CrowdStrike Stock Falls As Analysts Debate Annual Recurring Revenue Growth

Shares of CrowdStrike Holdings’ (CRWD) fell Wednesday as Wall Street focused on a financial metric tied to subscription customer growth in the wake of cybersecurity firm second-quarter earnings report. After attempting a move into positive ground in morning action, CrowdStrike stock dropped amid a debate over growth in annual recurring revenue, or ARR.


Sunnyvale, Calif.-based CrowdStrike reported earnings after the market close on Tuesday, noting that annual recurring revenue increased 70% to $1.34 billion from a year earlier. That topped estimates of $1.3 billion. The company beat ARR expectations by $42.5 million, or 3.3%. But in the April quarter, the ARR beat came in at 5.9%.

“ARR grew an impressive 70% in Q2 vs 74% in Q1 and 75% in fiscal Q4 2021 although this was likely at the low end of investor expectations given the 21% stock appreciation in the past two weeks,” Jefferies analyst Brent Thill said in a note to clients. “New business ARR (accounting for churn) of $157 million grew 45% year-over-year vs. the prior quarter’s 63% organic growth, which is a meaningful deceleration.”

CrowdStrike stock fell 3.9% to close at 269.97 on the stock market today.

CrowdStrike earnings came in at 11 cents a share, up 266% from a year earlier, on an adjusted basis. Revenue jumped 70% to $337.7 million, including acquisitions, the company said.

Analysts had projected CrowdStrike earnings of 7 cents on revenue of $323.2 million for the period ended July 31. A year earlier, the cybersecurity firm earned 3 cents a share on revenue of $199 million.

CrowdStrike Stock: Revenue Guidance Tops Estimates

The cybersecurity firm added 1,660 net new subscription customers in the quarter. CrowdStrike said it had 13,080 subscription customers as of July 31, representing 81% growth year over year.

“The magnitude of ARR upside was somewhat more moderate than recent quarters,” Mizuho Securities analyst Gregg Moskowitz said in his report to clients. “Nevertheless, ARR growth of 70% year-over-year was strong and still nicely surpassed our 67% target and the Street’s 65% to 66% estimate.”

For its third quarter ending in October, CrowdStrike forecast revenue of $361.5 million at the midpoint of guidance. Analysts had projected $351 million. CrowdStrike said it expects profit of 9 cents a share, in line with estimates.

CRWD Stock Added To Nasdaq 100 Index

Heading into the CrowdStrike earnings report, the cybersecurity stock owned a Relative Strength Rating of 94 out of a best-possible 99.

Also, CrowdStrike stock is extended from an entry point of 251.38, according to IBD Stock Checkup. In addition, CRWD stock recently made the Nasdaq 100 index.

“The Street is already modeling revenue growth deceleration in 2022 to 36%, down from 60% expected in 2021, which on its own might prove a hurdle for a stock already trading at a high multiple,” said Bank of America analyst Tal Liani in a report.

The cybersecurity company uses machine learning, one form of artificial intelligence. It also uses a specialized database to detect malware on laptops, mobile phones and other devices that access corporate networks.

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IBD offers a broad range of growth stocklists, such as Leaderboard. Investors also can create watchlists for issues like CrowdStrike stock, find companies nearing a buy point, or develop custom screens at IBD MarketSmith.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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