CrowdStrike stock rallies as forecast shows confidence in new approach


CrowdStrike Holdings Inc. shares rose in the extended session Tuesday after the cybersecurity company’s earnings and outlook beat Wall Street, and executives said they are targeting the tough-to-close small- to mid-business market.

shares rallied as much as 8% after hours, following a 2.1% decline to close the regular session at $124.93. By the end of the call with analysts, shares were up around 6%.

CrowdStrike expects adjusted fiscal first-quarter earnings of 50 cents to 51 cents a share on revenue of $674.9 million to $678.2 million, while analysts surveyed by FactSet forecast earnings of 42 cents a share on revenue of $663.3 million.

CrowdStrike also expects full-year earnings of $2.21 to $2.39 a share on revenue of $2.96 billion to $3.01 billion. Wall Street expected $1.99 a share on revenue of $2.95 billion, according to FactSet.

“Doing more with fewer internal resources has become the new normal for many companies,” George Kurtz, CrowdStrike’s co-founder and chief executive, told analysts on the call. “The outcome of stopping breaches remains the No. 1 priority for [chief technology officers.]”

The company reported a fiscal fourth-quarter loss of $47.5 million, or 20 cents a share, compared with a loss of $42 million, or 18 cents a share, in the year-ago period. Adjusted net income, which excludes stock-based compensation and other items, was 47 cents a share, compared with 30 cents a share in the year-ago period.

Revenue rose to $637.4 million from $431 million in the year-ago quarter.

Analysts expected CrowdStrike to report earnings of 43 cents a share on revenue of $625 million, based on the company’s forecast of 42 cents to 45 cents a share on revenue of $619.1 million to $628.2 million.

CrowdStrike said subscription customers with five or more, six or more and seven or more modules grew 52%, 62% and 75% year-over-year, respectively. The company added that five or mores make up 62% of customers, while seven-or-mores make up 22% of customers.

One of the big themes this earnings season has been how cloud software companies have been leveraging existing customers to adopt more modules as new customers have become scarce as they are most likely putting off purchases with a looming recession.

To build out new customers, CrowdStrike is targeting the small- to mid-level business market, and cited the hire of former SentinelOne Inc.
execs Daniel Bernard as chief business officer and Raj Rajamani as chief product officer as instrumental to the strategy.

“We’re still in the early innings of our SMB journey, but again, customers are wanting this,” Kurtz said.

Annual recurring revenue, or ARR, grew 48% to $2.56 billion from the year-ago quarter, while the Street expected $2.52 billion. ARR is a software-as-a-service metric that shows how much revenue the company can expect based on subscriptions.

CrowdStrike shares are down 25% over the past 12 months, while the S&P 500
has shed 5% and the tech-heavy Nasdaq Composite
has declined 10%, and the ETFMG Prime Cyber Security ETF 
has fallen 16%

Last quarter, CrowdStrike’s stock logged its worst one-day percentage drop after the company warned of slowing subscriptions amid macro headwinds and longer customer buying cycles, the same ones many cloud software companies are reporting this earnings season.

Read: These ‘Three Horsemen’ of cybersecurity most likely to weather slowing demand, Morgan Stanley says

Cloud-software vendors are still trying to snag deals in a cost-conscience environment as businesses slow spending a looming recession. By adding new services, or modules, to the platform, customers are then upsold, encouraged to add more modules, or functionality, to their customized platform.

Read: Cloud software is a ‘fight for a knife in the mud,’ and Wall Street is souring on the one sector that was winning

That’s the model supporting identity-management software company Okta Inc.
 which late Wednesday said the bulk of its businesses was in upsells and cross-sells to established customers, and Wall Street said the company was “partially out of the woods.”

To varying degrees, that’s the same story coming out from companies like Zscaler Inc.
and human-resources cloud-software company Workday Inc.
Meanwhile, customer-relationship management software giant Salesforce Inc.
won the Street with an earnings report, that promised profit growth, giving the stock its biggest boost since 2020.




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