Artificial intelligence is transforming the balance of power in cybersecurity, amplifying both threats and defenses, according to PwC’s Annual Threat Dynamics 2026 report released Wednesday. The firm warned that AI has become a “force multiplier” for cybercriminals while also offering defenders new capabilities to keep pace with escalating digital threats.
PwC’s incident response team found that AI-driven threats are now the most frequent concern among clients. Threat actors are embedding AI as a core part of their tradecraft, using it to automate reconnaissance, develop malware faster, generate more convincing phishing lures, and scale social engineering campaigns across languages and platforms.
The report cautioned that the time between the release of new AI tools and their weaponization by malicious groups is rapidly shrinking. PwC cited a case in which the release of ReaperAI, a proof-of-concept autonomous penetration-testing agent, was followed by a China-based hacking campaign leveraging tools with similar functions.
Despite the growing risks, PwC emphasized that AI also offers defenders an unprecedented opportunity to enhance response and resilience. The firm said organizations should prepare for malware that incorporates AI to evade detection and focus on integrating AI frameworks into threat modeling, as well as investing in post-quantum cryptography readiness.
The report also identified identity-based intrusions as a rising priority, describing identity as “the new battleground.” Attackers increasingly exploit stolen credentials, session tokens, and federated access to infiltrate systems, preferring to “log in rather than break in.” AI-generated deepfakes and multi-stage phishing campaigns have further blurred the line between human and machine identities.
PwC’s findings follow similar warnings across the cybersecurity industry. Earlier this month, CrowdStrike’s 2026 Global Threat Report reported an 89 percent year-on-year increase in AI-enabled adversary activity, highlighting how the era of AI-driven cyber warfare is accelerating at an unprecedented speed.
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