Following the release of its third-quarter fiscal results, CrowdStrike Holdings Inc. has seen its shares tumble nearly 5% during after-hours trading. This decline came after the cybersecurity company reported strong quarterly earnings, only to provide a fourth-quarter outlook falling short of market expectations.
CrowdStrike's fiscal Q3 results ending on October 31 revealed adjusted earnings per share of 93 cents compared to 82 cents from the same quarter last year, along with revenues hitting $1.02 billion, marking a 29% year-over-year increase. Analysts had projected earnings of 81 cents per share on revenues of $982.81 million, which means CrowdStrike not only met but surpassed those expectations.
The company's subscription revenue showed even more remarkable growth, reaching $962.7 million, up 31% year-over-year. Their annual recurring revenue also saw significant gains, increasing by 27% to $4.02 billion as of the end of October, aided by the addition of $153 million in new annual recurring revenue within the quarter.
During this quarter, CrowdStrike generated net cash from operations of $326.1 million, up from $273.5 million during the same period last year, alongside free cash flow of $230.6 million. By the end of the quarter, the company boasted $4.26 billion in cash and equivalents.
For investors, the business highlights were equally eye-catching. CrowdStrike reported enhancing module adoption rates, which grew significantly: 66% of customers adopted five or more modules, followed by 47% for six, 31% for seven, and 20% for eight or more modules.
Strategic partnerships established with CardinalOps Inc., Nagomi Inc., and Veriti Inc. aimed at delivering intelligence-led threat defense, set the stage for future growth. The cybersecurity sphere buzzed with activity as CrowdStrike introduced new products at its annual Fal.Con cybersecurity conference earlier this fall, including advancements across endpoint security, cloud security, identity protection, and other next-generation solutions. The announcement of Project Kestrel, aimed at enhancing user experience, was among these innovations.
Despite the encouraging quarterly results, analysts and investors were on edge considering the repercussions stemming from a July incident involving a faulty software update which disrupted services for several of CrowdStrike's clients globally. Concerns lingered about how this mishap could influence the company's future performance. The fourth-quarter guidance suggested adjusted earnings between 84 to 86 cents per share, with revenue projections between $1.029 billion to $1.035 billion. Enthusiastic investors had anticipated slightly higher adjusted earnings of around 87 cents per share.
On the communications front, Chief Financial Officer Burt Podbere expressed confidence about the financials, stating, "Our third-quarter results reflect our focused execution and financial discipline, which drove strong growth, notwithstanding anticipated obstacles from the July incident." He related the success of customer commitment packages, indicating clients had gravitated toward this initiative, solidifying their relationships with CrowdStrike.
CrowdStrike's Chief Executive George Kurtz emphasized the progressive measures his team was undertaking during the Fal.Con 2024 event, addressing the future of cybersecurity and the transformative influence of artificial intelligence within the sector.
Overall, the cybersecurity company may be riding high on resounding quarterly performance but is now faced with the economic reality shaped by market expectations and investor sentiment. While the current quarter's outlook may feel like a bump on the road, savvy investors indicate this dip could be seen as a buying opportunity. The key will be keeping a close eye on how the company rebounds from the challenges posed, particularly relating to their prior software updates and future innovations.
