CrowdStrike Holdings, Inc. (CRWD) reported impressive non-GAAP earnings of $1.04 per share for the second quarter of fiscal 2025, surpassing the Zacks Consensus Estimate of 98 cents and outperforming management’s own guidance of 98-99 cents. This marked a significant improvement from the 74 cents reported in the same period last year. The robust bottom-line performance was driven primarily by increased revenues and effective cost management.
CrowdStrike’s fiscal second-quarter revenue reached $963.9 million, representing a 32% year-over-year increase and surpassing the consensus mark of $958.58 million. The top line also exceeded the company’s guidance of $958.3-$961.2 million. This robust growth was fueled by the strong adoption of the Falcon platform and successful sales execution. The Falcon platform’s ability to consolidate cybersecurity functions at scale has made it a highly sought-after solution in the market. The platform’s value has been further enhanced by the expansion of available modules, particularly in cloud, Identity, and Falcon Next-Gen SIEM modules, leading to increased adoption.
Despite the strong second-quarter performance, CrowdStrike lowered its guidance for fiscal 2025. This revision was attributed to several factors, including an extended sales cycle and a planned delay in most outbound pipeline generation activities for several weeks following a global IT outage incident on July 19. Since the incident, the stock has plummeted by 23%, underperforming the Zacks Internet – Software industry’s growth of 4.6%. Given the lowered guidance, CrowdStrike’s share price is expected to remain under pressure in the near term.
On the revenue front, subscription revenues, representing 95.3% of total revenues, soared 33% year over year to $918.3 million. Professional services revenues, accounting for 4.7% of total revenues, grew 9.5% year over year to $45.6 million. As of July 31, 2024, annual recurring revenues (ARR) reached $3.86 billion, marking a 32% year-over-year increase. The company added $217.6 million to its net new ARR during the quarter. CrowdStrike’s subscription customers using five or more cloud modules accounted for 65% of total subscription customers, while those adopting six or more cloud modules represented 45%. Notably, 29% of subscription customers were using seven or more cloud modules as of July 31, 2024.
CrowdStrike’s non-GAAP gross profit surged 33% to $756 million in the second quarter, up from $568.2 million in the same period last year. The non-GAAP gross margin remained stable at 78%. This robust performance was attributed to the company’s ability to maintain stable pricing, driven by the exceptional customer value delivered by its Falcon platform, and ongoing investments in data center and workload optimization. The non-GAAP subscription gross profit jumped 34.5% year over year to $740.5 million, with the gross margin increasing 100 basis points to 81%. In contrast, non-GAAP professional gross profit declined 13% to $15.5 million, while the gross margin decreased 900 basis points to 34% year over year.
Total non-GAAP operating expenses increased 23% to $529.2 million in the quarter, up from $412.5 million in the year-ago period. However, as a percentage of revenues, non-GAAP operating expenses decreased to 55% from 56% in the previous year. Non-GAAP sales and marketing (S&M) expenses soared 27.4% year over year to $294.3 million. Non-GAAP research and development (R&D) expenses climbed 31.4% year over year to $174 million. Non-GAAP general and administrative (G&A) expenses rose 24% year over year to $61 million. S&M and G&A expenses contracted by 100 basis points each as a percentage of revenues, while R&D expenses remained flat at 18%. The non-GAAP operating income surged 46% to $226.8 million, driven primarily by higher revenues. The non-GAAP operating margin for the quarter improved 300 basis points year over year to 24%, benefiting from a higher gross margin and lower operating expenses as a percentage of revenues.
As of July 31, 2024, CrowdStrike held $4.04 billion in cash and cash equivalents and a long-term debt of $743.2 million. During the second quarter, CRWD generated $327 million in operating cash flow and $272 million in free cash flow.
CrowdStrike has provided guidance for the fiscal third quarter and revised projections for fiscal 2025. For the third quarter, the company anticipates revenues between $979.2 million and $984.7 million, with non-GAAP operating income expected in the range of $166.7-$170.8 million. Non-GAAP net income is forecasted between $201.2-$205.2 million, leading to expected non-GAAP earnings per share between 80-81 cents. The consensus mark for fiscal third-quarter revenues and non-GAAP earnings is pegged at $958.6 million and 98 cents per share, respectively.
For fiscal 2025, CRWD now expects revenues between $3,890 million and $3,902.2 million, down from the previously projected range of $3,976.3-$4,010.7 million. The updated non-GAAP operating income for fiscal 2025 is now projected between $774.7-$783.9 million compared with the previously guided range of $890.1-$916.5 million. The company now expects non-GAAP net income between $908.8-$918.0 million compared with the previous guidance of $985.6-$1,012 million. Non-GAAP earnings are now anticipated between $3.61-$3.65, down from the previous guidance range of $3.93-$4.03. The consensus mark for fiscal 2025 revenues and non-GAAP earnings is pegged at $3.97 billion and $3.92 cents per share, respectively.
Currently, CRWD carries a Zacks Rank #5 (Strong Sell). Investors may consider exploring better-ranked stocks in the broader technology sector, such as Aspen Technology (AZPN), Celestica (CLS), and Arista Networks (ANET), each currently sporting a Zacks Rank #1 (Strong Buy).
