CrowdStrike Earnings: Growth in New Areas as CrowdStrike Diversifies Its Reach

We are maintaining our $163 fair value estimate for narrow-moat CrowdStrike CRWD after the firm closed out its second quarter of fiscal 2024 with financial results largely in line with our prior estimates. While near-term macro pressures continue to affect customer buying decisions, we believe investors should focus their attention on CrowdStrike’s long-term market opportunity which continues to expand as the firm invests in growing areas such as identity, cloud security, and security operations. We reiterate our view that in a security landscape littered with bad actors using emerging technologies such as generative artificial intelligence for nefarious purposes, customers will expand their usage of security vendors. In turn, we believe CrowdStrike’s Falcon platform is well-positioned to capitalize on the increased appetite for security solutions over the medium to long term. With shares trading slightly up afterhours, we believe CrowdStrike is fairly valued and is trading in the 3-star range.

Second-quarter sales clocked in at $732 million, up 37% year over year and just shy of our $735 million estimate. Annual recurring sales revenue also grew 37% year over year to $2.93 billion. Net new ARR, a measure of new business CrowdStrike landed in the quarter, was up 13% sequentially to $196 million.

The highlight of the earnings report for us was the detail provided on the performance of CrowdStrike’s cloud, identity, and security operations solutions. These three verticals, which are new to CrowdStrike’s platform, contributed more than $500 million in ARR. With the ARR from these new solutions expanding at a rapid pace, we foresee them becoming a crucial part of CrowdStrike’s land and expand strategy in the near future. For context, the blended year-over-year ARR growth rate for these three solutions was in excess of 100%, well above the ARR growth rate for CrowdStrike’s traditional endpoint security business.