Why Is CrowdStrike (CRWD) Up 9.8% Since Last Earnings Report?
A month has gone by since the last earnings report for CrowdStrike Holdings (CRWD). Shares have added about 9.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CrowdStrike due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
CrowdStrike Q3 Earnings and Revenues Beat Estimates
CrowdStrike reported third-quarter fiscal 2024 results, wherein both revenues and earnings surpassed the Zacks Consensus Estimate and marked significant year-over-year improvements.
CrowdStrike reported third-quarter fiscal 2024 non-GAAP earnings of 82 cents per share, beating the Zacks Consensus Estimate by 10.8% and jumping 105% year over year.
The company’s fiscal third-quarter revenues of $786 million rose 35% year over year and surpassed the consensus mark by 1.14%.
Subscription revenues (93.3% of the total revenues) jumped 34% year over year to $733.5 million. Professional services revenues (6.7% of the total revenues) rose 56.8% year over year to $52.55 million. Our estimates for the Subscription and Professional Services segments were pegged at $733.2 million and $42.7 million, respectively.
Annual recurring revenues (ARR) increased 35% year over year to $3.15 billion. The company added $223 million to its net new ARR in the reported quarter. Our third-quarter projections for ARR and net new ARR were $3.19 billion and $381.4 million, respectively.
CrowdStrike’s subscription customers, who adopted five or more cloud modules, represented 63% of the total subscription customers, those with six or more cloud modules accounted for 42% and those with seven or more cloud modules represented 26% as of Oct 31, 2023.
Operating Details
CrowdStrike’s non-GAAP gross margin improved 300 basis points (bps) on a year-over-year basis to 78%.
The non-GAAP subscription gross margin expanded 200 bps to 80% on a year-over-year basis. The non-GAAP professional gross margin improved 300 bps to 44%.
Non-GAAP sales and marketing expenses jumped 23.4% year over year to $243.2 million. Non-GAAP research and development expenses surged 31.1% year over year to $142.9 million. Non-GAAP general and administrative expenses increased 17.6% year over year to $50 million.
The non-GAAP operating income was $175.7 million, up 95.8% year over year. The non-GAAP operating margin for the quarter improved 700 bps to 22%.
Balance Sheet & Cash Flow
As of Oct 31, 2023, cash and cash equivalents were $3.17 billion. CrowdStrike had a long-term debt of $742.1 million.
In the fiscal third quarter, CRWD generated operating and free cash flows of $273.5 million and $239 million, respectively.
Updated Fiscal 2024 Guidance
For fiscal 2024, CRWD now expects revenues between $3,046.8 million and $3,050.2 million, up from the previous guidance range of $3,030.7-$3,042.9 million. Non-GAAP earnings are now anticipated in the band of $2.95-$2.96 per share, up from the earlier forecasted range of $2.80-$2.84 per share. The non-GAAP operating income for fiscal 2024 is now projected in the band of $633.6-$636.2 million compared with the earlier guidance range of $601.3-$610.5 million.
For the fiscal fourth quarter, CrowdStrike anticipates revenues between $836.6 and $840.0 million. The non-GAAP operating income is expected in the band of $186.5-$189 million. For the bottom line, the company expects non-GAAP earnings in the range of 81-82 cents per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 73.45% due to these changes.
VGM Scores
At this time, CrowdStrike has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise CrowdStrike has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
CrowdStrike belongs to the Zacks Internet - Software industry. Another stock from the same industry, Zoom Video Communications (ZM), has gained 8.5% over the past month. More than a month has passed since the company reported results for the quarter ended October 2023.
Zoom Video reported revenues of $1.14 billion in the last reported quarter, representing a year-over-year change of +3.2%. EPS of $1.29 for the same period compares with $1.07 a year ago.
For the current quarter, Zoom Video is expected to post earnings of $1.15 per share, indicating a change of -5.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +2.2% over the last 30 days.
Zoom Video has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
CrowdStrike (CRWD) : Free Stock Analysis Report
Zoom Video Communications, Inc. (ZM) : Free Stock Analysis Report
