Global X’s ETF Market Scoop: July 2025 revealed that the Global X Cybersecurity ETF (ASX: BUGG) was one of the worst performing exchange-traded funds (ETF) in July, declining by 4.73 per cent, with broad weaknesses as around 70 per cent of its holdings ended the month lower.
Speaking to InvestorDaily, Global X’s senior investment strategist, Billy Leung, said the most significant contributors to the decline were BlackBerry (-18.2 per cent), Palo Alto Networks (-13.6 per cent), Check Point Software (-14.3 per cent), Radware (-11.5 per cent) and Trend Micro (-9.6 per cent), all of which were largely tied to post-earnings sell-offs.
This decline followed the ETF’s 8.2 per cent surge over the six months to June, which coincided with NATO member states’ committing to increase their military spending from 2 to 5 per cent.
At the time, Leung told InvestorDaily that cyber security ETFs were emerging as “standout beneficiaries” of the increase, with countries allocating 1.5 per cent specifically to address unconventional threats such as cyber security.
Detailing the ETF’s performance in July, Leung revealed that the declines were partially offset by gains in key holdings such as Varonis (up 12.0 per cent), Rubrik (up 7.9 per cent), CyberArk (up 2.9 per cent), SentinelOne (up 2.1 per cent), and Gen Digital (up 2.1 per cent). These gains were driven by strong billings results, increased adoption of AI-related products, and in CyberArk’s case, merger and acquisition speculation that was later confirmed by Palo Alto Networks’ potential bid, he said.
“Overall, performance was pressured by disappointing market reactions to key platform player results (PANW, CHKP, FTNT, CRWD) and a rotation away from pure play cyber into broader software and AI monetisers,” Leung said.
“I would also say that the positioning on these names has been very heavy going into the results due to the scarcity factor (e.g. really not much quality major cyber security names).”
More generally, Leung noted that a key factor behind the lag in cyber and software despite the broader tech rally is post-pandemic digestion, with the sector navigating a period of slower sequential growth after security budgets were pulled forward during 2020 to 2022.
“Also, investor flows are currently favouring AI monetisers such as Microsoft, Snowflake and Meta over AI enablers and builders, a category that often includes cyber,” he added. “Though it’s worth to note that AI-focused cyber security names were the leaders in the ETF during the past month.”
Moreover, organisations are prioritising compliance-driven and mission-critical security projects while deferring discretionary expansions, according to Leung, as IT budgets remain under pressure.
He added that Palo Alto Networks’ potential acquisition of CyberArk has also reflected a trend towards platform consolidation, which could benefit Palo Alto but simultaneously signal customer preference for fewer vendors and more integrated solutions.
Are the fundamental themes still solid?
Despite July’s lag, long-term drivers for cyber security investments remain intact, supported by expanding cyber attack surface on the back of cloud migration, IoT adoption and operational technology integration, according to Leung.
He added that regulatory and ESG frameworks are also keeping security spending non-discretionary, even as markets have repriced sector valuations.
“AI is both a threat and a catalyst, with the rise of AI-driven attacks increasing the need for AI-enabled defences which is a focus area for several holdings, including CrowdStrike, SentinelOne and Varonis,” Leung said.
Additionally, M&A activity is shaping the sector’s future, with Leung noting that consolidation can create scale efficiencies, broaden platform capabilities and enhance cross-selling opportunities for market leaders.
He added that valuations for many quality franchises have reset to multi-year lows despite continued double-digit growth, creating the potential for mean reversion once sentiment improves.
“July’s sell-off was broad and driven by a combination of earnings-related disappointment and a sector sentiment headwind, rather than a breakdown in the fundamental investment case,” Leung said.
“The index/ETF continues to hold companies with strong competitive moats, secular growth opportunities and optionality from AI-driven security demand, leaving the medium-term outlook favourable despite near-term volatility.”
