A recent report from Cycode underscores the burgeoning challenges surrounding AI integration in enterprise software development. According to their findings, businesses face a profound “Shadow AI” crisis, where the rapid uptake of AI technologies has eclipsed the capacity of security teams to effectively manage the associated risks.
The State of Product Security in the AI Era 2026 report reveals that nearly all surveyed organizations are engaged in utilizing or testing AI coding assistants, with all confirming the presence of AI-generated code within their codebases. However, visibility into this code and governance mechanisms have lagged, creating significant blind spots in the software supply chain.
Research involving over 400 Chief Information Security Officers (CISOs) and security professionals indicates these blind spots have birthed a new category of risk dubbed “Shadow AI.” As this issue escalates, it has emerged as a primary security concern for many organizations.
The report highlights several critical trends in the current AI landscape, illustrating a scenario that has already reached a point of concern. All organizations confirm the existence of AI-generated code in their systems, with about 30% indicating that the majority of their code is now created by AI. Alarmingly, over 81% lack comprehensive visibility into the application of AI throughout the software development lifecycle (SDLC), indicating a severe governance deficiency.
In light of these challenges, 100% of organizations report plans to allocate more of their budgets toward AI-related security initiatives in the coming year. “These findings clearly illustrate that the era of straightforward AI development has ended; it is now a pressing reality that demands an urgent and strategic response. We must facilitate complete visibility and governance of the entire AI toolchain,” emphasized Lior Levy, CEO and Co-Founder of Cycode. He noted that detecting vulnerabilities in AI-generated code is no longer adequate given the rapid escalations of Shadow AI, which presents unique attack vectors.
The report also outlines the dichotomy between the productivity enhancements offered by AI and the threats posed by unmanaged AI tools. A significant 78% of respondents recognize that AI substantially improves productivity, with 79% attesting to the enhancement of code quality and 72% noting accelerated time to market. Nevertheless, despite the widespread adoption of AI, 52% of organizations lack a structured AI governance framework, which allows for the unchecked proliferation of Shadow AI and has made AI-generated code vulnerabilities a top security priority for the year ahead.
With the awareness of these emerging risks, organizations are moving away from the “tool sprawl” of the past. The report indicates a market shift toward consolidation, whereby 97% of organizations plan to streamline their application security stacks and 100% are channeling investments into AI-related initiatives. This shift aims to counteract the complexities brought about by AI, providing enhanced visibility, reduced noise, and effective management of AI-driven risks across the software supply chain.
The research aligns with observations from industry experts such as Katie Norton, Research Manager at IDC, who states that the risk exposure related to application security is expanding faster than traditional security measures can accommodate. The proliferation of Shadow AI complicates the landscape, calling for unified and context-driven security strategies that can adapt to the rapid pace of AI-driven development.
The State of Product Security in the AI Era Report serves as a crucial analytical resource for understanding how AI is reshaping the landscape of security strategies, governance practices, and technological investments among global security and engineering leaders. For a more in-depth exploration of the report’s findings, access the full text at https://www.cycode.com/state-of-product-security-ai-era-2026.
