CrowdStrike Holdings (CRWD) shares fell nearly 9% during extended trading on March 4, 2025, following the company's disappointing earnings guidance, sparking concerns as investors analyzed the cybersecurity provider's future performance.
According to the company's fourth-quarter results, CrowdStrike reported earnings per share of $1.03, which surpassed the Zacks Consensus Estimate of $0.85 by 21.18%. Compared to the previous year's earnings of $0.95 per share, this result reflects the company's efforts to adapt to changing market demands. Despite this positive earnings surprise, the company disclosed a net loss of $92.3 million, translating to 37 cents per share, contrasting sharply with the net income of $53.7 million, or 22 cents per share, reported during the same period last year.
Revenue figures tell a more favorable story, as CrowdStrike recorded $1.06 billion for the fourth quarter of fiscal year 2025, showcasing a 25% increase from $845.3 million the year prior. This upward trend continued throughout the year, leading to annual revenues of $3.95 billion, up 29% year-over-year. Subscription revenues also rose 31%, concluding at $3.76 billion compared to $2.87 billion the previous year.
Despite the overall revenue growth, the outlook for CrowdStrike over the next fiscal year seems cautious. The company projected earnings for the upcoming fiscal year, excluding certain items, to range from $3.33 to $3.45 per share, significantly lower than analysts' expectations of $4.42 per share. First-quarter earnings are anticipated to fall between 64 cents and 66 cents per share, compared to the average estimate of 95 cents.
Annual recurring revenue (ARR) also stood out, with CrowdStrike achieving $4.24 billion, reflecting 23% growth year-over-year. The company reported adding $224 million in net annual recurring revenue during the fourth quarter alone. Notably, this growth was bolstered by strong adoption of its subscription modules, which achieved rates of 67% for customers using five or more modules.
After the earnings release, analysts focused on management's comments and the direction of future earnings estimates as stock prices are often tied closely to future projections. CrowdStrike's shares have gained about 11.9% since the start of the year, contrasting with the S&P 500's minor decline of 0.5% over the same period.
CEO George Kurtz emphasized the increasing importance of artificial intelligence in cybersecurity, stating, "The necessity for cybersecurity's AI-native platform is heightened as businesses of all sizes rapidly adopt AI to stop breaches." This sentiment aligns with recent trends where AI is becoming more integrated within cybersecurity operations, addressing increasingly sophisticated threats.
Despite the optimism surrounding AI, the fourth-quarter results come nearly eight months after CrowdStrike experienced significant operational challenges—a technology update resulted in global IT outages, grounding flights and leading to class-action lawsuits against the company. The potential risks associated with technical updates will be another focus area for investors watching CrowdStrike's stock over the coming months.
Financial analysts have also indicated favorable revisions leading to CrowdStrike obtaining a Zacks Rank #2 (Buy), which could suggest strong future performance expectations. Investors have been urged to monitor earnings outlooks rigorously, as research shows there is often a strong correlation between near-term stock movements and revisions of earnings estimates.
Meanwhile, the broader security industry has demonstrated resilience, with related companies such as Zscaler, which is expected to report their quarterly results on March 5, projected to face challenges of their own with estimates showing declines compared to last year.
CrowdStrike's performance will likely hinge on its ability to navigate these shifting dynamics within the industry, ensuring sustained growth as businesses continue to prioritize comprehensive cybersecurity solutions. The strategic introduction of new services, including the recently announced Charlotte AI Detection Triage, indicates CrowdStrike’s priorities as it adapts to the modern cybersecurity threats and market demands.
With record operating cash flow of $1.38 billion and free cash flow of $1.07 billion over the fiscal year, CrowdStrike is well-positioned financially. Nevertheless, the challenges of achieving GAAP profitability looms as the company eyes the long term. The focus remains on balancing growth with responsible operational management.
Looking forward, investors will carefully monitor CrowdStrike's earnings calls, where leadership will clarify expectations and share insights on the sustainability of this rapid growth. With the cloud-native cybersecurity market expected to expand significantly, CrowdStrike’s strategic operations will be pivotal to its success.