By Adam Levine

CrowdStrike Holdings' reported mixed first-quarter earnings results on Tuesday afternoon. Its shares were falling in after-hours trading.

CrowdStrike's adjusted earnings-per-share came in at 73 cents versus Wall Street's consensus estimate of 66 cents, according to FactSet, and down from 93 cents last year. Revenue for the quarter reached $1.10 billion, just below expectations of $1.11 billion, and up 20% on the year.

CrowdStrike stock was down 6.3% in late trading following the release.

This is breaking news. Read a preview of Crowdstrike's earnings below and check back for more analysis soon.

When CrowdStrike Holdings reports its first-quarter earnings on Tuesday afternoon, it will be looking to show continued strength after a bug in a software update by the information security provider disabled 8.5 million Windows PCs in July.

An equally important area to watch is the company's transition from a cash-strapped, fast-growing business to one that expands less rapidly but has mounting cash holdings, creating the potential for eventual stock buybacks.

The outage, starting on July 19, was likely the largest information technology outage ever. For some customers, the problem wasn't fully fixed for a week. The stock fell 36% over the next 11 trading sessions.

CrowdStrike booked $60 million in direct costs from the incident in fiscal 2025, which ended in January, but that was offset by $39 million in insurance recoveries. It has told investors it expects another $73 million in direct costs in the first quarter, plus $43 million in discounts to retain customers.

Several affected parties, including Delta Air Lines, have sued the company. How much that will cost, and how much of the expense insurance will cover, isn't known.

But the stock's close on Aug. 2 was the nadir. Customers didn't flee the company en masse, and revenue continued to grow at a double-digit rate. The stock is now up 40% since the day before the incident.

Now, CrowdStrike is making the shift from a mid-stage software company into a late-stage one. Growth rates are moderating year by year, but cash is also piling up, hitting $4.3 billion at the end of January, up 28% from the year before.

For the first quarter, Wall Street analysts are expecting to see revenue grow by 19.9%. Adjusted EPS is seen declining to 66 cents from 93 cents due to the costs of the incident and new research and development into Crowdstrike's AI assistant. Charlotte AI, as the tool is called, can take simple conversational commands from security engineers and automate a series of complex tasks from them.

Now that the stock has more than recovered, CrowdStrike is once again among the most richly valued software companies, selling for 23 times the per-share sales expected for the next 12 months. That compares with nine times for the iShares Expanded Tech-Software Sector ETF, where CrowdStrike is the ninth-largest holding.

Cloud software has a unique business model. Continued growth requires high investments into sales and marketing, typically the largest expense for these companies. About half of Crowdstrike's operating expenses were sales and marketing in fiscal 2025.

Most of these companies operate at a loss under generally accepted accounting principles -- the total was $17 million on revenue of $4 billion in fiscal 2025 for CrowdStrike -- and they make up for it by paying for a substantial portion of payroll with shares. Last year, about a quarter of CrowdStrike operating expenses were for stock-based compensation.

The result of that is a rising share count that dilutes shareholders. The share count has risen by an average of 3% over the past four years. With cash rising, investors may start putting pressure on CrowdStrike to begin buybacks to counteract the expanding share count.

Corrections & Amplifications

CrowdStrike finished January with $4.3 billion in cash on its balance sheet. A earlier version of this article had an incorrect figure.

Write to Adam Levine at adam.levine@barrons.com

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June 03, 2025 16:13 ET (20:13 GMT)

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