Cybersecurity company CrowdStrike Holdings (CRWD) reported stronger-than-expected third-quarter earnings on Tuesday, but shares dropped 5.1% in premarket trading Wednesday due to a cautious fourth-quarter outlook.
Despite the drop, the company posted notable revenue growth, signaling resilience after a challenging summer that included a global tech outage caused by its software.
Earnings and revenue beat expectations
For the third quarter, CrowdStrike reported adjusted earnings of 93 cents per share on revenue of $1.01 billion, surpassing FactSet analysts’ estimates of 81 cents per share and revenue of $983 million.
Compared to the same period last year, the company saw a 23% revenue increase from $786 million and a rise in earnings from 82 cents per share.
The company’s annual recurring revenue (ARR)—a key metric reflecting the annualized value of customer subscription contracts—reached $4.02 billion, just edging out Wall Street’s forecast of $4.01 billion.
This represents a 27% year-over-year increase.
“Our third-quarter results reflect our focused execution and financial discipline, which drove a strong finish and quarter-over-quarter increase in pipeline, despite expected headwinds from the July 19 incident,” said Chief Financial Officer Burt Podbere.
Fallout from July software outage
CrowdStrike’s software made headlines on July 19 after an update caused widespread system crashes in computers running Microsoft’s PC operating systems, leading to significant IT outages across multiple industries.
The incident occurred in the final two weeks of the company’s second quarter—a critical period for closing sales deals.
On the August earnings call, CEO George Kurtz acknowledged that the outage delayed deals into subsequent quarters but noted that the majority of those deals remained in the pipeline.
Despite the setback, CrowdStrike demonstrated resilience in Q3 with an increase in its pipeline and strong execution to close delayed deals.
Revised 2024 forecast and cautious Q4 outlook
CrowdStrike raised its fiscal 2024 earnings guidance, now expecting earnings per share of $3.74 to $3.76, up from its previous range of $3.61 to $3.65.
The company’s adjusted revenue forecast signals confidence in its ability to recover from the earlier challenges.
However, CrowdStrike projected fourth-quarter earnings of 84 to 86 cents per share, with the midpoint falling slightly below Wall Street’s estimate of 86 cents.
The conservative guidance may have contributed to the decline in the company’s stock price following the earnings announcement.
What’s next for CrowdStrike?
CrowdStrike remains a leader in cybersecurity solutions, benefiting from increasing demand as organizations prioritize digital defenses.
The company’s ability to maintain robust ARR growth and exceed earnings expectations underscores its strong market position.
However, cautious Q4 guidance reflects potential uncertainties, possibly linked to lingering effects of the July outage and macroeconomic headwinds affecting enterprise spending.
Investors will closely watch how the company navigates these challenges in the months ahead.
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