TLDR
- CrowdStrike shares fell 7% in premarket trading after reporting mixed Q1 earnings with revenue guidance below Wall Street expectations
- Company reported adjusted earnings of 73 cents per share, beating estimates, but Q2 revenue guidance of $1.15 billion fell short of $1.16 billion expected
- Revenue grew 20% year-over-year to $1.10 billion in Q1, matching expectations but showing slower growth momentum
- CrowdStrike announced $1 billion share buyback program and raised full-year earnings guidance while maintaining revenue outlook
- Stock remains up 43% year-to-date despite recent decline, trading at premium valuation of 24 times forward sales
CrowdStrike shares tumbled 7% in Wednesday premarket trading after the cybersecurity company delivered mixed first-quarter results. The stock decline came despite beating earnings expectations, as investors focused on weaker-than-expected revenue guidance.
The Austin-based company reported adjusted earnings of 73 cents per share for the quarter ended April 30. This beat analyst estimates of 65 cents but fell short of the 93 cents earned in the same period last year.
Revenue reached $1.10 billion, matching Wall Street expectations exactly. The 20% year-over-year growth rate showed continued expansion but at a slower pace than previous quarters.
$CRWD CrowdStrike Q1 FY26:
📊 ARR +22% Y/Y to $4.44B.
📈 Net new ARR $194M (+5% Q/Q).
• Revenue +20% to $1.1B ($10M miss).
• Non-GAAP EPS $0.73 ($0.07 beat).
• FY26 revenue guide ~$4.78B (unchanged).
• FY26 adjusted EPS ~$3.50 ($0.05 beat). pic.twitter.com/2chpSEyqVP— App Economy Insights (@EconomyApp) June 3, 2025
CrowdStrike’s forward guidance disappointed investors most. The company projected second-quarter revenue of $1.14 billion to $1.15 billion, with the midpoint of $1.15 billion falling below analyst expectations of $1.16 billion.
The revenue miss comes as CrowdStrike continues dealing with fallout from last July’s massive software outage. The incident affected 8.5 million Windows computers worldwide when a faulty update disabled systems across multiple industries.
Direct costs from the outage totaled $40 million in the first quarter after insurance reimbursements. The company previously booked $60 million in costs for fiscal 2025, offset by $39 million in insurance recoveries.
Several lawsuits remain pending from affected parties, including Delta Air Lines. The total financial impact and insurance coverage for these legal challenges remains unclear.
Recovery Progress Shows Mixed Results
Despite the guidance disappointment, several key metrics showed strength. Annual recurring revenue in CrowdStrike’s subscription business grew 22% year-over-year, exceeding Wall Street estimates.
Free cash flow also beat expectations, demonstrating the company’s ability to generate cash from operations. Net cash holdings reached $3.9 billion at quarter-end, providing financial flexibility.
The company announced a new $1 billion share buyback program on Tuesday. CEO George Kurtz said the repurchase plan “reflects our confidence in CrowdStrike’s future and unwavering mission of stopping breaches.”
CrowdStrike raised full-year earnings guidance to $3.44 to $3.56 per share from the previous range of $3.33 to $3.45. However, the company maintained its revenue outlook at $4.74 billion to $4.81 billion.
The mixed guidance signals reflected ongoing challenges from the July outage. Higher costs in sales, marketing, research and development contributed to pressure on margins.
Valuation Concerns Mount
Evercore ISI analysts downgraded CrowdStrike to In Line from Outperform following the results. They set a $440 price target, implying 10% downside from Tuesday’s close.
“It’s the combination of a full valuation and a theme of one-time events that keep coming up,” the analysts wrote. They cited “growing investor frustration around several lingering, unaddressed issues.”
CrowdStrike trades at 24 times forward sales, well above the nine times multiple for the broader software sector. The premium valuation leaves little room for execution missteps.
The stock had gained 43% year-to-date through Tuesday’s close, significantly outperforming the S&P 500’s less than 2% gain. This strong performance raised the bar for quarterly results.
CrowdStrike also faces typical challenges of maturing software companies. Growth rates continue moderating as the business scales, requiring continued high investment in sales and marketing.
The company cut 500 employees in May, representing about 5% of its workforce. Finance chief Burt Podbere said CrowdStrike expects free cash flow margins above 30% by fiscal 2027.
Stock-based compensation represented about 25% of operating expenses in the quarter. The rising share count from equity compensation dilutes existing shareholders, making the buyback program more important.
CrowdStrike reported a net loss of $110.2 million, or 44 cents per share, compared to net income of $42.8 million in the prior year quarter.
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