Allot Delivers Exceptional Returns Over 21 Months: The SECaaS Growth Story

Over the past 21 months, Allot Ltd. (ALLT) has emerged as a standout performer in the Internet-Software sector, demonstrating how focused business model transformation can drive substantial shareholder value. While the broader industry faced headwinds, Allot’s strategic pivot toward its Cybersecurity-as-a-Service (SECaaS) platform has positioned the company for sustained expansion and improved financial visibility. The impressive run has prompted investors to reassess the company’s investment thesis and long-term potential.

How SECaaS Became the Growth Engine

The story of Allot’s outperformance centers on one key business segment: SECaaS. This subscription-based security offering has transitioned from a secondary revenue stream to the company’s primary growth driver. Management’s disciplined execution in scaling SECaaS across telecom partnerships has created a powerful flywheel effect.

In the most recent quarterly report, SECaaS annual recurring revenue (ARR) expanded approximately 60% year-over-year, driven primarily by large telecom operators launching new security services and end-user adoption accelerating. Notably, this high-growth segment now represents approximately 28% of total company revenue and continues expanding its contribution to the overall business.

What makes this particularly compelling is the shift toward subscription economics. Recurring revenues now account for 63% of total company sales, up from 58% in the comparable year-ago period. This structural improvement enhances earnings predictability and strengthens the valuation foundation for a technology company transitioning toward software-as-a-service economics.

Financial Performance Demonstrates Execution

The numbers validate management’s growth thesis. Total revenue reached $26.4 million in the latest quarter, representing 14% year-over-year growth and exceeding analyst expectations. More impressively, non-GAAP earnings per share surged to 10 cents from 3 cents in the year-ago quarter—a 233% increase that captured market attention and sparked multiple upward estimate revisions among research analysts.

Management subsequently raised full-year guidance based on the stronger-than-expected quarterly results. The company now forecasts annual revenues in the $100-$103 million range, reflecting improved visibility into customer spending patterns. The SECaaS ARR growth guidance was similarly elevated, with management now expecting growth exceeding 60% on a year-over-year basis.

Looking forward, the consensus view among analysts suggests continued momentum. Revenue growth is expected to decelerate to a still-respectable 13.3% rate in the following year, while earnings are projected to expand at a 15.9% pace—a pattern that typically supports multiple expansion for high-quality software companies.

New Product Innovation Expands the TAM

Beyond customer expansion with existing offerings, Allot is introducing complementary security solutions that broaden its addressable market. New products like OffNetSecure extend protection beyond the operator’s network, creating additional revenue opportunities per user while enhancing the value proposition for telecom partners.

This product innovation strategy accomplishes two objectives: it deepens relationships with existing customers through upselling, and it attracts new operators interested in a more comprehensive security ecosystem. When combined with accelerating user adoption trends, these initiatives suggest the SECaaS momentum can persist through the coming quarters.

Valuation: A Compelling Risk-Reward Setup

Despite delivering superior growth relative to industry peers, Allot stock trades at reasonable valuations that provide downside protection. The forward price-to-sales multiple of 4.54X sits below the sector average of 4.71X, and significantly below several comparable companies.

Cisco Systems trades at 4.74X, while F5 commands a 4.93X multiple. Palo Alto Networks, as a higher-growth pure-play security vendor, trades at a substantially elevated 11.82X multiple. This valuation discount becomes even more attractive when considering Allot’s 60% ARR growth rate in its core SECaaS business—a expansion rate that would typically justify a premium multiple rather than a discount.

This pricing disconnect creates an asymmetric opportunity for investors: you receive exposure to robust cybersecurity growth at below-market valuations, while benefiting from potential multiple expansion as the market recognizes the business model transformation.

The Investment Case: A Strategic Inflection Point

Allot represents a compelling opportunity for investors seeking exposure to secular cybersecurity growth trends through a company executing a successful business model transition. The 21-month performance reflects not momentum-driven enthusiasm, but rather fundamental business improvements: accelerating customer adoption, expanding recurring revenue streams, improving earnings visibility, and a broadening product ecosystem.

The combination of strong growth, improving unit economics, product innovation, and attractive valuation creates a favorable risk-reward profile. For long-term investors with a multi-year investment horizon, Allot’s strategic positioning in the high-growth SECaaS market offers meaningful upside potential alongside reasonable valuation-based downside protection.