Tenable (TENB) could benefit from rising AI-driven security demand and increased exposure management adoption, but investors may remain on the sidelines until there is clearer evidence that inbound interest converts into sustained bookings and revenue growth, Morgan Stanley said in a note Thursday.

Tenable delivered a solid Q1 result and slightly raised its full-year outlook, but the implied growth trajectory still points to a moderation in momentum later in the year, the investment firm said.

Morgan Stanley said AI is generating a noticeable increase in customer interest as enterprises respond to a larger threat surface, but these discussions still need to convert into signed deals.

The investment firm added that the investors are likely to remain cautious given concerns around slower implied growth, weaker net retention, and ongoing pressure in the core vulnerability management market, including potential disruption from AI-native competitors.

Tenable One and exposure management remain key areas of strength, with Tenable One accounting for 41% of new business in the first quarter and enterprise customer additions remaining healthy, according to the note.

Morgan Stanley maintained its equal weight rating for Tenable and cut its price target to $27 from $30, saying it is waiting for clearer evidence that AI-driven demand can translate into sustained growth improvement.

Shares of Tenable were down 1.8% in Thursday afternoon trading.

Price: 21.08, Change: -0.40, Percent Change: -1.84