CrowdStrike’s (NASDAQ:CRWD) Q4 Sales Top Estimates But Stock Drops
Cybersecurity company CrowdStrike (NASDAQ:CRWD) reported Q4 CY2024 results topping the market’s revenue expectations , with sales up 25.2% year on year to $1.06 billion. The company expects next quarter’s revenue to be around $1.10 billion, close to analysts’ estimates. Its non-GAAP profit of $1.03 per share was 19.9% above analysts’ consensus estimates.
Revenue: $1.06 billion vs analyst estimates of $1.03 billion (25.2% year-on-year growth, 2.4% beat)
Adjusted EPS: $1.03 vs analyst estimates of $0.86 (19.9% beat)
Adjusted Operating Income: $217.3 million vs analyst estimates of $187.6 million (20.5% margin, 15.8% beat)
Management’s revenue guidance for the upcoming financial year 2026 is $4.77 billion at the midpoint, in line with analyst expectations and implying 20.8% growth (vs 29.6% in FY2025)
Management’s operating profit (non-GAAP) guidance for the upcoming financial year 2026 is $965 million at the midpoint, below analyst expectations of $1.02 billion
Operating Margin: -8.1%, down from 3.5% in the same quarter last year (margin lower due to a combination of higher sales & marketing, higher stock-based compensation, and one-time costs due to the July 19th outage)
Free Cash Flow Margin: 22.7%, similar to the previous quarter
Annual Recurring Revenue: $4.24 billion at quarter end, up 23.4% year on year
Market Capitalization: $94.27 billion
Company Overview
Founded by George Kurtz, the former CTO of the antivirus company McAfee, CrowdStrike (NASDAQ:CRWD) provides cybersecurity software that protects companies from breaches and helps them detect and respond to cyber attacks.
Endpoint Security
Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks. As the volume of internet enabled devices grows, every device that employees use to connect to business networks represents a potential risk. Endpoint security software enables businesses to protect devices (endpoints) that employees use for work purposes either on a network or in the cloud from cyber threats.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, CrowdStrike grew its sales at an exceptional 39.7% compounded annual growth rate. Its growth surpassed the average software company and shows its offerings resonate with customers, a great starting point for our analysis.
CrowdStrike Quarterly Revenue
This quarter, CrowdStrike reported robust year-on-year revenue growth of 25.2%, and its $1.06 billion of revenue topped Wall Street estimates by 2.4%. Company management is currently guiding for a 19.8% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 20.1% over the next 12 months, a deceleration versus the last three years. Despite the slowdown, this projection is healthy and indicates the market sees success for its products and services.
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Annual Recurring Revenue
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
CrowdStrike’s ARR punched in at $4.24 billion in Q4, and over the last four quarters, its growth was fantastic as it averaged 29% year-on-year increases. This performance aligned with its total sales growth and shows that customers are willing to take multi-year bets on the company’s technology. Its growth also makes CrowdStrike a more predictable business, a tailwind for its valuation as investors typically prefer businesses with recurring revenue.
CrowdStrike Annual Recurring Revenue
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
CrowdStrike is very efficient at acquiring new customers, and its CAC payback period checked in at 28.2 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give CrowdStrike more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.
CrowdStrike CAC Payback Period
Key Takeaways from CrowdStrike’s Q4 Results
It was encouraging to see CrowdStrike beat analysts’ annual recurring revenue (ARR), revenue, and operating profit expectations this quarter. On the other hand, its full-year revenue guidance was just in line while full-year operating profit guidance missed Wall Street's estimates. Overall, the quarter was solid, but the guidance was underwhelming, and this is weighing on shares. The stock traded down 5.7% to $367.92 immediately following the results.
