With much of Wall Street still focused on the impact of 2024's global IT outage on customer contract renewals, CrowdStrike Holdings reported first-quarter earnings that topped estimates while revenue met views. The cybersecurity firm's sales guidance for CrowdStrike stock missed Wall Street targets.
The Sunnyvale, Calif.-based cybersecurity firm reported April-ended quarterly earnings after the market close on Tuesday. Also, CrowdStrike announced a $1 billion share repurchase program.
Further, CrowdStrike earnings fell 8% to 73 cents per share on an adjusted basis. Revenue, including acquisitions, rose 20% to $1.1 billion.
Analysts polled by FactSet had predicted earnings of 66 cents a share on revenue of $1.104 billion.
CrowdStrike Stock: ARR Key Metric
With CrowdStrike, Wall Street analysts focus on annual recurring revenue, or ARR. It's a key financial metric tied to subscription services growth.
Analysts have lowered estimates for "net new" ARR amid expectations that many customers will seek price discounts when renewing contracts to help cover the cost of business disruptions. A software upgrade in July 2024 caused the IT outage.
In Q1, total ARR increased 22% to $4.44 billion. Analysts had predicted total ARR of $4.417 billion. Net new ARR came in at $194 million, down 8.5% from a year earlier, topping consensus estimates of $176.6 million.
"Expectations were running high into the Q1 print, leaving an 11% beat to consensus net new annual recurring revenues versus an 8% average beat over the last four quarters still below buy-side expectations and pressuring the shares," said Morgan Stanley analyst Keith Weiss in a report.
Bank of America Downgrade To Neutral
For the current quarter ending in July, CrowdStrike said it expects adjusted earnings per share of 83 cents at the midpoint of guidance vs. estimates of 81 cents. CrowdStrike predicted revenue in a range of $1.145 billion to $1.152 billion vs. estimates for $1.159 billion.
Bank of America on Wednesday downgraded CrowdStrike stock to neutral from buy.
"We favor CrowdStrike's fundamentals and growth prospects, but believe the valuation leaves only limited upside from the current level of 20 times 2026 estimated sales," said BofA analyst Tal Liani in a report. "Growth has decelerated to below 20% in first half fiscal 2026, and while we expect acceleration to about 22% in the second, we believe growth will decelerate in the next few years, hence our growing focus on valuation."
On the stock market today, CrowdStrike stock tumbled more than 7% to 451.40 in early trading. In Tuesday's regular session, shares rose 2%. Heading into the CrowdStrike earnings report, shares were up 41% in 2025.
UBS analyst Roger Boyd maintained a buy rating on CrowdStrike stock.
"We're inclined to look past some of the near-term revenue headwinds from the company's outage-related discounting program, which resulted in Q1 revenue coming in slightly below the midpoint of guidance and a Q2 guide slightly below consensus," he said in a report. "Conversely, the implied second half revenue guide suggests growth acceleration through the end of the year. Fundamentally, business momentum remains strong. Net, while valuation remains the key debate on shares, we think CrowdStrike deserves a premium valuation for accelerating 20%-plus topline growth and faster free cash flow growth."
Delta IT Outage Lawsuit
Meanwhile, CrowdStrike still faces litigation from Delta Air Lines in connection with the IT outage.
Jefferies analyst Joseph Gallo noted in a report: "In comments filed on May 16, Judge Kelly Lee Ellerbe (Georgia Fulton County Superior Court) allowed Delta's claims alleging negligence and computer trespass to move forward while dismissing Delta's claims alleging intentional misrepresentation and fraud by omission"
CrowdStrike competes with Palo Alto Networks, SentinelOne, Microsoft and others in the "endpoint" market. Endpoint security tools detect malware on laptops, mobile phones and other devices that access corporate networks.
The company is building a broad, threat-detection cybersecurity platform. It monitors endpoints as well as web/email gateways, web application firewalls and cloud business workloads.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
