CrowdStrike (NASDAQ:CRWD) Beats Q1 Sales Targets But Stock Drops

Adam Hejl /
2023/05/31 4:14 pm EDT

Cybersecurity company CrowdStrike (NASDAQ:CRWD) reported Q1 FY2024 results topping analyst expectations, with revenue up 42% year on year to $692.6 million. The company expects that next quarter's revenue would be around $722.3 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. CrowdStrike made a GAAP profit of $499 thousand, improving on its loss of $30.4 million, in the same quarter last year.

Is now the time to buy CrowdStrike? Access our full analysis of the earnings results here, it's free.

CrowdStrike (CRWD) Q1 FY2024 Highlights:

  • Revenue: $692.6 million vs analyst estimates of $676.2 million (2.42% beat)
  • EPS (non-GAAP): $0.57 vs analyst estimates of $0.50 (13.7% beat)
  • Revenue guidance for Q2 2024 is $722.3 million at the midpoint, above analyst estimates of $718.6 million
  • The company lifted revenue guidance for the full year, from $2.98 billion to $3.02 billion at the midpoint, a 1.13% increase
  • Free cash flow of $227.4 million, roughly flat from previous quarter
  • Gross Margin (GAAP): 75.6%, up from 74% same quarter last year

“CrowdStrike's first quarter results exceeded our guided metrics and reached new financial milestones, delivering the winning combination of growth, profitability and free cash flow at scale,” said George Kurtz, CrowdStrike’s president, chief executive officer and co-founder.

Founded by George Kurtz, the former CTO of the antivirus company McAfee, CrowdStrike (NASDAQ:CRWD) provides cybersecurity software that protects companies from breaches and helps them detect and respond to cyber attacks.

Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks. As the volume of internet enabled devices grows, every device that employees use to connect to business networks represents a potential risk. Endpoint security software enables businesses to protect devices (endpoints) that employees use for work purposes either on a network or in the cloud from cyber threats.

Sales Growth

As you can see below, CrowdStrike's revenue growth has been exceptional over the last two years, growing from quarterly revenue of $302.8 million in Q1 FY2022, to $692.6 million.

CrowdStrike Total Revenue

And unsurprisingly, this was another great quarter for CrowdStrike with revenue up 42% year on year. Quarter on quarter the revenue increased by $55.2 million in Q1, which was in line with Q4 2023. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

Guidance for the next quarter indicates CrowdStrike is expecting revenue to grow 35% year on year to $722.3 million, slowing down from the 58.5% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 30.7% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Cash Is King

If you have followed StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. CrowdStrike's free cash flow came in at $227.4 million in Q1, up 44.4% year on year.

CrowdStrike Free Cash Flow

CrowdStrike has generated $746.7 million in free cash flow over the last twelve months, an impressive 30.5% of revenues. This robust FCF margin is a result of CrowdStrike asset lite business model, scale advantages, and strong competitive positioning, and provides it the option to return capital to shareholders while still having plenty of cash to invest in the business.

Key Takeaways from CrowdStrike's Q1 Results

Sporting a market capitalization of $37.6 billion, more than $2.93 billion in cash and with positive free cash flow over the last twelve months, we're confident that CrowdStrike has the resources it needs to pursue a high growth business strategy.

We were very impressed by the strong improvements in CrowdStrike’s gross margin this quarter. And we were also excited to see that it outperformed analysts' revenue expectations and delivered very impressive free cash flow. Overall, this quarter's results seemed pretty positive and shareholders could feel optimistic. But the market was likely expecting more and the company is down 10% on the results and currently trades at $144 per share.

Should you invest in CrowdStrike right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.