Allot's SECaaS Growth Engine Drives Stock Rally: Why the Valuation Multiples of 21 Tell a Different Story

Allot Ltd. ALLT has demonstrated impressive stock price momentum, climbing 20.6% over the past six months—a significant feat considering the broader Internet - Software sector retreated 7.5% during the same period. This outperformance becomes even more notable when compared to heavyweights like Cisco Systems CSCO, F5 FFIV, and Palo Alto Networks PANW, which saw gains of 10.3%, losses of 8.1%, and declines of 1.1% respectively.

The SECaaS Expansion: Core Driver of Growth Momentum

The engine powering Allot’s recent gains is unmistakable: explosive expansion in its Cybersecurity-as-a-Service (SECaaS) segment. Recent third-quarter 2025 results underscore this trajectory, with net sales climbing 14% year-over-year to $26.4 million, surpassing consensus expectations of $26 million. More impressively, non-GAAP EPS surged to 10 cents from just 3 cents in the prior-year period—a 150% beat on the consensus forecast.

This momentum prompted management to upgrade full-year 2025 guidance. Revenue expectations now sit in the $100-$103 million range (previously $98-$102 million), while SECaaS annual recurring revenue (ARR) growth projections were raised to exceed 60% year-over-year, up from the earlier 55-60% guidance band.

What’s Propelling SECaaS Momentum?

Allot’s SECaaS ARR accelerated roughly 60% year-over-year in the third quarter, representing a substantial acceleration compared to broader software sector trends. The expansion stems from several reinforcing factors:

Tier-1 Telecom Partner Scaling: Large telecommunications operators that deployed SECaaS offerings in recent quarters continue expanding their user bases, creating sustained demand for Allot’s underlying infrastructure and services.

Upselling Dynamics: Existing customers are progressively adding complementary services, expanding wallet share and customer lifetime value. This cross-selling behavior is particularly evident as enterprises recognize the value of integrated security solutions.

Product Innovation: New offerings like OffNetSecure—which extends protection beyond the operator’s network perimeter—are opening fresh use cases and potential revenue-per-user expansion opportunities.

Reflecting this quality shift, recurring revenues now represent 63% of total quarterly revenue, compared with 58% a year ago. SECaaS itself accounted for approximately 28% of quarterly revenue, with management flagging a likely progression toward 30% penetration if current dynamics persist. Subscription-based models inherently provide greater revenue predictability and business stability.

Earnings Projections Signal Continued Momentum

Consensus estimates for 2026 point to revenue expansion of 13.3%, while earnings growth is forecast at 15.9% year-over-year. Notably, earnings expectations have been revised upward by one cent over the past 60 days, suggesting analyst confidence in the company’s trajectory. These upward revisions often precede positive price action, particularly when accompanied by strong SECaaS momentum.

Valuation Assessment: Opportunity Amid Growth

Despite robust growth metrics, Allot maintains an attractive valuation profile. The stock’s forward 12-month price-to-sales (P/S) ratio of 4.54X sits below both the broader Internet-Software industry average of 4.71X and key peer valuations: Cisco Systems at 4.74X, F5 at 4.93X, and Palo Alto Networks at 11.82X.

This valuation discount—particularly striking relative to competitors with comparable or lower growth rates—creates a meaningful margin of safety for growth-oriented investors. The combination of accelerating SECaaS adoption, expanding margins through recurring revenue mix, and reasonable multiples of 21 relative to estimated forward earnings creates a compelling risk-reward setup.

Forward Outlook

If Allot’s telecom partners sustain their service scaling efforts and user adoption momentum remains intact, SECaaS ARR growth could provide consistent tailwinds through upcoming quarters. The intersection of strong secular cybersecurity demand, proven execution capability, and reasonable valuation suggests the stock may attract continued institutional interest.

Allot currently holds a Zacks Rank #1 (Strong Buy) rating.