CrowdStrike's (NASDAQ:CRWD) Q3 Sales Top Estimates But Stock Drops 16.5% On Weak Guidance

Adam Hejl /
2022/11/29 4:11 pm EST

Cybersecurity company CrowdStrike (NASDAQ:CRWD) reported results ahead of analyst expectations in the Q3 FY2023 quarter, with revenue up 52.8% year on year to $580.8 million. However, guidance for the next quarter was less impressive, coming in at $623.6 million at the midpoint, being 1.66% below analyst estimates. CrowdStrike made a GAAP loss of $54.6 million, down on its loss of $50.4 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) Q3 FY2023 Highlights:

  • Revenue: $580.8 million vs analyst estimates of $575 million (1.01% beat)
  • EPS (non-GAAP): $0.40 vs analyst estimates of $0.32 (26.5% beat)
  • Revenue guidance for Q4 2023 is $623.6 million at the midpoint, below analyst estimates of $634.1 million
  • Free cash flow of $174 million, up 28.2% from previous quarter
  • Customers: 21,146, up from 19,686 in previous quarter
  • Gross Margin (GAAP): 72.7%, in line with same quarter last year

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 incredible over the last two years, growing from quarterly revenue of $232.4 million in Q3 FY2021, to $580.8 million.

CrowdStrike Total Revenue

This was another standout quarter with the revenue up a splendid 52.8% year on year. Quarter on quarter the revenue increased by $45.7 million in Q3, which was roughly in line with the Q2 2023 increase. 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 44.6% year on year to $623.6 million, slowing down from the 62.6% 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 40.1% 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.

Customer Growth

You can see below that CrowdStrike reported 21,146 customers at the end of the quarter, an increase of 1,460 on last quarter. That is a fair bit slower customer growth than last quarter but still in line with what we are used to seeing lately, suggesting that the company still has decent sales momentum.

CrowdStrike Customers

Key Takeaways from CrowdStrike's Q3 Results

With a market capitalization of $32.5 billion, more than $2.46 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were impressed by the exceptional revenue growth CrowdStrike delivered this quarter. And we were also happy to see the strong free cash flow. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Overall, it seems to us that this was a complicated quarter for CrowdStrike. The company is down 16.5% on the results and currently trades at $115.24 per share.

CrowdStrike may have had a tough quarter, but does that actually create an opportunity to invest 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.