CrowdStrike Q4 Earnings: Strong Growth Overshadowed by Weak Guidance as Cyber Giant Recovers from Major Outage

CrowdStrike's latest earnings report tells a tale of two companies: one celebrating impressive current growth and another facing a skeptical Wall Street concerned about future performance. The cybersecurity powerhouse released its fourth quarter and fiscal year 2025 financial results on March 4, revealing a company that continues to expand rapidly while still dealing with the aftermath of last summer's catastrophic IT outage. Despite beating analyst expectations with $1.06 billion in quarterly revenue (up 25% year-over-year) and non-GAAP earnings of $1.03 per share, CrowdStrike's stock tumbled approximately 9% in after-hours trading. The culprit? Forward guidance that fell significantly short of what analysts were hoping to see.

Financial Performance: Revenue Soars While Profits Send Mixed Signals

📈 Total revenue reached $1.06 billion, exceeding analyst expectations and marking a 25% year-over-year increase

💰 Annual Recurring Revenue (ARR) grew 23% to reach $4.24 billion, with $224.3 million in net new ARR added during Q4

📊 Non-GAAP EPS of $1.03 significantly beat analyst expectations of $0.86, while GAAP results showed a net loss

CrowdStrike delivered impressive revenue growth in its most recent quarter, with total revenue reaching $1.06 billion, marking a 25% increase compared to the same period last year. This performance exceeded analyst expectations, who had projected revenue of approximately $1.03 billion. For the full fiscal year 2025, CrowdStrike achieved total revenue of $3.95 billion, representing a robust 29% year-over-year increase.

The company's subscription revenue, which forms the core of its business model, grew at an even faster pace, reaching $1.01 billion for the quarter (a 27% year-over-year increase) and $3.76 billion for the full year (a 31% increase). Annual Recurring Revenue (ARR), the lifeblood of subscription-based businesses, grew 23% year-over-year to reach $4.24 billion as of January 31, 2025.

From an earnings perspective, CrowdStrike reported a non-GAAP earnings per share (EPS) of $1.03 for the fourth quarter, significantly exceeding analyst expectations of $0.86. However, on a GAAP basis, the company recorded a net loss of $92.3 million ($0.37 per share), compared to a net income of $53.7 million ($0.22 per share) in the same quarter of the previous year. This substantial difference between GAAP and non-GAAP results largely reflected tax expenses related to acquisitions and costs associated with the company's response to the major IT outage that occurred in July 2024.

Market Reaction: Wall Street Throws Cold Water on CrowdStrike's Party

📉 Stock dropped approximately 9% despite strong quarterly results due to disappointing forward guidance

🔮 FY2026 earnings guidance of $3.33-$3.45 per share fell far short of the $4.42 expected by analysts

💼 Revenue guidance of $4.74-$4.81 billion (20-22% growth) aligned better with market expectations

Despite the strong quarterly results, CrowdStrike's stock dropped approximately 9% in after-hours trading following the earnings announcement. This negative market reaction was primarily attributed to the company's disappointing forward guidance. For fiscal year 2026, CrowdStrike projected earnings to range between $3.33 and $3.45 per share (excluding certain items), which fell significantly short of the $4.42 per share expected by analysts surveyed by LSEG. For the first quarter of fiscal 2026, the company forecasted earnings between $0.64 and $0.66 per share, well below the consensus estimate of $0.95.

In terms of revenue guidance, CrowdStrike's outlook was more aligned with market expectations. The company projected fiscal year 2026 revenue to be between $4.744 billion and $4.805 billion, representing a growth rate of 20% to 22%. This revenue forecast was generally in line with analyst expectations of approximately $4.77 billion. However, the weaker earnings guidance overshadowed the revenue outlook, contributing to the stock's decline.

Wall Street analysts might be wondering if CrowdStrike's cybersecurity platform is better at protecting against threats than the company is at forecasting its own earnings! Sometimes it seems like predicting cyber attacks is easier than predicting Wall Street's reaction to an earnings report.

Cash Flow and Financial Health: A Money-Making Machine

💵 Record full-year operating cash flow of $1.38 billion and free cash flow of $1.07 billion (27% of revenue)

💪 Strong balance sheet with $4.32 billion in cash and cash equivalents

🏦 Q4 generated $345.7 million in operating cash flow and $239.8 million in free cash flow

CrowdStrike demonstrated exceptional cash flow generation capabilities throughout fiscal year 2025. The company achieved record full-year operating cash flow of $1.38 billion and record full-year free cash flow of $1.07 billion, representing 27% of total revenue. For the fourth quarter specifically, net cash generated from operations was $345.7 million, with free cash flow of $239.8 million. These strong cash flow metrics underscored the fundamental financial health of CrowdStrike's business model and its ability to convert revenue into cash.

The company maintained a robust balance sheet, with cash and cash equivalents totaling $4.32 billion as of January 31, 2025. This substantial cash position provides CrowdStrike with significant financial flexibility to pursue strategic investments, acquisitions, and other growth initiatives while navigating any potential challenges in the cybersecurity landscape.

Growth Drivers: Cloud Security and Flexible Subscriptions Lead the Way

☁️ Cloud security division grew 45% in Q4, with ARR exceeding $600 million

🔄 Falcon Flex subscription model reached $1.5 billion in total deal values, up 80% quarter-over-quarter

🏆 First cybersecurity vendor to surpass $1 billion in deal value on AWS Marketplace in a single year

CrowdStrike's cloud security division emerged as a particularly strong growth driver, experiencing a 45% increase in the fourth quarter, with ARR exceeding $600 million. The combined ARR for cloud security, identity protection, and next-generation Security Information and Event Management (SIEM) surpassed $1.3 billion, marking a nearly 15% increase from the previous year. These impressive growth figures highlighted CrowdStrike's successful expansion beyond its core endpoint protection offerings into adjacent cybersecurity markets.

