As Annual Recurring Revenue Accelerates, Is CrowdStrike a Buy?
Key Points
- CrowdStrike's annual recurring revenue growth has been accelerating.
- However, the stock is pricey, even after a modest pullback this year.
CrowdStrike (NASDAQ: CRWD) continues to regain its momentum, as its annual recurring revenue (ARR) growth once again reaccelerated in its fiscal fourth quarter. However, despite the cybersecurity company's improving performance, the stock is still down for the year.
With growth accelerating, let's see if now is a good time to buy Crowdstrike stock.
Accelerating growth
CrowdStrike delivered another strong quarter, as its net new ARR jumped 47% to $331 million and total ARR increased 24% to $5.25 billion. ARR is the annualized value of its high-gross-margin subscriptions and doesn't include its professional services revenue.
Revenue, meanwhile, rose 23% to $1.31 billion, while subscription revenue also climbed 23% to $1.24 billion. CrowdStrike's adjusted earnings per share (EPS) surged 38% to $1.12.
After several quarters in which year-over-year revenue and ARR growth slowed, CrowdStrike reversed the trend in the last two earnings reports.
Metric | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | Q1 FY26 | Q2 FY26 | Q3 FY26 | Q4 FY26 |
|---|---|---|---|---|---|---|---|---|---|
Revenue growth | 33% | 33% | 32% | 29% | 25% | 20% | 21% | 22% | 23% |
Subscription revenue growth | 33% | 34% | 33% | 31% | 27% | 20% | 20% | 21% | 23% |
ARR growth | 34% | 33% | 32% | 27% | 23% | 22% | 20% | 23% | 24% |
Data source: CrowdStrike earnings reports. CrowdStrike's fiscal year ends Jan. 31.
The company's Falcon Flex licensing model, which lets customers access its entire cybersecurity product portfolio while paying only for deployed modules, has been a growth driver. It added more than 350 new Falcon Flex customers in the quarter, while it saw 380 customers Re-Flex. The average Falcon Flex customer has an ARR of more than $1 million, and it has seen a 26% ARR lift when customers Re-Flex.
Its next-gen SIEM (security information and event management), cloud security, and identity businesses combined grew 45% to $1.9 billion in ARR. Next-gen SIEM ARR climbed 75% to $585 million, while cloud security ARR jumped 35% to $800 million. Identity ARR was up 34% to $520 million. Meanwhile, it said half of its customers now use six or more of its modules.
Looking ahead, CrowdStrike guided for fiscal 2027 revenue in a range from $5.868 billion to $5.928 billion (22% to 23% growth) and adjusted EPS guidance between $4.78 and $4.90. ARR is projected to growth 23% to 24% to $6.466 billion to $6.516 billion. For its fiscal first quarter, the company forecasted adjusted EPS of $1.06 to $1.07 on revenue of $1.36 billion to $1.364 billion.
Image source: Getty Images
Is the stock a buy?
CrowdStrike looks positioned to be a nice AI winner, and its Falcon Flex licensing model is proving to be a difference maker in helping grow its next-gen cybersecurity solutions. Revenue growth has been accelerating, and it has strong momentum.
However, at a forward price-to-sales (P/S) multiple of about 17 times analysts' estimates, the stock is simply too expensive in my view, even after a modest pullback. As such, I'd remain on the sidelines for now.
