CrowdStrike, a leading cybersecurity software maker, recently reported strong fiscal second-quarter results that exceeded expectations but also revised its full-year forecast downward following a global outage. The company’s CEO, George Kurtz, addressed the audience at the Wall Street Journal Tech Live conference in Laguna Beach, California, on Oct. 21, 2019, where he discussed the company’s performance and challenges.
CrowdStrike’s Strong Performance
CrowdStrike’s earnings per share for the quarter were $1.04, which surpassed the LSEG consensus of 97 cents. The company also posted revenue of $963.9 million, exceeding the expected $959 million. These results reflected a 32% year-over-year growth in revenue for the quarter ending on July 31. Additionally, CrowdStrike reported a net income of $47 million, or 19 cents per share, compared to $8.47 million, or 3 cents per share, in the same quarter the previous year.
Annual recurring revenue for CrowdStrike reached $3.86 billion, slightly above the StreetAccount consensus of $3.85 billion. The company’s performance in the second quarter demonstrated its continued growth and success in the cybersecurity market.
The Global Outage and Impact on CrowdStrike
On July 19, CrowdStrike experienced a global outage due to a flawed content configuration update for its Falcon sensor on computers running Microsoft Windows operating systems. The update was intended to gather data on new attacks but instead caused millions of computers to crash, leading to disruptions in various industries such as travel, package delivery, and healthcare.
The incident resulted in flight cancellations, delayed package deliveries, and postponed medical appointments as administrators had to manually reboot affected computers. CrowdStrike’s CEO, George Kurtz, publicly apologized to clients and partners for the disruption caused by the outage and assured that the company had implemented a fix to prevent such incidents in the future.
Financial Impact and Investor Reaction
Following the global outage, CrowdStrike’s shares slipped 4% in extended trading as investors reacted to the news. Shareholders also filed lawsuits against the company, and Delta Air Lines, which reported $380 million in lost revenue and $170 million in costs due to the incident, announced its intention to seek damages. Travelers affected by the disruption filed class action lawsuits against CrowdStrike as well.
Investment analysts Gray Powell and Trevor Rambo of BTIG noted that all customers were seeking some form of discount in response to the incident. They maintained a hold rating on CrowdStrike shares, reflecting the uncertainty surrounding the company’s financial outlook in the aftermath of the outage.
Revised Guidance and Future Outlook
In light of the global outage and its impact on operations, CrowdStrike revised its full-year guidance for the fiscal year. The company now projects adjusted net earnings of 80 to 81 cents per share on revenue ranging from $979.2 million to $984.7 million.
For the 2025 fiscal year, CrowdStrike adjusted its forecast to $3.61 to $3.65 in adjusted earnings per share and $3.89 billion to $3.90 billion in revenue. This revision marked a decrease from the previous forecast of adjusted earnings per share between $3.93 and $4.03 and revenue ranging from $3.98 billion to $4.01 billion.
The revised guidance includes a negative impact on subscription revenue of $30 million in each quarter and professional services revenue in the high single-digit millions of dollars for the second half of the fiscal year. These adjustments were made in response to customer commitment packages and incentives offered to mitigate the effects of the outage.
CEO’s Commitment to Improvement
George Kurtz, CrowdStrike’s CEO, emphasized his commitment to ensuring that such incidents never occur again. He acknowledged the challenges faced by the company in the aftermath of the outage and expressed empathy for the experiences of customers affected by the disruption.
Kurtz’s dedication to improving the company’s systems and processes to prevent future incidents reassured investors and stakeholders of CrowdStrike’s efforts to address the issue effectively. Despite the challenges faced, Kurtz remained optimistic about the company’s ability to bounce back from the setback and continue its growth trajectory in the cybersecurity market.
In conclusion, CrowdStrike’s strong performance in the second quarter was overshadowed by the global outage and subsequent revisions to its full-year forecast. The company’s proactive response to the incident and commitment to improving its operations will be crucial in rebuilding trust with customers and investors. As CrowdStrike navigates the challenges ahead, its ability to adapt and innovate in the cybersecurity landscape will be key to its long-term success.
