Cybersecurity Capital Markets in 2026:
AI, Services, and the Next Wave of M&A
Cybersecurity Capital Markets in 2026:
AI, Services, and the Next Wave of M&A
AI, Services, and the Next Wave of M&A
I recently sat down with Rob Wright of Dark Reading to discuss the state of cybersecurity capital markets in 2026 and the trends shaping deal activity across the sector.
The conversation comes at a pivotal moment for the cybersecurity market. After a record setting 2025, dealmaking has not slowed. In fact, based on the first several months of 2026, cybersecurity M&A activity is on pace to surpass last year’s record volume.
At Momentum Cyber, we are seeing a market defined by AI, services demand, financing concentration, and a widening gap between platform-aligned companies and the rest of the market.
AI Is Reshaping the Market, But Not Replacing Services
AI is influencing how investors allocate capital, how buyers evaluate strategic fit, and how companies position themselves for premium outcomes. At the same time, AI is not replacing cybersecurity services. It is accelerating demand for them.
As threat actors use AI to automate attacks and scale campaigns, enterprises are leaning more heavily on consultants, MSSPs, MDR providers, and incident response teams. Leading services firms are embedding AI into threat detection, SOC automation, and incident response to improve efficiency and scale.
That combination is driving significant M&A activity across Cybersecurity Services. The market remains fragmented, investor demand is strong from both PE and Strategics, and enterprises continue to spend twice as much on cybersecurity services as they do on products. While lots of the conversations in cybersecurity today are focused on AI software, human-led services are helping drive what is shaping up to be another record year for cybersecurity M&A.
Momentum Cyber has had a front-row seat to this evolution, including representing Eric Foster and TENEX on its $250M Series B financing led by Crosspoint Capital, the second largest Series B in cybersecurity history.
Key Trends We Are Seeing
AI is enhancing SOC labor. Security Services led M&A volume in Q1 with 44 deals, while AI Security led all segments in disclosed M&A value with $916M across just 12 deals. With five additional AI Security M&A deals in April, the category has officially entered the M&A arena.
Hyperscaler gravity is reshaping M&A. The Mythos announcement by Anthropic was a major signal. However, as new models are deployed and governance, trust, and security concerns expand, we expect more inorganic activity from frontier AI companies and the hyperscaler universe.
Security spend is competing, not disappearing. Cybersecurity financing outpaced M&A value in Q1, with $3.8B in financing compared to $2.6B in M&A. This was only the fourth time since 2018 that financing dollars exceeded M&A dollars. AI security captured 46% of all VC dollars deployed in the quarter, totaling $1.7B.
AI economics are now a diligence variable. Investors and buyers are increasingly focused on whether AI improves scale, efficiency, margins, and outcomes. The financing-over-M&A dynamic suggests capital is concentrating around vendors investors believe can win on AI economics.
Early 2026 Market Snapshot
Q1 2026 was the second most active cybersecurity M&A quarter on record, with 108 transactions, behind only Q2 2025’s 110. Based on the first four months of the year, cybersecurity is on pace for roughly 450 M&A deals in 2026, which would surpass the 2025 record of 400.
The financing market is also becoming more concentrated. Q1 saw 10 rounds of $100M or more, worth a combined $1.8B, compared to a 2025 quarterly average of six such rounds worth $1.5B. The median check size for $100M+ rounds rose to $200M, with a median valuation of $1.85B.
That capital is flowing toward scaled platforms and proven entrepreneurs at AI-native companies. Recent examples include Eric Foster, formerly of Cyderes, raising a $250M Series B for TENEX; Lior Div, formerly of Cybereason, raising a $130M Series A for 7AI; and Galina Atova, formerly of Claroty, raising a $125M Series A for Kai. Together, these financings reflect a broader shift toward backing experienced cybersecurity founders with a clear path to category leadership.
AI Security is also maturing quickly. The category saw 12 M&A deals in Q1and 5 more in April compared to 10 in all of 2025. The buying window has officially opened.
What Comes Next?
The market is doing what our Almanac from January anticipated: capital is concentrating in platform-aligned, AI-native companies, strategics are still commanding value, and private equity is rebounding in volume. For founders, investors, and buyers, 2026 is shaping up to be another defining year for the sector.
Author
Eric McAlpine
Founder & CEO, Managing Partner
Eric McAlpine has spent the last 28 years in the Technology industry as a strategic advisor to Boards, Founders & CEOs, a two-time founder, and award-winning engineer. He is a highly sought out speaker on the Cybersecurity market at major industry conferences, private events, and corporate gatherings sharing insights into M&A, capital markets, and industry trends.
