Q2 2025 Summary
Published Jan 10, 2025, 5:10 PM UTC- Customers continue to favor CrowdStrike for platform consolidation, preferring integrated solutions over disparate products. They view CrowdStrike as a key consolidator in the market and are interested in adopting multiple modules.
- CrowdStrike's hypergrowth modules, including identity protection, cloud security, and next-gen SIEM, have collectively surpassed $1 billion in Annual Recurring Revenue (ARR), demonstrating strong growth vectors. The company remains committed to reaching $10 billion in ARR by the end of fiscal year 2031.
- The Falcon Flex subscription model has generated over $700 million in deal value within a year and is becoming a primary go-to-market strategy. It facilitates greater platform adoption and is expected to enhance future renewals and growth.
- Extended Impact on Revenue Growth Due to July 19 Incident: CrowdStrike expects the July 19 incident to have a diminishing but ongoing negative impact on revenue growth over the next several quarters, with net new ARR and subscription revenue estimated to be reduced by approximately $60 million in the second half of fiscal year 2025. This extended impact could slow overall growth and delay the acceleration of the business until the back half of next year.
- Potential Hesitation from Customers on Module Upsells: Competitors claim that customers may be hesitant to "put all their eggs in one basket" after the incident, potentially impacting CrowdStrike's ability to upsell additional modules to existing customers, which historically has been a significant driver of growth (about two-thirds of their growth). Any slowdown in module adoption could adversely affect the company's expansion strategy and revenue.
- Possible Need for Architectural Changes Due to Microsoft Kernel Access Policies: Concerns have been raised about whether CrowdStrike may need to rearchitect its Falcon agent due to potential limitations on kernel access imposed by Microsoft or customers following the outage. If significant architectural changes are required, this could divert resources from future innovation and potentially impact product efficacy.
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Impact of Customer Commitment Packages
Q: How do customer commitment packages affect guidance?
A: Burt Podbere explained that the customer commitment packages are the biggest impact on revenue guidance, leading to a $60 million reduction in the back half of the year, with $30 million in Q3 and $30 million in Q4. This is due to delays in pipeline generation, longer sales cycles, and muted upsell values resulting from the outage incident. -
Business Acceleration Outlook
Q: When will business growth re-accelerate?
A: Burt Podbere stated that the impact of the outage has a half-life, diminishing over time. The hardest quarters will be Q3 and Q4, but they expect to see an acceleration in the business in the back half of next year as conditions normalize and the seeding strategy with customers takes effect. -
Customer Reactions and Module Adoption
Q: Are customers still buying more modules post-outage?
A: George Kurtz emphasized that customers remain committed to CrowdStrike, expressing confidence and wanting to "do more" with them. They are not moving away from consolidation but continue to adopt more modules, focusing on the benefits of an integrated platform over a patchwork of products. -
Falcon Flex as Growth Driver
Q: Is Falcon Flex now the main sales approach?
A: George Kurtz confirmed that Falcon Flex has become one of the primary go-to-market mechanisms, allowing customers flexible consumption of the entire product portfolio. This approach meets customer demand for easier procurement and fosters broader adoption, which is expected to benefit renewal cycles and future growth. -
$10 Billion ARR Target
Q: Has the $10 billion ARR timeline changed?
A: Burt Podbere reaffirmed their commitment to reaching $10 billion in ARR by the end of 2031, despite the incident causing some delays. The company sees multiple growth vectors and a massive total addressable market, maintaining confidence in their long-term goals. -
Competitive Dynamics Post-Outage
Q: How has competition been affected?
A: George Kurtz mentioned that despite market noise and competitors' misinformation, customers have responded positively, appreciating CrowdStrike's transparency and wanting to deepen their relationship. They continue to win against competitors, including securing next-gen SIEM projects. -
Renewal Risks and Timing
Q: Is there risk to renewals due to the outage?
A: Burt Podbere acknowledged that while Q4 is typically their highest quarter for renewals, the impact of the outage will lessen over time. He expects customers to continue renewing as they focus on the long-term benefits of CrowdStrike's platform. -
Federal Sector Momentum
Q: How is federal business performing post-outage?
A: George Kurtz stated that Q3 is their significant federal quarter, and they are seeing good momentum with no significant slowdown due to the outage. They have strong relationships and continue to win deals, recognizing that federal opportunities are long-term. -
Guidance Methodology
Q: How did you adjust your guidance after the outage?
A: Burt Podbere explained that they took a prudent approach, factoring in the impacts of the customer commitment packages on revenue and operating income. The guidance reflects consistent application of their methodology, considering the delays and challenges following the incident. -
Seeding Strategy with Customers
Q: Are you giving away modules as a seeding strategy?
A: George Kurtz indicated that while they aim to do the right thing for customers, expanding module usage is beneficial. The customer commitment packages may involve concessions, but they view this as an investment that will lead to greater adoption and long-term growth.