The Cloud Security Tipping Point: A $26B Market Shifts from Hardware

REDWOOD CITY, CA – December 04, 2025 – A fundamental reallocation of capital is underway within corporate IT. New market data reveals that the global Network Security market, on track to surpass $26 billion in 2025, is no longer defined by the blinking lights of hardware appliances in a data center. Instead, growth is being captured in the cloud, marking a decisive pivot in how modern enterprises protect their digital assets.

A report published this week by the Dell’Oro Group, a trusted industry research firm, quantifies this transformation. While the total market grew a healthy 9 percent year-over-year in the third quarter, that figure masks a deeper, more significant trend. Cloud-delivered security services are dramatically outpacing their hardware-centric predecessors. Security Service Edge (SSE), a modern architecture for securing user access, surged by nearly 20 percent. Meanwhile, Web Application Firewalls (WAF), which shield applications from attack, climbed 12 percent. In stark contrast, the traditional firewall appliance market advanced by only low single digits.

“The gap between cloud-native agility and legacy hardware has never been starker,” noted Mauricio Sanchez, Sr. Director at Dell’Oro Group, in the report's release. Sanchez highlighted a clear “bifurcation in the market,” where the urgent need for decentralized access and robust application security is fueling a “massive migration of value to the cloud edge.” This isn't just an incremental change; it’s a strategic shift reflecting a new reality for industrial and enterprise operations.

The End of the Perimeter Era

For decades, the dominant security model was the fortress. Companies built a strong, clearly defined digital perimeter with firewalls, intrusion prevention systems, and other hardware to keep threats out and sensitive data in. This model was effective when employees worked in an office and applications ran on-premise. Today, that perimeter has dissolved.

The widespread adoption of hybrid work, the proliferation of mobile devices, and the migration of applications to multiple public clouds have rendered the old fortress model obsolete. Users and applications are now everywhere, creating a vast and complex attack surface that a centralized hardware stack cannot effectively protect. Attempting to route all traffic back through a corporate data center for inspection creates bottlenecks, degrades user experience, and ultimately fails to provide the granular security required for a distributed environment.

This is the core driver behind the meteoric rise of SSE. Instead of securing a network, SSE focuses on securing the connection between a user and an application, regardless of their location. It integrates critical security functions—including Zero Trust Network Access (ZTNA), Secure Web Gateway (SWG), and Cloud Access Security Broker (CASB)—into a single, cloud-delivered service. This approach allows organizations to enforce consistent security policies for all users, on any device, accessing any application, without the performance penalty of legacy solutions.

Zero Trust and Application Armor: The New Budget Priorities

The explosive growth in SSE and WAF is not just about moving to the cloud; it's about adopting fundamentally different security philosophies. The 20 percent growth in SSE is a direct result of enterprises embracing Zero Trust, a principle that dictates no user or device should be trusted by default. ZTNA, a core component of SSE, grants users access only to the specific applications they are authorized to use, drastically limiting lateral movement for an attacker who breaches the network.

Simultaneously, as companies undergo digital transformation, their most valuable assets—applications and data—are increasingly exposed to the internet. This makes them prime targets. The mid-teens growth in WAF revenue reflects the urgent need to build a protective layer directly around these applications. Modern WAFs, often delivered as a cloud service, do more than block simple attacks. They use machine learning to defend against sophisticated threats, protect APIs (the connective tissue of modern software), and mitigate complex bot attacks, providing essential armor for a company’s digital presence.

The Dell’Oro report projects the total market will approach $29 billion in 2026, driven by this sustained demand for application-layer protections and the continued adoption of cloud workloads. The budget is following the risk, and the risk has moved from the network edge to the individual user and the distributed application.

A Market in Transformation: How Vendors Are Adapting

This market shift is creating a new landscape of winners and challengers. Traditional firewall vendors, long the titans of network security, are in a period of intense adaptation. Companies like Palo Alto Networks, Fortinet, and Check Point are not standing still. They are aggressively building or acquiring their own cloud security platforms, such as Prisma Access and FortiSASE, to compete directly with cloud-native specialists. Their strategy is to offer a hybrid approach, leveraging their massive installed base of hardware firewalls while providing an integrated path to the cloud, often under a single management console. The growth of virtual firewalls, which outpaces their physical counterparts, is a key part of this transition.

At the same time, a new class of leaders has emerged. Cloud-native players like Zscaler and Netskope built their entire architecture around the SSE model from the ground up, giving them a significant head start. In the WAF space, content delivery network giants like Cloudflare and Akamai leverage their massive global edge networks to provide highly effective, scalable application security services that are tightly integrated with performance optimization.

The competition is no longer just about who has the best firewall appliance. It is about who provides the most comprehensive, integrated, and performant cloud-delivered security platform. As businesses continue their digital journey, their choice of security partner will be defined less by hardware specifications and more by the ability to provide seamless, intelligent protection for a world without perimeters.