Why CrowdStrike (CRWD) Commands 3x More Attention Than Peers

Financial professionals can’t take their eyes off CrowdStrike (CRWD). The cybersecurity leader drew over 3,160 searches last quarter, dominating attention compared to Palo Alto Networks’ (PANW) 2,075 searches.

The intense interest isn’t surprising. 

The company is still dealing with the fallout from the July 19th Incident, where a CrowdStrike software update caused widespread system disruptions for customers globally. 

Yet, the company’s latest quarter showed remarkable resilience – delivering 31.35% revenue growth while maintaining a 97% gross retention rate.

As cyber threats escalate and AI reshapes security, CrowdStrike stands out from its peers.

Here’s our analysis of why CrowdStrike will continue to command the spotlight.

CrowdStrike’s Business

CrowdStrike revolutionized endpoint security by building the first cloud-native, AI-powered cybersecurity platform. Today, their Falcon platform protects millions of endpoints across more than 23,000 customers.

The company leverages its massive threat intelligence database and behavioral AI to stop breaches in real-time while providing deep visibility across customer environments. This cloud-native architecture enables rapid deployment, automatic updates, and superior threat detection compared to legacy solutions.

CrowdStrike segments its business into the following areas:

• Subscription (95% of total revenues) – Cloud-based access to the Falcon platform including endpoint security, cloud security, identity protection, and threat intelligence
• Professional Services (5% of total revenues) – Incident response, technical consulting, and training services

In Q3 FY2025, CrowdStrike hit $1.0 billion in quarterly revenue for the first time while maintaining a 97% gross retention rate. The company added a record number of new module adoptions, with 66% of customers now using 5+ modules.

The company’s strategic shift toward larger enterprise deals is paying off. Net new annual recurring revenue grew to $153 million with broad-based demand across endpoint security, cloud security, and identity protection.

Management continues to innovate, recently launching new AI-powered capabilities and expanding into adjacent markets through acquisitions like Bionic and Adaptive Shield.

Crowdstrike’s handling of the July 19th Incident demonstrated both challenges and strengths. 

While the software update disruption impacted customers and near-term financials, CrowdStrike’s rapid response and transparent communication helped retain customer trust. 

The incident cost $33.9 million in Q3, primarily from flexible payment terms and increased sales compensation expenses.

Financials

Source: Stock Analysis

CrowdStrike’s financial profile demonstrates the power of its land-and-expand business model. 

Revenue surged 31.35% year-over-year to $1.0 billion in Q3, maintaining strong momentum despite macro headwinds.

Q3 results include a $33.9 million impact from the July 19th Incident. Management expects a more pronounced impact on Q4 free cash flow due to extended payment terms and timing of expenses. However, the company’s strong cash position and high gross retention rate suggest minimal long-term impact.

More importantly, profitability is inflecting higher. 

Non-GAAP operating margins expanded to 19% while generating $231 million in free cash flow, representing a 23% margin.

The balance sheet remains rock solid with $4.3 billion in cash and no meaningful debt. This provides ample dry powder for continued R&D investment and strategic M&A.

Operating leverage is materializing as gross margins hold steady at 75% while sales efficiency improves. 

The company’s Rule of 51 (growth rate plus free cash flow margin) demonstrates best-in-class unit economics.

Valuation

Source: Seeking Alpha

CrowdStrike trades at 22.5x trailing twelve-month sales, a premium to peers like Palo Alto Networks at 15.1x and Fortinet (FTNT) at 12.7x. However, the company’s superior growth profile and improving profitability metrics justify the premium.

On a PEG ratio basis, CrowdStrike looks reasonably valued at 2.6x forward growth compared to Palo Alto at 2.8x and Zscaler (ZS) at 3.0x. 

The company also trades at a lower EV/EBITDA multiple than most peers on a forward basis.

Growth

Source: Seeking Alpha

CrowdStrike’s 31.4% revenue growth leads the peer group, outpacing Zscaler at 34.1% and Cloudflare (NET) at 30.0%. 

More impressively, the company has maintained a 55.6% revenue CAGR over the past 5 years, demonstrating consistent execution at scale.

Forward estimates suggest 28.7% growth, reflecting continued market share gains and module expansion opportunities. The company’s land-and-expand motion provides strong visibility into future growth.

Profitability

Source: Seeking Alpha

While CrowdStrike’s 75.2% gross margin trails Fortinet’s 79.7%, the company leads peers in cash flow generation with a 32.3% levered free cash flow margin. This compares favorably to Palo Alto at 38.2% and Fortinet at 28.8%.

EBITDA margins are expanding rapidly, growing 2,462% year-over-year as the business achieves greater scale. 

Operating margins should continue improving as revenue growth compounds against a relatively fixed cost base.

Our Opinion 9/10

CrowdStrike earns a 9/10 rating based on its market leadership position, superior growth profile, and rapidly improving profitability metrics. We see limited fallout from the July incident beyond what’s already been reported.

The company’s cloud-native platform and AI capabilities position it well to capitalize on rising cybersecurity spending.

While valuation appears full at current levels, CrowdStrike’s execution and expanding market opportunity justify the premium. 

The company’s ability to maintain industry-leading growth while demonstrating significant operating leverage makes it a core long-term holding in the cybersecurity sector.