CrowdStrike (CRWD) recently announced their quarterly sales and earnings report, exceeding Wall Street analysts’ expectations. Despite this positive news, the company’s lowered full-year revenue guidance suggests that the global Windows outage on July 19, caused by a faulty CrowdStrike update, may be impacting their business in the near term.
In their latest earnings report, CrowdStrike reported revenue of $963.9 million and earnings of $1.04 per share, surpassing analyst predictions. However, their annual revenue guidance of $3.89 to $3.9 billion fell below expectations of $3.98 to $4.01 billion, prompting the company to also lower its earnings outlook.
During a conference call following the earnings release, CrowdStrike CFO Burt Podbere highlighted several reasons for the company’s uncertain outlook. The company temporarily suspended prospecting operations after the outage but has since resumed them. Additionally, there is uncertainty surrounding potential legal costs stemming from the incident.
One major impact on revenue, totaling nearly $70 million, is attributed to incentives related to a customer commitment package aimed at encouraging customers to invest in a more comprehensive platform purchase, a strategy also adopted by competitors like Palo Alto Networks (PANW). Podbere mentioned that the company anticipates extended sales cycles and increased efforts to persuade executives to finalize deals in the upcoming months.
CEO George Kurtz acknowledged the challenges ahead, indicating that the company may face some headwinds in the next year before sales regain momentum. Despite this, Kurtz remained optimistic, noting that CrowdStrike successfully closed significant deals post-outage, including one valued in the seven figures and another in the eight figures.
However, despite the positive tone of the earnings call, several analysts have revised their earnings and sales estimates for CrowdStrike over the next 18 months. The projected five-year revenue growth rate has also decreased from around 28% annually to under 19%, reflecting concerns among analysts about the company’s long-term prospects and potential competition following the outage.
The security incident involving CrowdStrike prompted a reevaluation among potential buyers of endpoint detection and response (EDR) solutions. The tool meant to enhance security ultimately caused a significant cyber incident, leading buyers to scrutinize security tools more closely. Some may opt for free or simpler security options like Microsoft’s Defender, while others may prioritize solutions that integrate seamlessly with their existing environments.
In light of these developments, CrowdStrike faces challenges in rebuilding trust and maintaining growth amid heightened competition and evolving cybersecurity priorities in the marketplace. Looking ahead, the company will need to navigate these challenges strategically to regain momentum and sustain long-term success.