CrowdStrike hit by weak forecast, US government request for information

Nearly a year after CrowdStrike’s botched cybersecurity update crippled airlines, banks and hospitals for hours, the company is still reeling from the fallout. Its shares fell more than 5% in afternoon trading. The program ended in the fourth quarter but continues to weigh on subscription growth, as it let customers pick more products or extend usage. The incentives reduced first-quarter revenue by about $11 million and will have a $10 million to $15 million impact each quarter for the rest of the fiscal year.

The outlook underscores the lingering impact of the Windows outage that hurt CrowdStrike’s brand and triggered lawsuits, including one from Delta seeking compensation for canceled flights.

Still, CrowdStrike’s shares have advanced more than 40% this year, after a 34% gain in 2024. That has given it a lofty valuation, with shares trading at 123.69 times forward earnings estimates, compared with Palo Alto Networks’ 54.01.

The steep valuation left little room for any “unexpected slip-ups”, said Russ Mould, investment director at AJ Bell.

“Momentum stocks like CrowdStrike need to generate positive earnings surprises to maintain their upward share price trajectory.”

CrowdStrike was on track on lose nearly $6 billion from its market value of about $122 billion. The company reported a first-quarter loss on Tuesday, compared with a year-ago profit.

But several analysts said efforts to repair its reputation and attract clients in the competitive industry were working.

At least 23 brokerages have raised price targets after its in-line first-quarter revenue and better-than-expected adjusted profit per share.

“We believe CrowdStrike is taking share from other vendors across their product offerings,” Truist Securities said.