CrowdStrike Q4 - Strong numbers, slow outlook

When markets are jittery they tend to overreact to news. On Tuesday night, Crowdstrike reported stronger-than-expected numbers for their past quarter but marginally missed profit expectations for the year ahead. As a result, the stock closed down 6.4% yesterday.

Revenue for the quarter was up 25%, with the more sticky and important ARR (annual recurring revenue) up 23% to $4.2 billion. The company forecasts that it will have $10 billion in ARR by 2031. Very solid growth, that's what we like to see.

A big contributing factor to the adjusted outlook is the concessions they gave to key customers after their global outage in July last year. They agreed to give longer free trials, or offer complementary bolt-on packages, or do some discounted work. These distortions should work their way out of the numbers after this year.

CrowdStrike handled that outage very well, considering that it could have been a company-sinking event. Instead, customers chose to stick with them, thanks to their market-leading products and best-in-class customer service. There was no better test of the sticking power of future contracts and revenue, and it is why we back management to more than double sales in the next five years.

Crowdstrike is a higher-risk holding, as displayed by the volatility in its share price. It is one of our "future hero" stocks, so we only initiate smaller positions for our more risk-tolerant clients.