CrowdStrike (CRWD) Stock: Q3 Earnings Expected to Show 20% Revenue Growth Tuesday

TLDR

• Third-quarter earnings release scheduled for Tuesday with revenue expected to hit $1.2 billion, up 20% year-over-year
• Annual recurring revenue forecast to reach $4.9 billion, representing 22% growth from prior year
• Shares have rallied 130% since August 2024 following recovery from July software outage that impacted 8.5 million devices
• Current valuation sits at 77 times forward free cash flow, nearly double the industry average of 40 times
• Analysts project adjusted earnings of $0.94 per share with estimates remaining stable over past month

CrowdStrike delivers its third-quarter results Tuesday afternoon. Wall Street expects continued growth despite concerns about the stock’s price.

CrowdStrike Holdings, Inc., CRWD

Revenue projections stand at $1.2 billion for the quarter. This marks 20% growth from the same period last year. Adjusted earnings should reach $0.94 per share.

The cybersecurity firm changed its accounting methods earlier this fiscal year. The new approach for calculating adjusted earnings lowered reported figures. Payment structure changes also affected how revenue gets recognized.

Annual recurring revenue offers better insight into the business. This metric is expected to climb 22% to $4.9 billion. It’s a key measure for subscription-based software companies.

Bouncing Back From Software Crisis

The company continues recovering from its July 2024 incident. A defective software update crashed 8.5 million Windows systems globally. Each device required manual repairs due to the nature of the bug.

Shares dropped 11% on the day of the outage. The decline extended through August with the stock losing 36% total value.

Management responded with aggressive customer retention efforts. Free products and services were distributed widely. New safeguards were put in place to prevent future incidents.

Growth rates have declined from the 100% levels seen in 2019. The pace has stabilized around 20% annually. That’s still robust for a company at this scale.

Delta Air Lines filed a lawsuit related to the outage. This represents the primary legal risk facing the business.

Stock Price Raises Questions

The recovery has been dramatic since August 2024. Shares have jumped more than 130% from that bottom.

This surge created valuation concerns. The stock now trades at 77 times projected free-cash-flow-per-share over the next year. Industry peers trade at 40 times the same metric.

The company rarely misses revenue targets. Over two years, it missed just once. Average beats come in at 1.4% above estimates.

Last quarter showed a 1.7% revenue beat with $1.17 billion in sales. Year-over-year growth hit 21.3%.

Analyst estimates have remained steady recently. Forecasts haven’t changed meaningfully over 30 days. This indicates expectations for stable business conditions.

Sector Performance Mixed

Other cybersecurity companies showed varied results recently. Varonis Systems grew revenue 9.1% but missed estimates by 2.7%. Qualys beat forecasts by 2.2% with 10.4% growth.

The cybersecurity sector has struggled lately. Shares are down 5.2% on average over the past month. CrowdStrike has fallen 8.3% in that timeframe.

The stock currently trades around $506.51. Analysts maintain a consensus price target of $533.26. That suggests potential upside of roughly 5% from current levels.

The company has beaten revenue expectations in seven of its last eight quarters. Management’s full-year guidance exceeded analyst projections last quarter. EBITDA results also topped estimates.

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