Stocks of CrowdStrike were hit in Wednesday’s pre-market trading following the cybersecurity company’s report of fourth-quarter earnings. Although the results for the quarter beat analysts’ estimates, projections for the first quarter and full year turned the worries of investors, especially relating to the prolonged impact of a global IT outage in July on customer renewals.
Strong Q4 Performance, Soft Outlook Ahead
The company based in Sunnyvale, California came out with the report for the quarter that ended in January after the official close Tuesday. Adjusted earnings per share for CrowdStrike grew 8% to $1.03, with revenue buoyed by acquisitions that grew 25% to $1.06 billion.
CrowdStrike noted good performance in Q4, which beat the forecasts from analysts of earnings at 86 cents per share on a revenue of $1.035 billion. However, Street expectations did not match against the company’s guidance for fiscal 2026, which made investors doubt the future growth of the company.
Metric That Matters Most: Annual Recurring Revenue (ARR)
There is considerable attention being devoted by Wall Street for CrowdStrike because of an important financial metric to monitor, the annual recurring revenue (ARR), that must be followed to see years of service growth and, thus, an indicator in long-term such that it represents the business health of CrowdStrike.
Total ARR grew by 23% for the quarter to $4.24 billion, just over what analysts expected at $4.21 billion. However, new net ARR plummeted by 20%, to $224.3 million. The company’s recent IT outage has stoked fears about potential future growth as it may affect renewal of contracts.
UBS analyst Roger Boyd said CrowdStrike’s net new ARR for Q4 was stronger than expected, although it did not provide much clarity on the timing or size of the recovery in the second half of FY26. Boyd also said the company projected its operating margin would be just 20 despite its revenue growth guidance ahead of consensus estimates for FY26.
Fiscal 2026 Guidance Seemingly Inadequate
CrowdStrike have now formalized expectations for fiscal 2026 with revenues between $4.744 billion and $4.805 billion for the year starting in April. Although this is above analysts’ projections of $4.768 billion, the adjusted EPS guidance was much lower than this range. For the year, the company expects an adjusted EPS guidance of $3.39, significantly lower than the expected $4.40.
The downturn in CrowdStrike’s profits is due to increased spending on marketing and artificial intelligence infrastructure and higher taxes that will weigh on margins in the upcoming quarters. The company also didn’t give guidance for its total ARR, which was expected to reach $5.058 billion.
Reactions from Analysts
William Blair’s analyst Jonathan Ho pointed out that CrowdStrike was now giving no more incentives to the customer in connection with the IT outage, which might define its movement beyond the disruption. Renewal rates attached to the company’s customer commitment packages (CCPs) were vaguer, bringing the future revenue picture into question, according to Ho.
Jefferies’ Joseph Gallo expressed optimism that Crowdstrike would find a way to speed up growth in its net new ARR in the later part of fiscal 2026. However, he admitted that there remained risk especially regarding customers’ eventual willingness to pay for modules which CrowdStrike had previously offered free of charge.
Securities Market Response and Related Industry Context
CrowdStrike’s stock fell by 7.5% to around $361 in early trading hours on Wednesday after gaining 15% in value since early January 2025. Among other factors that have been cited as weighing heavily on stocks are the company’s new accounting practices regarding employee stock-based compensation, noted by Bank of America analyst Tal Liani as having reduced visibility into operating margin by 500 to 600 basis points. CrowdStrike is now accounting like its counterparts, but this introduces a bit of uncertainty into the outlook.
For the company, another exciting development recently was that its sales via Amazon Web Services, or AWS, shot past the $1 billion mark in 2024. This important milestone became part of the history of the company. It competes in the highly competitive endpoint security business with Palo Alto Networks, SentinelOne, and Microsoft, among others.
Apart from endpoint security, CrowdStrike is seeking to broaden its horizon with XDR, or offshoot detection and response (extended detection and response). This is even beyond endpoints to cover things like web/email gateways, firewalling, and cloud workload detection.
Summation
Even though the fourth quarter report from CrowdStrike surpassed analysts’ expectations, a tepid outlook and potential headwinds regarding customer renewals and profits have added to the short-term uncertainty for investors. The cybersecurity market tends to remain fierce, and although CrowdStrike stands firm in the industry, it will have to do much in this regard to maintain investor confidence.
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