CrowdStrike (CRWD -4.85%) shares tumbled after the company issued weak profitability guidance for fiscal year 2026 and saw spending from existing customers continue to decelerate. Shares of the cybersecurity company are up less than 6% over the past year as of this writing.
The company’s stock saw a big pullback last summer after a well-publicized outage, but the stock had nicely recovered until this recent sell-off.
Let’s take a closer look at CrowdStrike’s most recent results and guidance to see whether this dip is a good opportunity to buy the stock.
Decelerating revenue growth
The big outage from this summer is still impacting CrowdStrike. While its gross customer retention was 97%, the same as last quarter, net dollar retention growth continued to decelerate, coming in at 112% over the past 12 months. This metric measures how much existing customers are spending with the company over the past year, minus churn.
A number over 100% indicates customers are spending more. However, a year ago, net dollar retention was 119%, while in Q3 it was 115%.
Some of this comes from the company offering customers impacted by the outage customer commitment packages (CCPs), which were offered in 2024 and largely in the form additional modules and Falcon Flex subscriptions. Falcon Flex is a flexible licensing agreement where customers deploy modules only when needed to access its entire portfolio.
However, the CCPs have also be a great marketing tool for Falcon Flex. In the quarter, the company added $1 billion of total account Flex deal value to total $2.5 billion, an 80% sequential increase and a 10 times increase over a year ago. The company said it is ending its CCP program, which it thinks will drive revenue growth in the second half as discounts drop off and companies renew deals.
Overall, CrowdStrike’s revenue climbed 25% to $1.06 billion, which edged past the $1.03 billion analyst consensus as compiled by LSEG. Subscription revenue jumped 27% to $1.01 billion.
CrowdStrike’s Cloud Security, Identity Protection, and Next-Gen SIEM modules continued to show strong growth in the quarter. Meanwhile, it said its new generative artificial intelligence (AI) security analyst, Charlotte, is gaining traction.
Its annual recurring revenue (ARR) increased by 23% to $4.24 billion, as it added $224.3 million in new ARR during the quarter. ARR can be an indication of future revenue growth. This metric has continued to decelerate, although it has been impacted by its use of customer commitment packages.
| Metric | Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 |
|---|---|---|---|---|---|---|
| ARR growth | 35% | 34% | 33% | 32% | 27% | 23% |
Data source: CrowdStrike earnings reports.
The company’s adjusted earnings per share (EPS) rose 8% to $1.03. That was above the adjusted EPS of between $0.84 to $0.86 it had previously forecast.
CrowdStrike continues to generate a lot of cash, with operating cash flow of $345.7 million for the quarter and $1.38 billion for the year. It produced free cash flow of $239.8 million in the quarter and $1.07 billion for year. It ended the year with about $4.32 billion in net cash and short-term investments and $744 million in debt.
CrowdStrike guided for fiscal 2026 revenue of between $4.74 billion and $4.81 billion, representing growth of 20% to 22%. It is looking for adjusted EPS between $3.33 and $3.45. Analysts were looking for adjusted EPS of $4.42 on revenue of $4.77 billion. The big difference in forecast EPS versus estimates appears to be due to upfront investment costs.
For its fiscal first quarter, the company forecast adjusted EPS of $0.64 to $0.66 on revenue of $1.1 billion to $1.11 billion. The EPS was well below the $0.95 consensus.
Image source: Getty Images.
Is it time to buy the dip?
An investment in CrowdStrike really comes down to its revenue growth. The stock is quite pricey trading at a forward price-to-sales (P/S) multiple of just under 19 times fiscal 2026 analyst estimates. At the same time, the company has been seeing a big deceleration in both its ARR and net dollar-based retention. The low 20% growth that CrowdStrike forecast for fiscal 2026 just does not justify its current valuation in my view.
CRWD PS Ratio (Forward) data by YCharts
To like the stock at these levels, investors really need to see revenue reaccelerate in the back half as its customer commitment packages roll off. That’s a possibility, but there isn’t a lot of wiggle room for the company at current valuation levels.
While CrowdStrike is a great company that should do well over the long term, I think the stock still looks overvalued currently even after the pullback. As such, I’d stay on the sidelines.