The company's Falcon Flex subscription model gained significant traction during the quarter, with total deal values reaching $1.5 billion, reflecting an impressive 80% quarter-over-quarter growth. This flexible subscription approach has proven instrumental in accelerating platform adoption and driving larger deal sizes. As CFO Burt Podbere noted during the earnings call, the success of the Falcon Flex program, combined with strong customer retention, gives the company confidence in "future net new ARR reacceleration as products are deployed, one-time discounts expire, and contracts are upsized and renewed."

Another notable achievement during the fiscal year was CrowdStrike becoming the first independent software vendor in the cybersecurity sector to surpass $1 billion in deal value on the AWS Marketplace within a single calendar year. This milestone underscored the company's strong position within cloud ecosystems and its ability to leverage major cloud platforms as distribution channels.

Recovery from IT Outage: The Comeback Story

🔧 Successfully completed customer commitment program in Q4 following last summer's major IT outage

🤝 Approximately $80 million in ARR value provided to customers through commitment packages

🌱 Most customers chose additional products rather than extended services, indicating strong long-term trust

The earnings report came approximately eight months after a significant global IT outage caused by a problematic technology update from CrowdStrike. This incident, which affected flight operations, disrupted various businesses, and led to multiple class action lawsuits, presented a major challenge for the company. During the earnings call, CEO George Kurtz referred to CrowdStrike as a "comeback story," expressing pride in the engagement with customers, partners, and prospects throughout what had been a challenging year.

In response to the outage, CrowdStrike implemented a customer commitment program, which was successfully completed in the fourth quarter. The ARR value of customer commitment packages provided in Q4 was approximately $56 million, bringing the estimated value for the fiscal year to approximately $80 million. Notably, the majority of deals that closed with customer commitment packages included additional product or flex dollars rather than extended time and professional services, which management viewed as a positive indicator of customers' trust in their long-term partnership with CrowdStrike.

If there's one thing CrowdStrike learned from their outage, it's that when your software accidentally turns off millions of computers worldwide, you better have a really good apology gift basket ready! Fortunately for them, their customers seem to be accepting the peace offerings.

Customer Metrics: Growth and Retention Remain Strong

🌐 Customer base expanded to over 74,000 organizations, growing more than 30% year-over-year

🔒 Maintained strong gross dollar retention rate of 97% despite the IT outage challenges

📈 Total contract value surged to $6 billion, representing substantial growth of 40% year-over-year

CrowdStrike's customer base expanded significantly during fiscal year 2025, with the company now serving over 74,000 organizations, reflecting a growth rate exceeding 30% year-over-year. The company maintained a strong gross dollar retention rate of 97%, indicating high customer satisfaction and limited churn despite the challenges presented by the IT outage.

Total contract value surged to $6 billion, representing substantial growth of 40% year-over-year. This metric, which captures the full value of customer commitments, suggested increasing deal sizes and longer contract durations, both of which are positive indicators for CrowdStrike's future revenue stability and growth potential.

Future Strategy: Betting Big on AI

🤖 Emphasized AI-native cybersecurity platform as key differentiator moving forward

🎯 Maintained confidence in reaching $10 billion ARR target and fiscal year 2029 financial model

🔍 Multiple large growth opportunities identified despite near-term challenges

Throughout the earnings announcement, CrowdStrike emphasized the growing importance of artificial intelligence in cybersecurity. CEO George Kurtz highlighted this strategic focus, stating, "As businesses of all sizes rapidly adopt AI, stopping the breach necessitates cybersecurity's AI-native platform." This emphasis on AI-native capabilities reflected CrowdStrike's recognition of the evolving cybersecurity landscape and its commitment to leveraging advanced technologies to maintain its competitive edge.

Looking ahead, management expressed confidence in the company's ability to achieve its target financial model by fiscal year 2029 and deliver long-term profitable growth. The company's strong customer retention, accelerating module adoption, and multiple large growth opportunities were cited as fundamental strengths supporting this outlook, despite the near-term challenges reflected in the weaker-than-expected earnings guidance.

The Bottom Line: Short-Term Pain, Long-Term Gain?

CrowdStrike's fourth quarter and fiscal year 2025 earnings report presented a mixed picture, with strong current performance offset by disappointing forward guidance. While the company delivered impressive revenue growth, ARR expansion, and cash flow generation, the weaker-than-expected earnings outlook triggered a significant stock decline.

The report highlighted CrowdStrike's ongoing recovery from last year's major IT outage and its strategic focus on cloud security, identity protection, and AI-driven cybersecurity solutions. Despite the near-term challenges, the company's fundamental business metrics, expanding customer base, and strategic positioning in high-growth cybersecurity segments suggested potential for continued success in the long term, albeit with more modest growth expectations for the coming fiscal year.

The key question for investors remains: is this merely a temporary growth slowdown as CrowdStrike digests its rapid expansion and outage recovery, or are there deeper structural challenges in maintaining its historical growth trajectory? Either way, CrowdStrike's dominant position in the cybersecurity landscape and its continued innovation in critical areas like cloud security and AI suggest the company remains well-positioned to capitalize on the ever-expanding need for advanced cybersecurity solutions.