Should Investors Buy, Sell, or Hold CrowdStrike Ahead of Q2 Earnings?

CrowdStrike Holdings (CRWD) has long been a darling of the cybersecurity sector, celebrated for its AI-native platform and relentless innovation. As the company prepares to report Q2 earnings, investors face a critical question: Should they buy, sell, or hold shares in this high-flying stock? The answer hinges on a nuanced evaluation of its growth momentum, valuation concerns, and strategic positioning in a rapidly evolving market.

Growth Momentum: Strong, but With Caveats

CrowdStrike's first-quarter fiscal 2026 results underscore its enduring growth engine. Revenue hit $1.10 billion, up 20% year-over-year, while Annual Recurring Revenue (ARR) surged 22% to $4.44 billion. Subscription revenue, the lifeblood of SaaS businesses, grew in lockstep. These figures reflect robust customer retention and cross-selling of modules, with 67% of customers now adopting five or more Falcon platform modules.

However, profitability remains a mixed bag. GAAP net loss widened to $110.2 million, driven by costs from the July 2024 Falcon outage and strategic investments. Non-GAAP net income, at $184.7 million, fell slightly from the prior year. The disconnect between GAAP and non-GAAP metrics highlights CrowdStrike's focus on reinvestment over short-term profitability—a strategy that has fueled growth but raises questions about margin sustainability.

Free cash flow, at $279.4 million, remains a bright spot, up from $239.8 million in Q4 2024. The company's $1 billion share repurchase authorization further signals confidence in its ability to generate capital. Yet, with 79% of costs allocated to R&D and sales, margins remain under pressure.

Valuation: A Premium Priced for the Future

CrowdStrike's valuation metrics are staggering. As of Q3 2025, its EV/EBITDA ratio stood at 606.58x, dwarfing the Software industry median of 14.29x. Its forward P/E ratio of 121.95x and P/S ratio of 25.48x also far exceed those of peers like Fortinet (P/S 6.13) and Palo Alto Networks (P/S 15.35). These multiples reflect investor optimism about CrowdStrike's AI-driven cybersecurity vision but also expose the stock to volatility if growth slows.

The company's EBITDA has grown from $101 million in 2020 to $2,107 million in 2025, a 27% CAGR, yet its P/E ratio remains “At Loss” due to negative GAAP earnings. This disconnect is common in high-growth SaaS firms but introduces risk for investors seeking near-term returns.

Strategic Innovations: Leading the AI Security Charge

CrowdStrike's competitive edge lies in its ability to anticipate and address emerging threats. Recent innovations like AI Model Scanning and the AI Security Dashboard position it as a leader in securing AI workloads, a $250 billion TAM by 2029. These tools proactively detect adversarial manipulations in AI models and provide real-time visibility into shadow AI deployments—critical as enterprises rush to adopt generative AI.

The company's expansion into cloud data protection (Falcon Data Protection for Cloud) and SaaS threat detection further broadens its attack surface. By integrating eBPF technology and dynamic Just-in-Time access controls, CrowdStrike is addressing pain points in hybrid and multi-cloud environments. Its recognition as a Gartner Leader in Endpoint Protection Platforms and CNAPP underscores its market credibility.

Yet, challenges loom. The July 2024 Falcon outage—a rare operational misstep—highlighted vulnerabilities in its cloud-native model. Competitors like Microsoft and emerging AI-focused startups are also closing the gap, particularly in identity and cloud security.

Investment Thesis: Buy, Sell, or Hold?

For long-term investors, CrowdStrike's strategic innovations and growth trajectory justify holding or even buying. Its leadership in AI-native security and expanding TAM provide a durable moat. The $1 billion share repurchase program also adds value, signaling management's confidence in the stock's intrinsic worth.

However, the valuation is a double-edged sword. At 25x P/S and 600x EV/EBITDA, the stock is priced for perfection. Any shortfall in Q2 guidance—whether from slower ARR growth, margin compression, or macroeconomic headwinds—could trigger a sharp correction. Conservative investors might prefer to wait for a pullback or consider undervalued peers like Fortinet, which trades at a 12x P/S and 15x EV/EBITDA.

Conclusion

CrowdStrike remains a compelling story for those who believe in its ability to redefine cybersecurity through AI and cloud-native solutions. Its Q2 earnings will be a litmus test: Strong results could validate the premium valuation, while a miss might force a reevaluation. For now, hold is the prudent call for most investors, with a watchful eye on execution risks and macroeconomic shifts. If the company can maintain its growth cadence and address operational hiccups, the long-term outlook remains bullish—but patience is key in this high-stakes game.