AI Arms Race Drives Cyberattacks and Spending, CrowdStrike Raises Guidance

CrowdStrike Holdings Inc. shares rose in pre-market trading Thursday after the cybersecurity company delivered what it called its best quarter ever.

Revenue rose to $1.47 billion, beating analyst expectations of $1.44 billion. Adjusted earnings per share came in at 31 cents, above the consensus estimate of 29 cents.

CrowdStrike also issued third-quarter revenue guidance above Wall Street expectations and raised its fiscal 2027 outlook.

CrowdStrike Raises Full-Year Outlook

CrowdStrike raised its fiscal 2027 revenue forecast to between $5.99 billion and $6.01 billion, up from its prior range of $5.92 billion to $5.96 billion. Analysts had expected $5.93 billion.

The company raised its adjusted earnings per share forecast to between $1.25 and $1.26, up from $1.22 to $1.24. Wall Street had expected $1.23 per share.

CrowdStrike also raised its net new annual recurring revenue guidance by approximately $116 million, to between $1.35 billion and $1.36 billion. The forecast implies growth of roughly 34%, compared with an initial projection of 22.5%.

For the third quarter, CrowdStrike expects revenue of $1.52 billion to $1.53 billion, above expectations of $1.52 billion. The company expects adjusted earnings per share of 31 cents, in line with consensus.

The company expects third-quarter annual recurring revenue of $6.18 billion to $6.19 billion, representing 26% growth. Net new ARR is expected to be between $343 million and $347 million.

CrowdStrike maintained its full-year free cash flow margin forecast of at least 30%.

The company expects its acquisition of XM Cyber technology assets to close in the second half of fiscal 2027. Its outlook does not include any contribution from the deal to fiscal 2027 revenue or ARR.

On the earnings call, Chief Executive Officer George Kurtz described cybersecurity as an "arms race" and said: "AI is driving more cyberattacks. AI is driving more cyber spending."

He said the rapid adoption of AI models and agents is expanding the attack surface, prompting enterprises to accelerate security upgrades and increase spending on the CrowdStrike Falcon platform.

Profitability and Cash Flow Improvement

Adjusted gross margin reached 79%, supported by cloud optimization efforts, while subscription gross margin rose to 81%.

Adjusted operating profit jumped 46% to $372 million. Adjusted operating margin expanded 350 basis points to 25%.

Net new ARR climbed 51% to $333 million, while ending ARR grew more than 25% to $5.84 billion.

Free cash flow grew 33% to a record $377 million, with operating cash flow reaching $530 million.

Subscription revenue grew 27% to $1.4 billion. Professional services revenue reached a record $71 million.

Revenue from global system integrators grew nearly 50%, driven by demand for Next-Gen SIEM and vulnerability management products.

CrowdStrike ended the quarter with $5.01 billion in cash and cash equivalents.

Falcon Flex Growth Accelerates

CrowdStrike said 51% of subscription customers use at least six modules. Approximately 35% use seven or more modules, and 26% use at least eight.

Falcon Flex ARR exceeded $2.29 billion, up 101% year over year. CrowdStrike added more than 935 Falcon Flex accounts during the quarter.

Customers transitioning to Flex recorded average ARR growth of more than 40%. More than 630 existing customers renewed or expanded through Flex, six times the level in the prior-year period.

Customers who renewed through Flex at least twice saw average ARR 53% higher than their initial Flex level. New customer Flex ARR accounted for a record 34% of net new ARR in the second quarter.

Identity ARR grew 34% to more than $585 million. Falcon Shield ARR climbed more than 185%, while privileged account security ARR grew more than 35 times.

Falcon Cloud Security ARR exceeded $905 million, growing more than 29%.

Project QuiltWorks now includes more than 25 partners and has generated a combined contract value pipeline of nearly $400 million.

Kroll migrated the majority of its customers to Falcon through a multi-year Falcon Flex subscription, covering 450,000 endpoints and more than tripling its spending.

Deals closed through cloud marketplaces of Amazon.com Inc., Alphabet Inc., and Microsoft Corp. exceeded $600 million in value, growing more than 30%.

CRWD stock movement: Pre-market trading data Thursday showed CrowdStrike Holdings shares up 8.77% at $205.78.