CrowdStrike had a very good quarter after the closing bell on Tuesday, as management raised its full-year forecasts for sales, operating income and profits. However, shares of the cybersecurity company were sold off as traders booked profits, perhaps because the current quarter's earnings guidance came in a penny below expectations. Stock decline plays directly into our hands. Revenue during CrowdStrike's fiscal 2025 third quarter rose 29% year over year to $1.01 billion, beating the consensus estimate of $928 million, compiled by LSEG. This is the first time that quarterly revenues have exceeded one billion dollars. Adjusted earnings per share rose 13% to 93 cents in the three months ended Oct. 31, beating EPS estimates of 81 cents, LSEG data showed. Annual recurring revenue jumped 27% to $4.02 billion, also beating estimates of $4.01 billion, according to FactSet. This is the first time ARR has exceeded $4 billion in a single quarter. Remaining performance obligations rose 46% year over year to $5.4 billion, easily surpassing the consensus estimate of $5.08 billion compiled by FactSet. YTD shares of CRWD CrowdStrike Mountain CrowdStrike sank more than 5.5% in after-hours trading after the print run. The move was perfectly in line with Jim Cramer's comment on Sunday that investors should be thankful for short-sighted traders who present opportunity after opportunity to those like us with little patience and a willingness to do the homework to win over the long term. Bottom line: After reviewing the results, listening to the team on the call, and seeing the stock's reaction, we collectively have another reason to be thankful that you must have been a short-sighted hot money trader to sell the stock on Tuesday evening. Therefore, we reiterate our #1 Buy equivalent rating and increase our price target to $400 per share from $350. CrowdStrike CEO George Kurtz noted in the earnings press release that the company achieved an overall retention rate of more than 97%, an important factor given investor concerns about customers leaving the platform after a botched software update in July led to a global IT outage. Since the glitch, Kurtz and his team have provided a masterclass in addressing the company's misstep — and as its fiscal third-quarter results show, the glitch appears to be resonating with customers. On the post-earnings call, Kurtz said the company set “a new record high of $1 million plus transactions, and closed more than 260 deals this quarter, equating to an average of four million or more dollars plus trades each business day.” . The team highlighted strong “unit adoption rates,” which CrowdStrike defines as “the total number of customers with five or more, six or more, seven or more, and eight or more, respectively, divided by the total number of subscription customers.” This excludes Falcon Go customers. Essentially, this metric is used to demonstrate that when customers come to CrowdStrike's Falcon platform, they tend to sign up for more offers and integrate deeper into the CrowdStrike ecosystem over time. By the end of the quarter, “unit adoption rates had increased to 66%, 47%, 31%, and 20%,” respectively, the company’s press release said. , allowing for rapid updates, scalability and ease of deployment, it stops breaches and saves time by accelerating threat protection and response time Standardize security solutions The platform consists of modules that each provide a specific security capability. It also serves to demonstrate customers' commitment to the Falcon platform, as Kurtz noted on the call that the dollar-based network was “temporarily impacted by the incident.” Retention rate was 115% this quarter. CrowdStrike defines net dollar retention as “ARR from a group of subscription customers versus the same measure of subscription customers from the previous year.” They spent more, in this case, 15% on average, with CrowdStrike than they did a year ago. The team also noted the positive response to the Falcon Flex model announced last year at Fal.Con 2023. A Falcon Flex subscription allows customers to swap one unit for another as needed to achieve the lowest total cost of ownership while improving security. During the call, Kurtz said CrowdStrike, on average, signed two Flex deals per day during the quarter “with the average Falcon Flex subscription being multiples larger than the value of our typical contract.” In fact, the Falcon Flex model now represents more than $1.3 billion in total deal value, and that's up from the more than $700 million figure announced at this year's Fal.Con in mid-September. This shows how incredibly customer adoption is accelerating. The team said it signed more than 150 Falcon Flex deals in the fiscal third quarter, with deal volume accelerating. “Flex has already proven to be a rapid accelerator of platform adoption across the customer base, giving us confidence in net new ARR acceleration in the back half of next year,” Kurtz said. The company is also seeing its customer base expand thanks to Flex, Kurtz said. “We've talked about cybersecurity moving from the back room to the boardroom. With Flex, we've expanded our customer audience of stakeholders to include the CFO. … Flex customers have adopted, on average, more than nine units, and we expect to see those numbers continue rising faster.” He added: “With Flex, we've seen some customers adopt their model by more than doubling or even more than tripling. …Flex has allowed us to increase our share of wallet, and consolidate multiple product vendors. Looking at Q3, the average CrowdStrike customer spent Hundreds of thousands, while the average Flex customer spent several million.” It's clear to us that the CrowdStrike Falcon platform resonates with customers new and old. The threat landscape will become more challenging as bad actors ramp up their efforts and leverage AI to launch increasingly sophisticated attacks faster than ever before. In this day and age, cybersecurity is a must-have – not something businesses can back away from, even when the economic backdrop weakens or budgets come under pressure. Consistently investing in cybersecurity may not be cheap, but CrowdStrike works hard to offer customers the best value possible. A corporate data breach can be much more costly, not only financially but reputationally as well. Given the endless threat of cyber attacks, and therefore the endless need for cyber security solutions, we believe there is a lot of demand, which is why we believe there is also enough room in the portfolio for two names in the space, the other being Palo Alto Networks, which also reported The win and rally were met with selling pressure. Guidance For the fourth quarter of fiscal 2025, CrowdStrike management expects: Total revenue of $1.0287 billion to $1.0354 billion, slightly better than estimates of $1.03 billion, at the midpoint of non-GAAP earnings in the range of 84 cents to $1.03 billion. 86 cents, a penny below the estimate of 86 cents at the midpoint (GAAP stands for GAAP) Non-GAAP operating income is $184 million to $189 million, slightly above estimate The agreed-upon amount of $186 million, at the midpoint. Looking at the fourth-quarter outlook, for the full fiscal year 2025, management expects: Total revenue of $3.92 billion to $3.93 billion, which is better than estimates of $3.9 billion, even on the lower end. Non-GAAP EPS is between $3.74 and $3.76, well above the consensus estimate of $3.63 per share, even at the low end. Non-GAAP operating income ranged from $804.4 million to $809.4 million, well above estimates of $781 million. Longer term, the team also noted in the slideshow that they see the company's total addressable market (TAM) doubling from $116 billion in calendar year 2025 to $250 billion by calendar year 2029. That's a massive 115% increase. (Jim Cramer's Charitable Trust Long Term CRWD. See here for full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you'll receive a trade alert before Jim takes a trade. Jim waits 45 minutes after a trade alert is sent before buying or selling a stock in his charitable fund's portfolio. If Jim talks about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. The above Investment Club information is subject to our Terms and Conditions and Privacy Policy, as well as our Disclaimer. No obligation or fiduciary duty exists or is created by your receipt of any information provided in connection with the Investment Club. No specific results or profits are guaranteed.
A CrowdStrike Holdings banner on the floor of the New York Stock Exchange on July 22, 2024.
Michael Nagel | Bloomberg | Getty Images
Crowd Strike It delivered a very good quarter after the closing bell on Tuesday, with management raising its full-year forecasts for sales, operating income and profits. However, shares of the cybersecurity company were sold off as traders booked profits, perhaps because the current quarter's earnings guidance came in a penny below expectations. Stock decline plays directly into our hands.
