CrowdStrike drops as revenue growth fails to impress investors despite AI push
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June 4 : CrowdStrike shares slid 11 per cent in Thursday's premarket trading after the cybersecurity firm's annual recurring revenue (ARR) growth failed to impress investors expecting a boost from AI investments.
The stock had rallied 60 per cent in May.
CrowdStrike's ARR grew 22 per cent year-over-year to $4.44 billion, of which $193.8 million of net new ARR was added in the first quarter.
Morgan Stanley analysts said the sell-off was due to "relatively skinnier net new ARR beat this quarter and elevated expectations following the stock's 60 per cent move over the last month."
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Cybersecurity providers such as Crowdstrike and Palo Alto have benefited from enterprises' increased spending on AI-driven cybersecurity products, even as fears of AI disruption to the wider software industry lingers.
Shares of Palo Alto fell nearly 3 per cent.
CrowdStrike has leant heavily into AI, launching new offerings such as Falcon Data Security and Charlotte AI AgentWorks Ecosystem, a no-code platform developed with AWS, Nvidia, and OpenAI.
The firm's heavy AI investments reflected in higher quarterly total operating expenses, which jumped 15 per cent to $1.07 billion, compared with $934.3 million a year earlier.
In contrast, Palo Alto raised its annual profit forecast earlier this week on strong cybersecurity demand.
Despite the short-term blip, analysts were optimistic about CrowdStrike's long-term growth.
"While near-term expectations may have been a bit elevated following the recent rally, we continue to see room for further multiple expansion... as investors gain confidence in the durability of accelerating ARR growth through FY27," Morgan Stanley added.
CrowdStrike currently trades at 137.81 times its estimated earnings for the next 12 months, compared with 68.91 times for Palo Alto and 31.03 times for Okta, according to LSEG data.
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