A10 Networks: Is the Cybersecurity Stock Undervalued Amid AI-Driven Growth?

A10 Networks (ATEN) has emerged as a compelling case study in the cybersecurity sector, balancing disciplined financial execution with strategic bets on AI infrastructure. With revenue growth of 15% year-over-year in Q2 2025-reaching $69.4 million-and a non-GAAP net margin of 23.9%, the company has demonstrated operational resilience amid macroeconomic headwinds, according to the A10 Q2 2025 results. Yet, the critical question for investors remains: Does the stock's current valuation fully reflect its long-term potential in a market poised for explosive growth?

Strategic Positioning: Cybersecurity as a Core Engine

A10's transformation into a cybersecurity-centric business is evident in its financials. Security-led revenue now accounts for 63% of total sales, up from previous cycles, according to the A10 Q2 2025 presentation. This shift aligns with global cybersecurity market projections, which anticipate a 12.9–14.4% CAGR through 2030–2032, driven by AI adoption and regulatory pressures, per Grand View Research. The company's acquisition of ThreatX Protect-a WAAP (Web Application and API Protection) provider-further cements its position in high-growth niches, following the ThreatX Protect acquisition that adds capabilities to defend AI-driven applications against evolving threats.

However, A10's management has set more conservative internal targets. While the cybersecurity market is expected to expand at double-digit rates, A10 has guided for "high single-digit" annual revenue growth through 2028 in its earnings call transcript. This discrepancy suggests the company may be underestimating its own potential, perhaps to manage expectations or due to cautious capital allocation.

Valuation Metrics: Discounted Relative to Peers

A10's trailing P/E ratio of 25.83 and forward P/E of 19.79 trail the 34.8x average for the U.S. software sector, according to A10 valuation statistics. Analysts have assigned a consensus price target of $21.50, implying a 20% upside from current levels per the MarketBeat forecast. This valuation gap could reflect skepticism about A10's ability to scale its cybersecurity offerings or skepticism about the broader market's growth trajectory. Yet, the company's balance sheet-boasting $252.9 million in cash as of June 2025-and its commitment to returning capital via dividends and buybacks ($13.9 million in Q3 2024) underscore financial discipline, as shown in the Q3 2024 results.

The stock's price-to-sales ratio of 4.70 also appears attractive when juxtaposed with the cybersecurity market's projected $500.7 billion valuation by 2030, per a SimplyWall analysis. If A10 can capture even a fraction of this growth-particularly in AI infrastructure, where the market is forecasted to grow at 30.4% CAGR through 2030-its current multiples may appear undemanding.

Risks and Considerations

While A10's strategic moves are prudent, several risks could temper its growth. The cybersecurity talent shortage (3.5 million unfilled roles globally in 2024) may delay product rollouts or strain margins, according to cybersecurity predictions. Additionally, the company's reliance on enterprise and service provider clients exposes it to macroeconomic volatility. For instance, 59% of Q2 2025 revenue came from the Americas, a region where AI data center spending could slow if interest rates remain elevated - a point also noted in the A10 Q2 2025 presentation.

Moreover, A10's lack of explicit 3–5 year CAGR targets complicates valuation analysis. While management cites "high single-digit" growth, third-party estimates project a 6.9% annual revenue increase through 2028, with EBITDA margins expanding to 26–28%, according to SimplyWall analysis. These figures, while solid, lag behind the cybersecurity and AI infrastructure sectors' projected growth rates, suggesting the stock may not yet fully price in disruptive potential.

Conclusion: A Stock with Upside, but Not Without Caution

A10 Networks' financial performance and strategic acquisitions position it well to capitalize on cybersecurity and AI infrastructure tailwinds. Its valuation metrics-particularly the P/E discount relative to peers-suggest the market has not yet fully priced in its long-term potential. However, the absence of aggressive internal growth targets and macroeconomic risks warrant caution. For investors comfortable with a moderate-risk profile, A10 offers an attractive entry point into a sector poised for transformation.