Stocks of Crowdstrike Have Gained Significantly This Year. Earnings May Stall the Rally

Through Tuesday’s close, CrowdStrike Holdings Inc. had become the 10th-best-performing stock in the S&P 500 for 2024. However, that impressive run may be at risk following the market’s response to the company’s latest earnings report.

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Shares of CrowdStrike dropped by 6.5% during after-hours trading on Tuesday. This came after the cybersecurity firm issued a forecast for the current quarter that underwhelmed analysts. The company projected revenue between $1.1447 billion and $1.1516 billion for the quarter. That range falls short of Wall Street expectations, with analysts surveyed by FactSet anticipating $1.159 billion in revenue.

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CrowdStrike became a widely recognized name last year after a flawed software update led to a global IT outage. In response to that event, the company introduced a customer-commitment program designed to rebuild trust. Customers could opt for one-time benefits such as additional services, more usage time, or a combination of both. But while this initiative was aimed at customer retention, its financial impact is still being felt.

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Chief Financial Officer Burt Podbere explained during the earnings call that the customer-commitment packages are affecting the company’s subscription revenue in the short term. Specifically, they caused an $11 million revenue impact in the fiscal first quarter. Podbere noted that the company anticipates a continued negative effect of $10 million to $15 million in each of the next three quarters.

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The company's current-quarter guidance reflects this expected revenue drag. Still, Podbere mentioned that the negative impact should begin to fade by the fiscal fourth quarter.

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Despite the cautious near-term guidance, CrowdStrike's leadership remains optimistic about the company's long-term prospects. Executives believe the business will accelerate in the second half of the fiscal year. CEO George Kurtz and other leaders pointed to strong product momentum and a broader industry shift toward vendor consolidation in cybersecurity.

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According to them, organizations are increasingly interested in reducing the complexity of using multiple cybersecurity vendors and are instead turning to comprehensive platforms offered by single providers like CrowdStrike. This shift plays to the company’s strengths, as it can deliver both superior outcomes and cost savings for clients.

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Artificial intelligence also features prominently in CrowdStrike’s growth strategy. Kurtz emphasized that AI presents significant opportunity—and risk—for businesses. As companies adopt autonomous AI agents to perform tasks alongside human employees, they are expanding access to sensitive systems and data. This creates new security vulnerabilities.

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“These autonomous AI agents increasingly have access to multiple internal and external data stores, applications, and machines,” Kurtz said during the call. CrowdStrike believes it is well-positioned to protect these expanded attack surfaces. Kurtz added that his company is uniquely equipped to safeguard the full spectrum of digital assets: identity, workload, infrastructure, data, and even the AI models themselves.

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For its fiscal first quarter, CrowdStrike reported revenue of $1.10 billion, which matched analyst expectations. However, the company beat on earnings, delivering 73 cents per share in adjusted earnings versus the 66 cents expected by analysts tracked by FactSet.

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Additionally, CrowdStrike announced that its board has authorized a share-repurchase program. The company now has approval to buy back up to $1 billion worth of its own stock—a move that signals confidence in its long-term value and may help cushion recent market volatility.

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Even with the post-earnings drop in extended trading, CrowdStrike’s performance so far this year has been strong. As of Tuesday’s market close, the stock had gained 43% year-to-date.

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In summary, while CrowdStrike’s short-term revenue outlook has dampened Wall Street’s enthusiasm, the company continues to see significant opportunities ahead. With solid performance in the first quarter, a confident approach to emerging risks in cybersecurity, and a clear focus on AI and vendor consolidation, CrowdStrike believes it is well-prepared for future growth—even if it must navigate some turbulence in the near term.

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