AI is transforming how software is built — but not how it’s secured. A new report from Cycode warns that enterprises may already be in the middle of a “Shadow AI” crisis, where the speed of AI adoption far outstrips the ability of security teams to manage it.
Cycode’s State of Product Security for the AI Era 2026 report paints a stark picture of an industry racing ahead without a clear map. Nearly every organization surveyed is already using or piloting AI coding assistants, and all confirm that AI-generated code now lives within their codebases. Yet for most, visibility and governance haven’t caught up — leaving major blind spots across the software supply chain.
A survey of more than 400 CISOs and security practitioners confirms that this lack of oversight has created a new category of risk: unmanaged AI use, or “Shadow AI.” For many organizations, this challenge has quickly become one of their top security concerns.
Some of the key findings from the report reveals a landscape that has already passed a tipping point with challenges:
- AI Code is Ubiquitous: All organizations confirm having AI-generated code within their codebases.
- The Role of AI is Increasing: Nearly one-third (30%) of respondents state that AI now creates the majority of code in their organizations.
- “Shadow AI” is the Blind Spot: More than four out of five (81%) lack full visibility into how and where AI is being used across the software development lifecycle (SDLC).
- Investments are Pivoting to AI Security: In response, 100% of organizations plan to invest more of their budget in AI-related security initiatives in the next 12 months.
“The findings make it clear: AI development is no longer a future trend; it is today’s reality. As security struggles to keep pace with this rapid adoption, the stage is set for a significant supply chain breach, with Shadow AI as the attack vector,” said Lior Levy, CEO and Co-Founder of Cycode. “It’s no longer sufficient to just find vulnerabilities in AI-generated code. The rapid spread of Shadow AI demands a strategic response: we must gain complete visibility and governance over the entire AI toolchain. This imperative is why Cycode is empowering organizations with the essential visibility, policies, and controls needed to secure AI development from prompt to production.”
The Productivity Boom vs. The “Shadow AI” Problem
The report shows why AI adoption is unstoppable. Participants overwhelmingly respond that AI increases productivity (78%), code quality (79%), and faster time to market (72%).
However, while AI boosts productivity, it also introduces significant risks. Despite near-universal AI adoption, most organizations (52%) lack a formal AI governance framework. This has led to a proliferation of Shadow AI, including the rapid, unmanaged spread of AI development tools, models, and coding assistants. Consequently, security leaders have identified AI-generated code vulnerabilities as both their biggest blind spot and their top security priority for the upcoming year.
Leaders Reject Tool Sprawl, Embrace Consolidation
As AI security becomes the top enterprise priority, the report reveals a definitive market trend: organizations are aggressively consolidating. Instead of funding niche tools, 97% of organizations surveyed plan to unify their application security stack in the next 12 months, and 100% are investing in AI-related initiatives. This pivot is a direct response to the complexity introduced by AI. Leaders are rejecting the “tool sprawl” of the past. Instead, they are investing in unified platforms to gain visibility, reduce noise, and manage AI-driven risk across the software supply chain.
“As enterprises accelerate their use of AI in software development, the surface area for application security risk is expanding faster than traditional controls can manage,” said Katie Norton, Research Manager at IDC. “The rise of shadow AI compounds this challenge, creating new layers of exposure that often can’t be fully seen or governed. These market dynamics observed by IDC align with the findings of Cycode’s State of Product Security in the AI Era, highlighting the need for more unified and context-driven approaches to keep security aligned with the pace of AI-driven development.”
The State of Product Security in the AI Era Report provides a comprehensive data-driven look at how AI is reshaping security strategies, governance practices, and technology investments for global security and engineering leaders. To access the full report, visit https://www.cycode.com/state-of-product-security-ai-era-2026.
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