CrowdStrike has reduced its revenue and profit forecasts following a global outage in July caused by a faulty software update. The cybersecurity company, which specialises in endpoint security for hundreds of corporate clients globally, anticipates that it will experience a challenging fiscal environment for approximately a year. The outage, which disrupted internet services globally, affected 8.5 million Microsoft Windows devices and led to widespread flight cancellations.
CrowdStrike’s CEO George Kurtz, acknowledged that the incident delayed some deals, pushing them into future quarters, although the majority of contracts remain viable. “Working with customers to recover from the July 19th incident, we emerge as an even more resilient and even more customer-obsessed CrowdStrike, continuing to aggressively invest in innovation,” argued Kurtz. “Our second quarter demonstrates the resilience of our business and platform – with LogScale Next-Gen SIEM, Identity Protection, and Cloud Security eclipsing $1 billion in combined ending ARR.”
The horror, the horror (of a global cyber outage)
Analysts have suggested that the damage to CrowdStrike’s reputation is likely to impact its dominant market position. Even so, the high cost involved in corporations switching cybersecurity providers may mitigate the potential fallout on Crowdstrike’s bottom line. Following the announcement of its latest results, CrowdStrike’s shares dropped more than 3% in after-hours trading.
Chief Financial Officer Burt Podbere stated that the company expects to face challenges for about a year, with growth likely to pick up again in the latter half of the next year. He also noted that the annual revenue forecast would be affected by a customer commitment package, expected to cost $60m in the second half.
CrowdStrike now anticipates its annual revenue to be between $3.89bn and $3.9bn, down from its previous expectations of $3.98bn to $4.01bn.
Analysts had, on average, forecast revenue of $3.95bn. The company also expects annual adjusted profit per share to range from $3.61 to $3.65, compared to its prior estimate of $3.93 to $4.03.
CrowdStrike announced its financial results for the second quarter of the fiscal year 2025 (Q2 FY25), which ended on 31 July 2024. The company reported a GAAP net income attributable to CrowdStrike of $47m, compared to $8.5m in the same quarter of the previous year.
GAAP net income per share, diluted, stood at $0.19, up from $0.03 in Q2 FY24. Non-GAAP net income was $260.8m, compared to $180m in the same period last year. Non-GAAP net income per share, diluted, increased to $1.04 from $0.74.
Total revenue for the quarter was $963.9m, representing a 32% year-over-year increase compared to $731.6m in Q2 FY24. Subscription revenue also rose by 33% to $918.3m, up from $690m in the previous year.
The annual recurring revenue (ARR) grew by 32% year-over-year to $3.86bn as of 31 July 2024, with $217.6m in net new ARR added during the quarter.
CrowdStrike reported a GAAP subscription gross margin of 78% for the second quarter of FY25, consistent with the same period last year. The non-GAAP subscription gross margin was 81%, slightly up from 80% in Q2 FY24.
Following the infamous global IT outage on 19 July, CrowdStrike was hit by a class action lawsuit filed by shareholders in Austin, Texas. The shareholders accused the company of defrauding them by failing to disclose the risks associated with its software testing methods. The plaintiffs argued that CrowdStrike had made materially false and misleading statements about the reliability of its technology.
Read more: CrowdStrike promises stronger vetting of future updates after causing global IT meltdown
