CrowdStrike: Higher Sales, Higher Costs

Core Viewpoint - CrowdStrike's financial report shows solid growth despite challenges from a previous outage, with mixed results in key metrics, indicating resilience in its cybersecurity platform [3][10]. Financial Performance - Revenue for Q1 FY25 was $921 million, increasing to $1.1 billion in Q1 FY26, reflecting a 19% growth and meeting expectations [2]. - Earnings per share (EPS) decreased from $0.79 to $0.73, an 8% decline, but beat estimates [2]. - Net new Annual Recurring Revenue (ARR) fell from $212 million to $194 million, an 8% decrease [2]. - Free cash flow dropped from $323 million to $279 million, a 14% decline [2]. Cost and Margin Analysis - Subscription gross margin decreased by 100 basis points to 77% [5]. - The company reported a net loss of $110.2 million on a GAAP basis [5]. - Total operating expenses rose by 36% year over year to $939 million, primarily driven by increased sales and marketing expenses [5]. Customer Engagement and Growth Initiatives - The "Falcon Flex" licensing program is gaining traction, with total deal value increasing over 6 times year over year [6]. - A new $1 billion share-repurchase program has been approved by the board to help offset stock-based compensation and manage share growth [6][7]. Market Reaction and Future Outlook - Following the earnings report, CrowdStrike's stock fell 7% in aftermarket trading despite a 40% year-to-date increase prior to the report [8]. - The company forecasts Q2 FY26 EPS between $0.82 and $0.84, slightly above the consensus estimate of $0.81, with expected revenue growth to $1.14 billion to $1.15 billion [9]. - Full-year EPS guidance has been raised by $0.11, now projected between $3.44 and $3.56 [9]. Management's Perspective - Management remains optimistic about future growth, focusing on net new ARR reacceleration and margin expansion in the second half of FY26, supported by the Falcon Flex program and a strong pipeline [10][11].