Core Insights - CrowdStrike's Falcon Flex model is rapidly growing and is integral to the company's expansion strategy, with Annual Recurring Revenue (ARR) from Falcon Flex customers reaching $1.35 billion in Q3 fiscal 2026, more than tripling from the previous year [1][9] Group 1: Falcon Flex Growth and Impact - Falcon Flex facilitates quicker adoption of new modules without lengthy contract processes, resulting in increased platform usage and strong re-Flex activity, with over 200 customers expanding their contracts in Q3 [2][9] - The model is driving growth in key product areas such as Next-Generation Security Information and Event Management, cloud security, identity security, and endpoint protection, as it reduces procurement friction and encourages multi-module adoption [3][9] - Falcon Flex is expected to remain a significant growth engine for CrowdStrike, contributing to increased ARR, larger deal sizes, and deeper platform utilization, with revenue estimates indicating a year-over-year increase of around 21% for fiscal 2026 and 2027 [4] Group 2: Competitive Landscape - Competitors like Palo Alto Networks and SentinelOne are also experiencing growth through platform expansion and AI innovations, with Palo Alto Networks reporting a 29% year-over-year increase in its Next-Gen Security ARR in Q1 fiscal 2026 [5] - SentinelOne achieved a 23% year-over-year growth in its ARR for Q3 fiscal 2026, driven by the adoption of its AI-first Singularity platform [6] Group 3: Financial Performance and Valuation - CrowdStrike's shares have increased by 9.6% over the past three months, contrasting with a 3.3% decline in the Zacks Security industry [7] - The company trades at a forward price-to-sales ratio of 21.56, significantly higher than the industry average of 11.83 [11] - The Zacks Consensus Estimate for CrowdStrike's fiscal 2026 earnings suggests a year-over-year decline of 5.6%, while fiscal 2027 earnings are expected to grow by 28.8%, with recent upward revisions in estimates [14]

Core Insights - Zscaler (ZS) reported a 23% year-over-year revenue increase to $678 million for Q3 of fiscal 2025, but experienced a slight decline in non-GAAP gross margins to 80.3%, down from 81.4% a year ago, reflecting a 110-basis point contraction [1][11] Revenue and Growth - The company achieved a revenue growth of 24% and a free cash flow margin of 28% year-to-date, resulting in a combined score of 52%, known as the Rule of 52, marking the 21st consecutive quarter of exceeding the Rule of 40 benchmark [5][11] Margin Dynamics - The decline in gross margins is attributed to the rollout of new products aimed at quickly gaining market share rather than focusing on high margins initially. Management plans to improve margins once these products reach scale [2][6] - Zscaler's gross margin is projected to be 80% for Q4 of fiscal 2025, indicating a sequential decline of 30 basis points [6] Product Development - Recent introductions of fast-growing modules under categories like Zero Trust Everywhere and Data Security Everywhere are attracting large deals and expanding annual recurring revenue (ARR), although they are not yet margin-optimized [3][4] - The Z-Flex program, which offers flexible purchasing options, has contributed over $65 million in total contract value in Q3, but often bundles lower-margin modules, complicating near-term margin stability [4] Competitive Landscape - Competitors like CrowdStrike and Okta are also evolving their platforms to meet enterprise security demands, with CrowdStrike enhancing its identity security platform using AI solutions, and Okta focusing on identity and access management with AI for real-time detection of identity attacks [7][8] Valuation and Estimates - Zscaler's shares have increased by 74.4% year-to-date, outperforming the Security industry's growth of 22.1% [9] - The company trades at a forward price-to-sales ratio of 15.32X, higher than the industry average of 14.67X [12] - Earnings estimates for fiscal 2025 imply a year-over-year decline of 0.31%, while fiscal 2026 estimates suggest a growth of 12.01%, with upward revisions in the past 60 and 30 days respectively [15]