CrowdStrike shares plunge on lower-than-expected revenue and outlook

Shares in CrowdStrike Holdings Inc. plunged in late trading after the cybersecurity company missed estimates for annual recurring revenue and outlook for its latest earnings.

For its third quarter that ended Oct. 31, CrowdStrike reported a profit before costs such as stock compensation of $96.1 million, or 40 cents per share, compared with $41.1 million, or 17 cents per share, a year ago. Revenue rose 53%, to $580.9 million. Both figures were a beat, with analysts having expected earnings per share of 32 cents on revenue of $575.16 million.

ARR rose 54% year-over-year, to $2.34 billion as of Oct. 31. The figure included $198.1 million in net new ARR, with CrowdStrike’s acquisition of Reposify contributing less than $1 million to net new ARR. Analysts were expecting ARR of $2.36 billion.

George Kurtz, CrowdStrike’s co-founder and chief executive officer, acknowledged in a statement that “total net new ARR was below our expectations as increased macroeconomic headwinds elongated sales cycles with smaller customers and caused some larger customers to pursue multi-phase subscription start dates, which delays ARR recognition until future quarters.”

“As a platform consolidator with industry-leading efficacy, we differentiate ourselves from the competition and empower customers, which we believe positions us to capture enduring industry trends and generate durable long-term growth,” Kurtz added.

Highlights in the quarter included CrowdStrike adding 1,460 net new subscription customers, bringing the company’s total paying subscriber number to 21,146, up 44% year-over-year. In September, CrowdStrike added extended detection and response to Falcon Insight, enabling customers to leverage the power of native and hybrid XDR as a fundamental platform capability.

CrowdStrike’s subscription gross margin was 78% on an adjusted basis, down from 79% in the same quarter last year. Net cash generated from operations was $242.9 million, up from $159.1 million a year ago. Cash and cash equivalents sat at $2.47 billion as of the end of October.

Looking forward, CrowdStrike is predicting adjusted earnings of 42 to 45 cents a share on revenue of $629.1 million to $628.2 million in its fiscal 2023 fourth quarter. Although analysts had expected on a 34-cent-per-share profit, CrowdStrike’s revenue outlook was below an expected $632.84 million. For its full fiscal year 2023, CrowdStrike is expecting a profit of $1.49 to $1.52 a share on revenue of $2.223 billion to $2.232 billion.

All that sent CrowdStrike shares down almost 19% in late trading.

In an interview with theCUBE, SiliconANGLE Media’s livestreaming studio in September, Amanda Adams, vice president of Americas Alliances at CrowdStrike, explained that security is no longer an afterthought in the enterprise world “because it continues to be heavily embedded in the bloodstream.”

“Our services are one of the best in the business,” Adams said in the interview. “When you look at [our] instant response, our proactive services, supporting our customers — if you think XDR of integration, building out those connector packs with our customers, building the alliances, we really do work with our partners to drive that successful outcome with our customers.”

Photo: CrowdStrike/Twitter