CrowdStrike ($CRWD) faced a downturn in its shares early Thursday, following the cybersecurity firm’s decision to revise its fiscal 2025 outlook. This adjustment comes in light of the repercussions from the global tech outage that occurred in July. However, despite this setback, CrowdStrike exceeded Wall Street's earnings expectations for the second quarter. In the latest earnings report, the firm indicated that it now forecasts its per-share adjusted earnings to fall within a range of $3.61 to $3.65 for the current fiscal year.
This projection marks a decline from earlier expectations of $3.93 to $4.03. Additionally, CrowdStrike anticipates revenues to be between $3.89 billion and $3.90 billion, a revision from the previous guidance of $3.98 billion to $4.01 billion. Current market analysis, as outlined in Capital IQ, suggests a normalized EPS of $3.66 and projected revenue of $3.91 billion. The outages experienced on July 19 have been traced back to an update that CrowdStrike implemented for its Falcon sensors on Microsoft (MSFT) Windows systems.
The company estimates that this incident will negatively impact subscription revenue by approximately $30 million in each of the remaining quarters of this fiscal year. Moreover, there is anticipated to be a high-single-digit million dollar effect on professional services revenue during the latter half of the year.
Following these announcements, the stock witnessed a 2.1% decrease in premarket trading. Burt Podbere, Chief Financial Officer of CrowdStrike, commented during an earnings call that "Customer retention remains remarkably strong, and we do not expect this to meaningfully change in the foreseeable future." He also mentioned the strategic decision to shift some planned investments from sales and marketing towards enhancing research and development, quality assurance, and customer support.
Despite the market fluctuations, CrowdStrike continues to uphold its investment plan for fiscal 2025 for the remainder of the year. Looking ahead to the third quarter, CrowdStrike projects adjusted EPS in the range of $0.80 to $0.81, with revenue estimates falling between $979.2 million and $984.7 million.
The market consensus expects a normalized EPS of $0.81 with projected revenue of $984.1 million. Podbere highlighted a shift in customer engagement dynamics, stating, "We expect to see extended sales cycles for both new and existing customers, with additional scrutiny requiring higher levels of approval at the CEO and, in some cases, the board of directors level." He elaborated on the anticipated short-term impacts, noting that the firm's commitment packages may lead to subdued upsell dollar values and increased levels of subscription term contraction. In terms of financial performance, CrowdStrike reported adjusted earnings of $1.04 per share for the quarter ending July 31, up from $0.74 in the previous year, significantly surpassing the Street's estimate of $0.97.
The company's revenue saw a remarkable 32% year-over-year increase, amounting to $963.9 million, once again exceeding analyst forecasts of $958.3 million. Notably, subscription revenue surged by 33% to $918.3 million, while professional services climbed to $45.6 million from last year’s $41.7 million. The company’s Annual Recurring Revenue (ARR) advanced 32% to reach $3.86 billion, which included $217.6 million added in net new ARR during the second quarter.
Podbere also noted that while the July 19 incident created disruptions during the final weeks of the quarter, the company was able to successfully close deals, including significant expansions in deal values. Current Price: 257.85, Change: -6.35, Percent Change: -2.40 $CRWD.