What Happened?
Shares of cybersecurity company CrowdStrike (NASDAQ:CRWD) fell 6.6% in the morning session after the company reported mixed third quarter results. The quarter itself was solid as CRWD beat across most of the key operating metrics we track, including billings, revenue, operating profit, and earnings.
However, the quarter wasn't perfect as the company provided earnings guidance for the next quarter which fell below expectations, while revenue guidance was roughly in line.
Additionally, there was an unusual update during the earnings call: the removal of $26 million in annual recurring revenue (ARR) from a transaction with a distributor in the Federal vertical, which is not expected to recur.
Furthermore, management's comments during the earnings call suggest net new ARR growth is not expected to accelerate until the second half of fiscal 2026, potentially dampening near-term expectations.
Given the strong momentum leading up to the earnings report, the market may have been expecting a more convincing "beat and raise" quarter.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy CrowdStrike? Access our full analysis report here, it’s free.
What The Market Is Telling Us
CrowdStrike’s shares are quite volatile and have had 15 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock gained 25.2% on the news that the company reported fourth-quarter results with revenue and ARR (annual recurring revenue) beating by a slight margin but very convincingly on operating profit.
Keeping with that theme, while forward guidance for the next quarter and the full year were only slightly above expectations, non-GAAP EPS guidance was more convincingly ahead, showing better-than-expected profitability.
Lastly, Palo Alto Networks (NASDAQ:PANW) warned of weakness in security spending earlier when it reported earnings, sending waves of caution across the sector. Cybersecurity peers that reported after Palo Alto put up mixed results, which kept investors on edge for CrowdStrike's results. These results could signal a shift in sentiment given CrowdStrike's popularity within the cyber security space, especially considering its cloud security capabilities.
CrowdStrike is up 38.2% since the beginning of the year, but at $340.82 per share, it is still trading 13.1% below its 52-week high of $392.15 from June 2024. Investors who bought $1,000 worth of CrowdStrike’s shares 5 years ago would now be looking at an investment worth $6,055.
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