Due to a shift from profit to loss and Q3 revenue guidance falling short of expectations, CrowdStrike dropped nearly 8% in after-hours trading | Earnings Report Insights
Despite the fact that the cybersecurity technology company CrowdStrike's core performance in the second quarter generally exceeded market expectations, with new ARR reaching a historical high and the company also raising its full-year adjusted profit forecast, the revenue guidance for the third quarter was slightly below Wall Street expectations. Additionally, the company is still digesting the customer and cost pressures brought about by the 2024 outage incident, leading to a nearly 8% intraday drop in stock price after the earnings report was released. Analysts are focused on whether the future subscription revenue growth momentum is sufficient to support its long-term goals
CrowdStrike announced its financial results on Wednesday, showing that despite exceeding analysts' expectations for key performance metrics in the second quarter, it turned from profit to loss, and the revenue guidance for the third quarter was slightly below market expectations. The market remains focused on how the company will address the costs incurred from the global computer failures caused last year. As a result, the company's stock price fell nearly 8% in after-hours trading on Wednesday.
Here are the key points from CrowdStrike's second-quarter financial report:
Key Financial Data:
Revenue: Total revenue reached $1.17 billion, a year-on-year increase of 21%, exceeding analysts' expectations of $1.15 billion, compared to $963.9 million in the same period last year.
Subscription Service Revenue: $1 billion, a year-on-year increase of 20%, compared to $918.3 million in the same period last year.
Annual Recurring Revenue (ARR): As of July 31, 2025, ARR grew by 20% year-on-year to $4.66 billion, with new ARR of $221.1 million, setting a quarterly record.
Subscription Gross Margin: 77% under GAAP, slightly down from 78% in the same period last year; 80% under non-GAAP, compared to 81% in the same period last year.
Operating Income/Loss:
- GAAP operating loss was $113 million, compared to an operating profit of $13.7 million in the same period last year.
- Non-GAAP operating profit reached a record high of $255 million, compared to $241.1 million in the same period last year.
Net Income/Loss:
- GAAP net loss was $77.7 million, compared to a net profit of $47 million in the same period last year. GAAP net loss per share was $0.31, compared to a net profit per share of $0.19 in the same period last year.
- Non-GAAP net profit reached a record $237.4 million, compared to $221.6 million in the same period last year. Non-GAAP net profit per share was $0.93, exceeding analysts' expectations of $0.83, compared to $0.88 in the same period last year.
Cash Flow: Net cash inflow from operating activities was $332.8 million, compared to $326.6 million in the same period last year. Free cash flow was $283.6 million, compared to $272.2 million in the same period last year.
Cash and Cash Equivalents: As of July 31, 2025, the balance was a record $4.97 billion.
Performance Guidance:
Third Quarter Revenue: Expected to be between $1.208 billion and $1.218 billion, slightly below the market consensus expectation of $1.23 billion.
Full Year Revenue: Expected to be between $4.75 billion and $4.806 billion, an increase from the previous lower limit of $4.74 billion.
Third Quarter Profit: Non-GAAP operating profit is expected to reach $256 million to $262 million, and non-GAAP net profit is expected to be between $238.1 million and $242.8 million. The corresponding non-GAAP diluted earnings per share is expected to be between $0.93 and $0.95, higher than analysts' expectations of $0.91
Full Year Profit: The full-year non-GAAP operating profit is expected to reach between $1.00 billion and $1.04 billion, with non-GAAP net profit ranging from $922 million to $954 million. The expected non-GAAP diluted earnings per share is between $3.60 and $3.72, an increase from the previous expectation of $3.44 to $3.56.
The company also stated that starting from the second quarter of fiscal year 2026, CrowdStrike will lower its long-term non-GAAP tax rate from 22.5% to 21.0%, a change related to the passage of the "One Big Beautiful Bill Act."
CrowdStrike Chief Financial Officer Burt Podbere commented:
“We exceeded expectations on all key metrics in the second quarter, achieving a 21% year-over-year total revenue growth, with operating cash flow reaching a new high of $333 million in Q2, and free cash flow also setting a record of $284 million. Our excellent execution and business momentum have strengthened our confidence in accelerated ARR growth in the second half of fiscal year 2026.”
Due to poor performance guidance, CrowdStrike's stock price fell nearly 8% in after-hours trading, before narrowing the decline to about 2.6%.
Subscription Revenue Growth in the Second Half Will Be Key
Media reports indicate that this is CrowdStrike's fifth earnings report since the global Windows system crash in July 2024. An update at that time caused widespread disruptions across nearly all industries. As part of the announcement on Wednesday, the company revealed plans to acquire Onum, a company known as a "pioneer in real-time telemetry data pipeline management."
In June of this year, when CrowdStrike announced its second-quarter revenue expectations, the data also fell short of market expectations, leading to a drop in stock price. At that time, the company stated that revenue was still affected by an incentive program aimed at retaining customers impacted by the outage—an incident that led to thousands of flight cancellations, bank system failures, and hospitals being forced to postpone medical procedures. This incentive program has now ended.
Analysts point out that as CrowdStrike works to overcome the ongoing costs of the outage and seeks more customers, investors will focus on the growth rate of subscription revenue in the second half of the year.
In May of this year, CrowdStrike announced layoffs of about 500 employees to achieve its goal of reaching $10 billion in annual recurring revenue. The company estimated that this round of layoffs would incur costs of approximately $36 million to $53 million, mainly including severance pay, employee benefits, and related costs.
Although Microsoft remains the highest-grossing cybersecurity company globally, analysts believe that both CrowdStrike and its competitor Palo Alto Networks are well-positioned to benefit from large enterprises' continued investment in cybersecurity, while the increase in AI-driven attacks may also create new demand Matt Hedberg, Managing Director of the Software Division at RBC Capital Markets, stated in an email:
"We still believe that integrated platform vendors outperform those relying on point solutions in the cybersecurity space."
George Kurtz, Founder and CEO of CrowdStrike, stated:
"CrowdStrike's performance in Q2 further confirms CrowdStrike's leadership position in the cybersecurity integration space. Artificial intelligence is reshaping the way businesses operate, and CrowdStrike enables organizations to confidently embrace the AI future, whether in development or deployment, from the cloud to the endpoint, and from human operation to intelligent agents."
