Revenue, profitability and margin
The company posted revenue of $1.23 billion in the third quarter, slightly above analysts' consensus. Although the year-on-year growth of 22.2% represents a slowdown compared to the peak values of recent years, it is still an above-average fast pace by the standards of the software sector.
Profitability was also a positive surprise. Non-GAAP EPS of $0.96 beat estimates and adjusted operating profit was $264.6 million, representing a margin of 21.4%. Interestingly, while the adjusted metrics are improving, the official operating margin remained the same as last year – at -5.6%. However, CrowdStrike continues to excel at generating cash, with the FCF margin stable at 24%, which is an extremely solid level for a growth firm.
ARR is growing again
Annual Recurring Revenue (ARR) rose to $4.92 billion, again above expectations. The year-on-year growth of 22.5% reflects a healthy influx of new customers and the expansion of contracts for existing ones. ARR is an explicit advantage of CrowdStrike – it's a metric pillar of its business that gives investors a high degree of earnings predictability.
Moreover, strong ARR dynamics show that cybersecurity is among the industries that maintain demand regardless of macroeconomic cycles. At a time of growing threats and the expansion of cloud infrastructure, customers rely more than ever on long-term contracts.
Outlook remains stable
CrowdStrike also provided a fourth-quarter revenue outlook of $1.30 billion, which is in line with market expectations. More important, however, is the adjusted full-year EPS forecast – the company raised the midpoint to $3.71, an increase of about 1.4%. Even a small adjustment is a positive sign in this context, as CrowdStrike is known for its conservative guidance. [1]
Why does CrowdStrike remain so attractive?
The company became especially famous in 2020, when its analysts uncovered a large-scale cyberespionage attack on SolarWinds. Today, the Falcon platform is one of the most comprehensive cloud ecosystems for cyber protection – from endpoints to identity to cloud workload protection.
Cyber threats are becoming more sophisticated, businesses are migrating to the cloud, and regulatory security requirements are constantly increasing. This creates an environment in which demand does not decline even during economic slowdowns – which also explains CrowdStrike's stable valuation, which is based on predictability and high recurring return.
[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which is subject to change. Such statements are not a guarantee of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.
Resources:
https://ir.crowdstrike.com/static-files/1e06e0bb-28f0-4b12-a2f7-1b808c4c665a
https://ir.crowdstrike.com/static-files/e2c7859c-37d2-4581-a7e3-e1ed5ce545da
