CrowdStrike Faces Earnings Amid Software Slump, Will It Buck the Trend?

CrowdStrike, a leading cybersecurity stock, is set to report earnings and may end the software stock slump. Despite a 22% year-to-date gain, the stock has faced headwinds since mid-July, dropping on 21 of the last 33 trading sessions. Snowflake will also report earnings later this week. Bulls argue that the fund is retesting a prior double bottom breakout, but a worst-case scenario could see the ETF slide through $100 toward $90.

CrowdStrike Holdings (CRWD) is poised to report its earnings today, which could be pivotal in shaping the sentiment around the cybersecurity stock. The company has seen its stock pull back almost 20% from recent highs, yet it has also traded 20% higher than its opening price in 2025. With earnings expected to come in at $0.83 per share, a drop from $1.04 year-over-year, investors are closely watching key metrics such as ARR growth, customer acquisition costs, and subscription gross margin [1].

CrowdStrike's most recent quarter presented a compelling narrative of growth and strategic execution. The company reported a robust net new Annual Recurring Revenue (ARR) of $194 million, exceeding expectations and propelling total ARR to $4.44 billion, a commendable 22% year-over-year increase [1]. The Falcon platform remains the central engine of growth, with the FalconFlex model adding $774 million in total account value, representing a significant 31% sequential growth and a more than six-fold increase year-over-year. Subscription gross margin remained exceptionally strong at 80%, and free cash flow reached $279 million, representing 25% of revenue [1].

Further bolstering investor confidence, CrowdStrike's management signaled confidence in the company's trajectory by authorizing a share repurchase program of up to $1 billion. This move is designed to return value to shareholders and underscores the company's commitment to enhancing shareholder returns [1]. The repurchase program is a sign that the company believes its shares are undervalued.

However, the high valuation of CrowdStrike, increasing competition from established players and emerging startups, and the potential for commoditization in the cybersecurity market warrant a cautious approach [1]. The company's dependence on the Falcon platform for growth creates a concentration risk, and the risk of security breaches or outages could damage the company's reputation and customer trust.

In the broader tech sector, software companies are feeling the pain from AI tools that can write and develop code, sending shares in those companies into a slump. Shares in software giant Salesforce (CRM) are down 26% this year, while Adobe (ADBE) shares are down 19% and Atlassian (TEAM) shares are down 30% [2]. The rise of "agentic AI" or AI tools that can operate without supervision is opening the door for companies to cut back on the traditional Software as a Service (SaaS) rental model, potentially threatening established software firms' seat count or number of subscriptions [2].

Despite the challenges, some analysts believe that software companies will find a way to adapt and prosper in this changing environment. Salesforce, for example, has its own AI agent tool called "agentforce" [2]. The jury is still out on whether AI will truly replace SaaS, but the volatility in the tech sector is likely to continue as the industry adjusts to this new paradigm [2].

CrowdStrike stands at an interesting point. The company's strong fundamentals and strategic initiatives provide a solid foundation for future growth. However, the high valuation, increasing competition, and inherent volatility of the cybersecurity market warrant a cautious approach. Investors will be closely watching the earnings report to gauge the company's trajectory and the broader impact on the cybersecurity sector.

References:
[1] https://www.asktraders.com/analysis/crowdstrikes-stock-crwd-looking-for-direction-as-earnings-cast-shadow-what-next/
[2] https://finance.yahoo.com/news/software-shares-doldrums-blame-ai-090043685.html