CrowdStrike(CRWD) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Record Q3 net new ARR of $265 million, growing 73% year over year, exceeding expectations by more than 10% [4][31] - Ending ARR reached $4.92 billion, accelerating to 23% growth year over year [4][31] - Record Q3 free cash flow of $296 million, representing 24% of revenue [5][31] - All-time record operating income of $265 million, or 21% of revenue, marking the second consecutive quarter of record operating income [5][31] - Non-GAAP net income attributable to CrowdStrike was a record $245.4 million, or $0.96 on a diluted per-share basis [36][31] Business Line Data and Key Metrics Changes - Broad-based ending ARR acceleration across cloud, next-gen identity, and next-gen SIEM, as well as acceleration in the endpoint business [5][31] - Falcon Shield had a record net new ARR quarter, growing nearly 50% sequentially [15][31] - Falcon Flex customer ending account ARR more than tripled year over year, with re-Flex activity more than doubling quarter over quarter [20][31] Market Data and Key Metrics Changes - Geographic revenue mix consisted of approximately 67% from the U.S. and 33% from international markets, with both U.S. and APAC year-over-year revenue growth accelerating compared to Q2 [33][31] - The cloud security market is maturing, with customers realizing that posture does not equate to prevention, leading to increased demand for active defense within cloud environments [16][31] Company Strategy and Development Direction - CrowdStrike positions itself as the operating system of cybersecurity for the agentic era, emphasizing the need for a single platform to manage cybersecurity effectively [10][12] - The company is focused on leveraging AI to enhance its cybersecurity offerings, with AI adoption being a significant driver of demand [29][30] - The partnership with AWS is a strategic focus, providing native access to Falcon Next-Gen SIEM for AWS customers, enhancing customer acquisition opportunities [12][26] Management's Comments on Operating Environment and Future Outlook - Management expressed strong conviction in the ability to deliver profitable growth as they finish FY26 and look into FY27, supported by a robust demand environment and record pipeline [31][37] - The company anticipates continued strong demand for its products, particularly in the context of AI adoption and the need for enhanced cybersecurity measures [29][30] - Management highlighted the importance of consolidating security needs to lower total cost of ownership, resulting in higher retention rates and increased module adoption [32][31] Other Important Information - The company achieved a total revenue of $1.23 billion in Q3, growing 22% year over year, with subscription revenue growing 21% [33][31] - Non-GAAP gross margin was 78%, with subscription gross margin increasing to 81% [34][31] - The company expects total revenue for Q4 FY26 to be in the range of $1.290-$1.300 billion, reflecting a year-over-year growth rate of 22%-23% [39][31] Q&A Session Summary Question: Insights on emerging segments and seasonality of net new ARR - Management noted that emerging products like Next-Gen SIEM and Identity performed exceptionally well, with strong customer adoption and outcomes [41][42] Question: Value captured in SIM market displacements - Management indicated that customers are seeking better outcomes and lower costs, with the opportunity to activate Next-Gen SIEM for existing customers [43][44] Question: Further push into observability - Management sees observability as a consolidation opportunity, leveraging existing technology and data collection capabilities [45][46] Question: Dynamics of Flex licensing and its impact on NRR - Management emphasized that Flex licensing is designed for continuous net ARR growth, making it easier for customers to buy more and consolidate their security needs [48][50] Question: AI's impact on customer conversations - Management highlighted that CrowdStrike's AI capabilities differentiate it from competitors, with AI agents embedded in the platform delivering significant operational efficiencies [51][52]