Eric is the Founder & CEO at Momentum Cyber, the premier trusted strategic advisor to the Cybersecurity industry providing bespoke high-impact advice combined with tailored senior-level access. He is one of the top dealmakers in the Cybersecurity industry with a prolific M&A track record advising on and orchestrating deals across the industry.
About Momentum Cyber
Momentum Cyber is the premier trusted advisor to the global cybersecurity industry, providing M&A advisory, capital raising, and strategic research services. With 68 cybersecurity transactions completed, $25B+ in cybersecurity deal value, and unparalleled industry relationships, Momentum Cyber delivers mission-critical advice to leading founders, CEOs, and decision-makers.
By The Numbers
M&A Highlights
Deal Volume & Value
- 37 total M&A transactions
- $1.0B in disclosed deal value
- 8 disclosed transactions
- $125M average disclosed deal value
Top Acquirers
- Check Point Software made 3 acquisitions (Cyata, Cyclops Security, Rotate) worth combined $150M
- Palo Alto Networks acquired KOI for $400M to secure agentic endpoint protection
- Varonis acquired AllTrue.ai for $126M to extend AI trust and governance capabilities
Most Active Sectors
- Security Services: 13 deals
- Risk & Compliance: 4 deals
- AI Security: 4 deals
- Data Security: 4 deals
- Digital Channel Security: 3 deals
Financing Highlights
Capital Deployment
- $563M total capital raised
- 61 financing transactions
- $12M median deal size
- 15% below 13-month median count
Stage Distribution
- Early Stage & Series A: 40 deals, $266M deployed (median: $7.2M)
- Series B: 3 deals, $65M deployed (median: $25.0M)
- Series C+: 14 deals, $207M deployed (median: $50.0M)
Top Financed Companies
- UpGuard: $75M Series C (Springcoast Partners)
- Gambit Security: $61M Series A (Kleiner Perkins)
- GitGuardian: $50M Series C (Insight Partners)
- Astelia: $35M Series A (Index Ventures)
- Orion Security: $32M Series A (Norwest Venture Partners)
Most Active Sectors by Deal Count
- Risk & Compliance: 18 deals, $271M
- Identity & Access Management: 8 deals, $102M
- AI Security: 7 deals, $57M
- Security Operations: 6 deals, $50M
- Digital Channel Security: 5 deals, $25M
Strategic Market Insights
AI Security Consolidation Arrives
February 2026 marks an inflection point for AI Security M&A. With 4 transactions in a single month, the segment is experiencing the buying window that operators and investors have anticipated since enterprise AI adoption accelerated in 2024-2025.
Key AI Security Transactions
- Palo Alto Networks acquired KOI ($400M) for agentic endpoint security
- Varonis acquired AllTrue.ai ($126M) for AI trust and governance
- Check Point acquired Cyata for AI agent discovery and control
- Proofpoint acquired Acuvity for unified protection across humans, data, and AI agents
The market is recognizing that AI security is no longer speculative. Enterprises are deploying autonomous agents, and acquirers who move early are securing critical capabilities at reasonable valuations before premium pricing takes hold.
Capital Concentrates at Scale
February financing activity reinforced the flight-to-quality dynamic. Five deals accounted for 45% of total capital deployed, while median deal sizes compressed to $12M as early-stage volume balanced late-stage concentration.
$100M+ Financing Activity Accelerates
- Q1 2026 is projected to match 2025's quarterly average of 6 deals worth $1.4B in $100M+ rounds
- Median investment size in $100M+ deals increased to $200M (up from $159M in 2024)
- Median post-money valuation for $100M+ deals reached $1.85B
This bifurcation reflects investor conviction that scaled platforms with demonstrated efficiency can command premium capital, while earlier-stage companies face more disciplined funding environments.
Record M&A Momentum Continues
February’s 37 M&A transactions extend the elevated deal velocity observed throughout 2025 and into early 2026. The first two months of 2026 are on pace for 489 total M&A deals, which would represent 22%+ growth over 2025’s record 400 transactions.
Historical Context
- February 2026: 37 deals (4th highest month ever)
- January 2026: 38 deals (3rd highest month ever)
- Only June 2025 (42 deals) and May 2025 (39 deals) recorded higher monthly totals
Strategic buyers are driving this acceleration. With stronger enterprise budgets, platform consolidation imperatives, and the urgency to own AI-enabled security infrastructure, acquirers are moving decisively on targets that extend their capabilities or fill critical gaps.