Cybersecurity company CrowdStrike Holdings (CRWD) reported stronger-than-expected third-quarter earnings on Tuesday, but shares dropped 5.1% in premarket trading Wednesday due to a cautious fourth-quarter outlook.
The company’s revenue grew despite the decline, a sign of resilience following a difficult summer, which included an outage in the global technology caused by the software.
Revenue and earnings beat expectations
CrowdStrike’s third-quarter adjusted earnings were 93 cents a share, on revenues of $1.01billion, exceeding FactSet analyst estimates of $81.50 per share, and $983m in revenue.
Comparing the current period to last year’s, revenue increased by 23% from $786m and earnings rose from 82c per share.
ARR, a metric that measures the value of subscriptions contracts for customers on an annualized basis, reached $4.02billion. This was just above Wall Street’s $4.01billion forecast.
It represents an increase of 27% from one year to the next.
Burt Podbere, Chief Financial Officer, said: “Our results for the third quarter reflect our focus on execution and financial discipline. This led to a strong end and a quarterly increase in pipeline despite anticipated headwinds due to the incident of July 19.
The fallout of the July Software Outage
CrowdStrike software was in the news on 19 July after a system update led to widespread crashes of computers using Microsoft PC Operating Systems, causing significant outages for multiple industries.
This incident took place in the last two weeks of a company’s second quarterly, a crucial period to close sales.
George Kurtz, the CEO of the company’s August earnings call acknowledged the delay in deals but said that most deals were still in the pipeline.
CrowdStrike showed resilience in the third quarter despite its setback. Its pipeline increased and it executed well to complete delayed deals.
Updated 2024 Forecast and cautious Q4 Outlook
CrowdStrike has raised its earnings guidance for fiscal 2024. It now expects earnings per share to be between $3.74 and $3.76. This is up from the previous range of $3.6 to $3.65.
The adjusted revenue forecast of the company signals its confidence that it can recover from earlier challenges.
CrowdStrike’s fourth-quarter forecast was 84 cents to 86cents, the middle point being slightly lower than Wall Streets’ estimate of 86cents.
It is possible that the conservative outlook may have been a factor in the drop of the stock price after the announcement.
What is next for CrowdStrike?
CrowdStrike is a leading provider of cybersecurity solutions. The company benefits from the increasing demand for digital defenses as more organizations focus on them.
Its strong position in the market is reflected by its ability to achieve robust growth of ARR and earnings that exceed expectations.
The cautious guidance for Q4 reflects possible uncertainties. These could be linked to the lingering effect of the outage in July and macroeconomic headwinds that affect enterprise spending.
Investors are closely watching how the company manages to overcome these obstacles in the coming months.
The post CrowdStrike’s shares fall on cautious Q4 forecast but beat Q3 expectations may change as new information is released.
