CrowdStrike (CRWD) Stock: Drops Despite Q2 Earnings Beat. Here's Why

TLDR

Table of Contents

CrowdStrike reported Q2 earnings of $0.93 per share, beating estimates of $0.83, with revenue of $1.17 billion exceeding forecasts
Stock dropped 3-4% in premarket trading despite strong results due to Q3 revenue guidance of $1.208-1.218 billion falling short of $1.23 billion consensus
Company achieved record net new annual recurring revenue of $221 million, pushing total ARR to $4.66 billion with 20% year-over-year growth
Goldman Sachs cut price target from $530 to $492 while maintaining Buy rating, citing lower peer multiples for valuation adjustment
CrowdStrike announced acquisition of Onum and guided for 40% NNARR acceleration in second half of fiscal 2026

CrowdStrike delivered a solid second quarter performance but investors weren’t impressed with what’s coming next. The cybersecurity company reported earnings that topped Wall Street expectations yet shares tumbled in early trading.

The company posted adjusted earnings of $0.93 per share for the quarter ending July 31. This beat analyst estimates of $0.83 per share by a comfortable margin.

Revenue came in at $1.17 billion, surpassing the $1.15 billion forecast. The top-line figure represented 21% year-over-year growth, showing the company continues expanding at a healthy pace.

$CRWD | CrowdStrike is -7.5% after-hours
🔹 EPS: $0.93 vs. $0.83 est. ✅
🔹 Revenue: $1.17B vs. $1.15B est. ✅
Key takeaways:
🔸 Subscription rev: +20% YoY
🔸 ARR: +20% YoY
🔸 Cash: $4.97B
🔸 Acquired Onum Tech
🔸 FY EPS outlook: ~$3.66 ($3.50 prior)
🔸 Q3 rev outlook: ~$1.21B pic.twitter.com/DtYrq1fApX
— CMG Venture Group (@CmgVenture) August 27, 2025

CrowdStrike’s subscription revenue climbed 20% to $1.10 billion. This metric remains crucial for investors tracking the company’s recurring business model.

The company achieved record second-quarter net new annual recurring revenue of $221 million. This drove ending ARR to $4.66 billion, marking a 20% increase from the same period last year.

Revenue Guidance Disappoints Markets

Despite the strong quarterly performance, CrowdStrike’s forward-looking statements dampened investor enthusiasm. The company provided third-quarter revenue guidance of $1.208 billion to $1.218 billion.

This range fell short of the $1.23 billion analyst consensus. The miss on guidance overshadowed the positive quarterly results and sent shares down 3% in premarket trading.

The company explained that Q3 revenue guidance reflects its CCP partner rebate program being amortized as contra revenue. This accounting treatment reduces reported revenue figures.

Piper Sandler analyst Rob Owens noted that while NNARR returned to positive growth, the incident from last year continues affecting near-term revenue. He pointed out that subscription revenue came in line with expectations for the second consecutive quarter.

CrowdStrike’s full-year revenue outlook of $4.749 billion to $4.815 billion aligned with the $4.78 billion consensus. The company’s full-year EPS guidance of $3.60 to $3.72 exceeded analyst expectations of $3.51.

Strong Cash Generation and Strategic Moves

The company reported record second-quarter operating cash flow of $333 million. Free cash flow reached $284 million, demonstrating strong financial performance.

These cash flow figures highlight CrowdStrike’s ability to convert revenue growth into actual cash generation. The metrics provide reassurance about the underlying business health.

CEO George Kurtz highlighted several key achievements during the quarter. The company gained over 1,000 Flex customers and completed more than 100 re-flexes.

CrowdStrike also announced the acquisition of Onum during the earnings period. Onum specializes in real-time telemetry pipeline management, expanding CrowdStrike’s cybersecurity capabilities.

Goldman Sachs adjusted its price target following the earnings report. The investment bank lowered its target from $530 to $492 while maintaining a Buy rating.

The analysts cited lower peer multiples as the reason for the price target reduction. Goldman now bases its valuation on 55 times fiscal 2028 free cash flow estimates versus 60 times previously.

Guggenheim analysts maintained a Neutral rating, expressing caution about the current valuation. They noted more risk in the numbers than usual given the company’s circumstances.

The firm believes CrowdStrike needs consistent performance across NNARR, revenue, and earnings per share metrics. Goldman expects this consistency to emerge in the first half of fiscal 2026.

Stay Ahead of the Market with Benzinga Pro!

Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders: