AI earnings grow 26% to 31% as Citi CIO urges staying invested

AI stocks pulled back this spring, but earnings from CrowdStrike and Palo Alto Networks show the bull case remains intact.

The selloff in AI stocks this spring erased months of gains, but earnings from CrowdStrike and Palo Alto Networks — showing revenue growth of 26% and 31% — argue the pullback was a valuation reset rather than a demand problem.

"We are definitely game on. Yes, fully invested," Kate Moore, chief investment officer at Citi Wealth, said on CNBC on July 21. "Earnings have been powering the equity market higher. It's not been multiples. In fact, there's been multiple contractions across every major market."

Palo Alto Networks' next-generation security annual recurring revenue surged 60% year over year, while CrowdStrike posted 26% revenue growth. Core PCE reached 130.08 in May, up 0.3% month over month, and real GDP registered at 2.1% annualized as of Q4 2025. Moore noted that pullback windows in spring 2026 lasted only days, leaving cash-heavy investors with shrinking opportunities to buy at lower prices. "These drawdowns are going to be short," she said.

The AI investment thesis now hinges on whether megacap earnings can justify the sector's valuation. With nearly 88% of reporting S&P 500 companies beating estimates this earnings season, according to Apex Securities, the next test comes from Alphabet and Tesla, whose results will either confirm the demand narrative or reopen the capital expenditure debate.

'Infinite AI Agents' Reshape the Cybersecurity Market

Moore's second argument for staying invested centers on cybersecurity. "We're not talking about a single kind of cyber attack or a series of people that could be engaging in it, but almost infinite AI agents across a huge attack surface," she said, arguing that enterprise security budgets remain dangerously underfunded relative to the threat. CrowdStrike and Palo Alto are direct beneficiaries: both companies reported accelerating demand as enterprises upgrade legacy defenses against AI-powered attacks. The cybersecurity market's share of enterprise technology spending is still too small, Moore argued, even as AI-generated threats multiply at an accelerating pace.

What Earnings Say About AI Infrastructure Demand

The 26% and 31% revenue growth rates from two of the largest cybersecurity firms offer a proxy for broader AI infrastructure spending. Palo Alto's 60% surge in next-gen security ARR suggests enterprises are prioritizing AI-native security platforms over traditional firewall solutions. For investors, the question is whether this demand can sustain the sector's elevated multiples. Nvidia, the bellwether for AI chip demand, reports next quarter, and its data center revenue will provide the clearest signal yet on whether the spring pullback was a buying opportunity or a warning.

CrowdStrike and Palo Alto shares have recovered most of their spring losses, but the sector still trades below February highs. If Alphabet and Tesla deliver strong results this week, it could trigger a broader rotation back into AI names. If they disappoint, the pullback could deepen. Either way, Moore's message is clear: sitting in cash is the riskier bet for investors who believe the AI demand story is still in its early innings.

This article is for informational purposes only and does not constitute investment advice.