CRWD Stock: Is CrowdStrike Out of the Doghouse?

Introduction

CrowdStrike [CRWD] is a Texas-based cyber security company whose main product is the endpoint protection platform (EPP) Falcon. 

According to the 2024 edition of Gartner’s Magic Quadrant, released in October, CrowdStrike has the second-biggest share of the EPP market, at 14.2%, behind only Microsoft [MSFT], at 40.2%.

This stock spotlight will discuss what caused the Crowdstrike to fall from a 52-week high to a 52-week low within the space of less than a month. It will also examine why CRWD stock has bounced back following a significant cyber security incident earlier this year.

All eyes will be on annual recurring revenue (ARR) and free cash flow when Q3 2025 results are reported after the bell on Tuesday. 

CrowdStrike Defect Causes Global IT Outage 

CrowdStrike has an ambitious goal of reaching $10bn in ARR by the end of fiscal 2031, supported by a strong free cash flow margin. 

In July, a defect in a software update for Falcon crippled millions of computers running on Microsoft systems around the world, impacting airlines, banks, hospitals and government departments. 

Though CrowdStrike’s response was swift and transparent, analysts warned that the company’s financial performance would likely take a hit in the near term. 

“Initially we expect outage-related headwinds to revenue, ARR, profitability and free cash flow over the next four quarters,” wrote J.P. Morgan Analyst Brian Essex in an August note to clients seen by Investor’s Business Daily.

CrowdStrike Climbs Back from 52-Week Low

The global outage caused the CrowdStrike share price to fall from a 52-week high of $398.33 set on July 9 to a 52-week low of $200.81 on August 5. Despite this, it has slowly clawed its back up, closing at $363.68 on November 25. 

CRWD stock is up 42.44% in the year to date and 72.64% in the past 12 months. 

ARR Remains on Track

In Q1 2025, which ended April 30, CrowdStrike’s ARR was up 33% year-over-year to $3.65bn and it had generated free cash flow of $322.5m, up from $227.4m in Q1 2024. 

In Q2, ARR was up 32% to $3.86bn, while free cash flow was $272.2m compared to the $188.7m reported in Q2 2024. 

“Working with customers to recover from the July 19 incident, we emerge as an even more resilient and even more customer-obsessed CrowdStrike, continuing to aggressively invest in innovation,” said CrowdStrike CEO and Co-Founder George Kurtz in the earnings press release. 

Revenue for Q3 is guided to be $979.2m–984.7m, up from $786m in the year-ago period. The slight bad news baked into Q2’s results was that full-year guidance across the board was cut in the wake of the IT outage. Revenue forecast has been lowered from $3.98bn–4.01bn to $3.89bn–3.90bn, while EPS was cut from $3.93–4.03 to $3.61– 3.65.

Kurtz added on the Q2 2025 earnings call that the incident had delayed some deals, pushing them into later quarters, although the majority remain “in our pipeline”. 

Fellow EPP provider SentinelOne [S] reported a 32% rise in ARR for its Q2 2025 to $806m. Another, Check Point Software [CHKP], reported security subscription revenue rising 12% to $277m in its Q3 2024.

Source: Yahoo Finance

Given its current P/S ratio, CRWD stock could be considered overvalued, especially when compared to S stock and CHKP stock. 

CrowdStrike’s Q3 earnings should give investors a clearer picture of its growth outlook and whether its share price is overvalued at present. 

CRWD Stock: The Investment Case

The Bull Case for CrowdStrike 

Despite the full-year guidance cut, analysts are generally bullish on CrowdStrike. MarketBeat data shows the stock has received a slew of upgrades over the past few months.

Last week, J.P. Morgan’s Essex reiterated a ‘buy’ rating but upped his price target from $330 to $369, implying a marginal upside of 1.14% from the November 25 closing price.

In a note to clients seen by TipRanks, Essex noted that Q3’s numbers “could be much better than some anticipate”, adding that the guidance was “relatively conservative and [included] wide goalposts to set expectations for performance after the unprecedented event”.

The Bear Case for CrowdStrike 

Analysts seem to think that the worst is behind CrowdStrike but there is still the potential issue of the company’s customer commitment package announced in response to the IT outage.

The package, which includes discounted prices, more flexible payment terms and extensions to subscriptions, is expected to have a negative $30m impact in both Q3 and Q4, the company stated on the Q2 earnings call in August. 

The company believes the package “will drive even more Falcon utilization and platform value realization in both the short and long term”. However, it could potentially impact its pricing power if customers demand lower prices and improved payment terms in the future. This could slow its progress towards achieving its $10bn ARR target. 

Conclusion

CrowdStrike has recovered from July’s global IT outage and could surprise investors when it delivers Q3 results on Tuesday. However, it could also face near-term headwinds in its bid to achieve $10bn ARR by the end of fiscal 2031. 

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