CrowdStrike Holdings, Inc. reported its financial results for the third quarter of 2024. The cybersecurity company posted total revenue of $1,010,178,000, a significant increase from $786,014,000 in the same quarter last year.
Subscription services made up 95% of the revenue, while professional services accounted for the remaining 5%. The cost of revenue for the quarter was $255,087,000, which is 25% of the total revenue. This increase was mainly due to higher employee-related expenses and cloud hosting costs.
The gross profit was $755,091,000, with a gross margin of 75%. However, operating expenses increased substantially to $810,814,000 from $587,847,000 in the previous year. Sales and marketing expenses saw a 43% increase, reaching $408,267,000.
As a result, CrowdStrike reported a net loss of $16,819,000 for the quarter, compared to a net income of $26,669,000 in the prior year. The company generated $1,036,005,000 from operating activities, while investing and financing activities used $211,569,000 and $60,822,000, respectively. As of October 31, 2024, CrowdStrike had a working capital of $2,572,947,000.
CrowdStrike’s financial challenges increase
The company continues to focus on expanding its customer base and improving its Falcon platform. The filing also mentioned legal proceedings related to the July 19 Incident, which caused system crashes for some customers and led to significant costs.
CrowdStrike acknowledged risks associated with reliance on third-party data centers and potential geopolitical tensions affecting operations. The company does not expect to pay cash dividends to common stockholders in the near future. Despite the impressive revenue growth, CrowdStrike’s stock fell 5.6% to $343.41 after the earnings report.
Investors expressed concerns about the outlook for the January quarter, particularly regarding annual recurring revenue (ARR). Total ARR in Q3 grew by 27% to $4.02 billion, slightly above analysts’ expectations. Analysts noted ongoing challenges, such as headwinds from customer commitment packages and the impact of the July global IT outage caused by a faulty software update.
This incident has led to delays in signing contracts and expectations of price discounts from customers renewing contracts. CrowdStrike faces intense competition in the cybersecurity sector from companies like Palo Alto Networks and SentinelOne. The company is expanding its capabilities with a comprehensive cybersecurity platform called XDR (extended detection and response).
In summary, while CrowdStrike’s recent performance has been strong, concerns about future ARR and the long-term impact of the IT outage have created a more cautious outlook among investors and analysts.