Shares of CrowdStrike (CRWD) are trading lower after the stock surged on Wednesday following the company's strong full-year guidance, which cited higher demand for cybersecurity. The uptick in demand comes as a slew of large companies, from MGM Resorts International (MGM) to UnitedHealth Group (UNH), have suffered a series of cyberattacks.
CrowdStrike Co-Founder & CEO George Kurtz joins Yahoo Finance to discuss the threat environment, increasing corporate demand for cybersecurity, and possible future mergers and acquisitions for the company.
Kurtz outlines his company's new AI and how its integral to the growing business: "AI has been a huge element of CrowdStrike's success. When I started the company, people weren't even talking about AI. It was machine learning and there's a lot of techniques we use. And over the years we have added more capabilities in terms of identifying and finding things that have never been seen before. Over the last, say, 18 months, we have created Charlotte AI, which is our generative AI product. And really the goal for Charlotte is to take the collective wisdom of CrowdStrike, be able to distill it, to make it available to these stock analysts, folks who are using our technology. And more than a chatbot, it actually can drive workflow automation. This is really important in today's environment. "
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
BRAD SMITH: Cybersecurity company CrowdStrike pulling back this morning after surging on Wednesday. The company issuing strong guidance and citing increased demand for its services.
This comes, as we've seen huge companies recently hit by cyber attacks. Joining us now, we've got George Kurtz. Who is the CrowdStrike co-founder and CEO. George, great to have you back on "Yahoo Finance" here with us.
You think about some of the companies that have been impacted most recently by a wave of cyber threats here, UnitedHealth. You've got Microsoft reporting hackers spying on its executives. Last year, MGM casinos, of course, took a $100 million hit from a hack.
Bad news in the environment. Generally, good news for demand, at least, perhaps, for some of your solutions and services. Where are you seeing that demand remains strong in the environment right now?
GEORGE KURTZ: Well, what we're seeing is broad-based demand. And we reflected those results, obviously, for Q4 with incredible growth, $282 million of ARR for the quarter and 66% rule of 40, if you will, from a free cash flow perspective.
So what we're seeing is that the threat environment is actually getting worse. We're seeing that take shape with some of these companies that you talked about. But the biggest thing to keep in mind is these adversaries are very determined. It's very hard for organizations to continue to battle them back. And that's one of the reasons why CrowdStrike has been successful.
We've got technology to help fight these adversaries and stop the breach.
SEANA SMITH: George, given that and the fact that the threat seems to just be escalating at this point, I know you made an acquisition here in the most recent quarter of Flow Security. Should we expect more M&A down the line, as you do try to beef up the protection here against these types of threats?
GEORGE KURTZ: We've been very diligent about our acquisition strategy. We've got some great companies, great technologies, great teams over the years. We're really excited about Flow, because that brings capabilities in the cloud that allows us to, basically, identify data, be able to classify that data, and be able to protect that data from leaking.
And that ties nicely into our data protection module, which we recently launched. So having this DSPM capabilities is really important for us. And I think when you look at our cloud strategy, and what we've put together, and what we reflected and disclosed to Wall Street just a couple of days ago, a $400-million business in cloud security. One of the largest and fastest growing cloud security businesses on the planet.
So we're excited about those acquisitions. And we will continue to look at great companies that fit within our product portfolio.
BRAD SMITH: George, I wonder-- and I've been able to have the opportunity to go inside of one of these artificial intelligence war rooms or cybersecurity war rooms. And it's clear that artificial intelligence is within the fabric, within the DNA of cybersecurity as a whole. But for an industry, how do you take that one step further and apply the generative nature to it, to go as far as rewriting code that further protects and suggests to some of your portfolio clients, how they can implement that as well?
GEORGE KURTZ: Pure AI has been a huge element of CrowdStrike's success when I started the company people weren't even talking about AI. It was a machine learning. And there's a lot of techniques that we use. And over the years, we've added more capabilities in terms of identifying and finding things that have never been seen before.
Over the last, say, 18 months, we've created Charlotte AI, which is our generative AI product. And really, the goal for Charlotte is to take the collective wisdom of CrowdStrike to be able to distill it, make it available to these SOC analysts, the folks that are using our technology, but more than just a chat bot. It actually can drive workflow automation.
And this is really important in today's environment. There's not enough people to do this work. There's not enough skilled people. So our goal with Charlotte and generative AI is to take eight hours of work, turn it into 10 minutes of work, and take a level one, maybe, an intro analyst, and give them the capabilities of a level 3 a very experienced analyst.
We think it's a game changer. We just released it. Customers love it. And we look forward to its future success.
SEANA SMITH: George, I'm curious. Given your decades of experience within the industry, where are we in AI adoption? Are we still right around that first inning? And given that, what does that then tell us about demand for your product five, 10 years from now?
GEORGE KURTZ: Well, to be candid, I think we're putting the cleats on and getting ready to hit the batter's box. We are so early in this game. If you look at generative AI, what it means. People are just trying to figure out how they use it internally, how they use it safely, which is one of the cool things about Flow. We can actually put guardrails on how people can use Gen AI and ChatGPT and those things. So that data doesn't flow out that the company doesn't want.
So very early innings. And I think you're seeing a lot of companies create a strategy around Gen AI. How do they use it? Where do they use it? What groups? How do you look at the data? Does the data go out to the internet? Is it used for training in someone else's LMS?
Very, very early. But there's so much promise. So much promise from a defender perspective, and just, I think, a productivity perspective. But also, we talked about in our earnings call, Gen AI really is a force multiplier for the adversaries. It takes very esoteric tactics and techniques and brings it down to the masses.
You're going to see more adversaries come out of evil generative AI.
BRAD SMITH: How do we more quickly deploy some of these solutions, especially, knowing the threats, and how quickly they are also replicating their attempts towards getting towards some of the critical data that is extremely sensitive, regardless, of the sector that you're serving?
GEORGE KURTZ: That's the beauty about the CrowdStrike Falcon platform. Single agent architecture, single platform, single console. So when we added our technologies around data protection as an example, customers just need to turn it on. It's a license entitlement. It's all there.
And that frictionless ease of use for our platform is one of the reasons why we've been so successful. So we continue to focus on that and build new technologies. More importantly, listen to customers, what they're saying, where are their problems? Their experts in pain. We need to be experts in solutions. And that's really what we're focused on and delivering that value to our customers.
BRAD SMITH: George, just lastly, while we have here. We're going into-- and we are amid now clearly after Super Tuesday and election year, where should cybersecurity rank in what we're hearing from political candidates knowing how much the threat level has raised?
GEORGE KURTZ: I think it should be front and center. I can tell you it's front and center for boards of directors. I was just on a call yesterday with a big Fortune 500 company going through this. The number one risk factor, when you look at the political environment and you look at our election integrity and process around that, and really going beyond that now, is the deep fake opportunities, whether it's video or audio, the ability to influence. It's all wrapped together as a huge risk for election security.
And something that I know and I believe that the governments are taking seriously.
SEANA SMITH: George, congratulations on the strong quarter. We hope to have you back again soon on "Yahoo Finance." George Kurtz, the CEO of CrowdStrike.
