Sam Badawi
CrowdStrike: Is the Growth Story Cracking?
3/7/2025, 9:41:33 PM
Economic Summary
- CrowdStrike (CRWD) reported FY25 Q4 revenue of $1.06B and ended the year with ~$4.24B in ARR, up ~23% year over year, with subscription revenue dominating and subscription gross margins around 77% (80% non-GAAP).
- GAAP results showed a net loss of $92.3M and operating loss of $85.3M, while free cash flow was roughly $240M and cash & equivalents totaled about $4.32B, giving the company balance-sheet optionality.
- Management expects margin expansion and re-acceleration of free cash flow in the second half of fiscal 2026, targeting subscription gross margin 82–85% and free cash flow margin 34–38%.
- Product metrics show strong multi-module adoption (67% growth in clients with 5+ modules; 21% with 8+), but dollar-based net retention has declined to ~112% and gross retention to ~97%, likely tied to last July outage and customer package changes.
- CrowdStrike positions across multiple security segments (endpoint, identity, log/CM) against competitors like Microsoft, Palo Alto, Fortinet, Okta, SentinelOne, and expands toward data protection and log management with high-growth subsegments (e.g., CM at 115% YoY).
- Valuation context: stock referenced trading near ~$385 (speaker), previously as low as under $200 post-outage and as high as ~$455; multiples discussed around 20–24x EV/NTM revenue, implying sensitivity to growth/profitability re-acceleration.
Bullish
- Massive TAM (company cites ~$116B in 2025, $250B by 2029) with large addressable opportunity.
- Market leader in endpoint protection with sticky multi-module adoption and land-and-expand model.
- Strong recurring subscription revenue, high subscription gross margins (~77–80%), and sizable cash balance.
Bearish
- Net dollar retention fell to 112%, signaling weaker upsells and possible churn pressure.
- GAAP net loss and EPS miss indicate near-term profitability and execution headwinds.
- High valuation (20–24x EV/NTM revenue historically) risks multiple contraction.
- Competition from large incumbents (notably Microsoft) could limit TAM capture in identity.
Bullish tickers
CRWD
Bearish tickers
CRWDMSFT
CRWD
6 price targets
150200270350385455
Bullish
Market leader in endpoint protection with large TAM, sticky multi-module adoption, strong ARR growth, and healthy cash generation potential.
Bearish
EPS miss, GAAP losses, declining net retention, and rich multiples create downside risk near-term.
MSFT
Bullish
Large incumbent with integrated security ecosystem that pressures competitors on identity and platform adoption.
Bearish
Microsoft's Defender and security ecosystem competes in identity and platform spaces, limiting rival TAM.
PANW
Bullish
Leader in network/platform security; a competitive alternative to some CrowdStrike use cases.
Bearish
Less focused on endpoint, more platform-centric, not a direct one-to-one challenger in endpoint dominance.
FTNT
Bullish
Well-established network security vendor with broad enterprise footprint.
Bearish
Competes in networking/security segments; may pressure pricing in some enterprise deals.
ZS
Bullish
Cloud security specialist that competes in complementary security segments.
Bearish
Focused on cloud networking/security; different specialty than endpoint.
OKTA
Bullish
Leading identity provider; relevant competitive peer in identity/security stacks.
Bearish
Identity market is commoditized and fiercely competitive, limiting outsized growth for identity specialists.
CYBR
Bullish
Established identity security vendor with focused product set.
Bearish
Competes in identity and privileged access; faces strong competition from larger players.
DDOG
Bullish
Observability and log management leader; large SaaS peer in monitoring/data.
Bearish
CrowdStrike's move into log/CM encroaches on Datadog's territory, increasing competition.
SUMO
Bullish
Historically focused on log management and analytics; a peer in data monitoring.
Bearish
Smaller log-management/observability players face pressure from cloud-native entrants and platform expansions.
NEWR
Bullish
New Relic competes in monitoring/observability spaces relevant to CrowdStrike expansion.
Bearish
Observability competitors may lose share as larger security vendors expand into logging.
S
Bullish
Fast-growing endpoint competitor with SMB traction; potential to capture share in certain segments.
Bearish
SentinelOne targets SMB and some enterprise, representing competitive pressure at lower price points.
RUBRIK
Bullish
Representative of backup/data protection peers that occupy adjacent TAMs.
Bearish
Rubrik (backup segment) is distinct; unclear public ticker/valuation risk for direct comparison.
TREND MICRO
Bullish
Longstanding security vendor with presence across endpoint and platform security markets.
Bearish
Regional and legacy players may be less competitive against cloud-native leaders.
People mentioned
George KurtzBert Perdue