Morningstar

CrowdStrike Earnings: New Product Categories Still Spearheading Sales

We’ve raised our fair value estimate of CrowdStrike stock.

The logo of Crowdstrike photographed from the screen of a laptop.
Karl-Josef Hildenbrand/picture alliance via Getty
Securities in This Article
CrowdStrike Holdings Inc Class A
(CRWD)

Key Morningstar Metrics for CrowdStrike Holdings

What We Thought of CrowdStrike Holdings’ Earnings

CrowdStrike Holdings CRWD reported strong third-quarter results, including sales growth of 22% and adjusted operating margins of 21%. The firm’s annual recurring revenue grew 23% to $4.92 billion, while net new ARR grew 73% to $265 million.

Why it matters: CrowdStrike has aggressively leaned into the vendor consolidation trend, racking up material share gains in a fragmented security market as the firm has expanded beyond endpoint security.

  • The firm’s bundling discounts, offered through the Flex program for customers seeking to consolidate spending, have been quite successful, with ARR from these accounts growing more than 200% year over year to more than $1.35 billion.
  • We attribute CrowdStrike’s success in consolidating security spending to its broad platform that includes security operations, cloud, identity, and endpoint. Customers who have adopted more than eight CrowdStrike’s modules grew 4 points to 24%, an endorsement of the firm’s platform strategy.

The bottom line: We are raising our fair value estimate for narrow-moat CrowdStrike to $410 per share from $330 as we recalibrate our medium-to-long-term growth estimates upward.

  • Our updated view on CrowdStrike’s growth is informed not only by the success the firm has seen in selling a broader range of solutions, but also by the resilience of its core endpoint business, which reaccelerated this quarter.
  • Despite our material fair value hike and our view of CrowdStrike as arguably the highest-quality security company under our coverage, we continue to view valuation for the name as stretched.

Between the lines: The success of Flex is evident in the fact that more than 200 customers have renewed these agreements despite the program being launched only two years ago.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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