tag at roughly 30 times ARR. Part of that can be justified by its rapid growth, but it’s a premium valuation compared to its peers which increases risk.
We think the deal makes a lot of sense and will help strengthen Alphabet’s position in the cloud market.
That said, there’s still a significant risk that the deal gets blocked, especially given Alphabet is already under the regulator’s microscope for its Google Search monopoly among other things.
Related: Risk Isn’t the Enemy Anymore—And Your Clients Know It