CrowdStrike Stock Plunges Nearly 19 Percent As Sales Outlook Falls Short

CEO George Kurtz blames ‘macroecomomic headwinds’ for ARR woes, but remains confident in long-term growth.

Shares of CrowdStrike plummeted by nearly 19 percent in after-hour trading Tuesday after the cybersecurity giant signaled revenue may fall below expectations next quarter due to “macroeconomic headwinds.”

The Austin, Texas-based CrowdStrike announced Tuesday quarterly numbers that would be the envy of most other companies, particularly many tech firms that are now laying off employees across the nation.

CrowdStrike reported its fiscal third-quarter revenues were up year-over-year by about 53 percent, to $581 million, compared to the same quarter last fiscal year.

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Meanwhile, the company saw record cash flow of $243 million and record free cash flow of $174 million. CrowdStrike reported numerous other impressive third-quarter numbers, ultimately driven by high corporate and governmental demand for security solutions amid a spike in sophisticated cyberattacks around the world.

But George Kurtz, CEO of CrowdStrike, also announced problems with the firm’s annual recurring revenue, saying that “total net new ARR was below our expectations” for the quarter.

“Increased macroeconomic headwinds elongated sales cycles with smaller customers and caused some larger customers to pursue multi-phase subscription start dates, which delays ARR recognition until future quarters,” he said.

He said the same macroeconomic trends should push down its ARR in the fourth quarter.

That was all traders needed to hear. Kurtz hadn’t even finished his introductory remarks in a conference call Tuesday afternoon when his firm’s share prices began to tank in after-hour trading.

CrowdStrike’s shares finished daytime trading at $138. But the stock started to plunge minutes after the start of CrowdStrike’s conference call at 5 p.m. ET.

As of early this evening, CrowdStrike’s share price was down 18.66 percent to $112 per share in after-hours trading.

“CrowdStrike delivered a mixed quarter as ARR came in slightly below expectations and a smaller revenue beat,” RBC Capital analyst Matthew Hedberg said in a note to clients, as reported by Investor’s Business Daily.

“Management noted the macroeconomic impact to ARR seeing elongated sales cycles with smaller customers and some larger customers pursuing multi-phased subscription start dates, which delays ARR recognition to future quarters.”

Both Kurtz and Burt Podbere, CrowdStrike’s CFO, expressed confidence that their firm’s long-term prospects remain extremely bright due to the strong demand for security products.

“There are many positive trends we see in our business, including strong competitive win rates, consistent and exceptional retention rates, and the mission critical nature of cybersecurity,” Kurtz said.

He added that CrowdStrike is “still in the early innings” of it long-term growth and he expressed optimism that strong demand for his company’s products will continue into next year.

“While the cybersecurity market is not immune to macro pressures, it is a mission critical technology,” he said. “The inherent demand remains strong. … The landscape remains favorable to us.”