CrowdStrike makes case on AI with an excellent quarter — where we stand

CrowdStrike delivered strong quarterly results on Tuesday, beating expectations on all key metrics. Still, the market was undecided on whether AI would be the company's friend or foe. We believe this is old. Revenue in the fiscal fourth quarter rose 23% year over year to $1.305 billion, beating the $1.297 billion consensus estimate compiled by market data provider LSEG. Adjusted earnings per share (EPS) rose to $1.12 in the three months ended Jan. 31, beating estimates of $1.10, according to LSEG. Shares of the cybersecurity provider fell less than 1% in after-hours trading. CRWD 1-Year mountain CrowdStrike 1-year return The bottom line is that for CrowdStrike to trade higher, the market had to see a combination of two things. The first is its continued strong financial performance, which has not disappointed, with a set of clean pace and optimistic forward guidance for the new financial year. The second was the change in the company's narrative. The reason CrowdStrike shares are down 16% this year, along with many other enterprise software companies, is because some investors believe large language models (LLMs), with their rapidly evolving capabilities, will one day replace even the best traditional cybersecurity providers. We are aware of the risks out there, but we are not one of those investors. Instead, we agree with CrowdStrike founder and CEO George Kurtz, who said in the earnings release that "the AI revolution is driving a major growth opportunity for the company" and that "the technology, team, and ecosystem are well positioned to continue winning." During the earnings call, Kurtz reiterated that AI is "driving increased demand" for the company's Falcon platform (a cloud-based AI-powered cybersecurity platform) and has become a "significant accelerator" for the business. “CrowdStrike is an AI adoption accelerator,” Kurtz explained. “Our customers safely and securely use more than 1,800 different AI applications across their endpoints, and this wouldn't be possible without CrowdStrike.” Another point he emphasized was that the adoption of artificial intelligence creates the need for greater cybersecurity. "Every organization using AI needs an independent layer of protection for visibility, compliance, and implementation. As AI adoption increases, CrowdStrike becomes an even greater necessity for these organizations." Why we have this Cybersecurity is a must for companies in the digital age. Led by co-founder and CEO George Kurtz, CrowdStrike is among the best, along with Club member Palo Alto Networks. The company specializes in endpoint protection through its AI-based platform called Falcon. Competitors: Palo Alto Networks, Fortinet, SentinelOne, Microsoft Portfolio weight: 2.57% Last purchase: February 3, 2026 Start date: October 16, 2024 Finally, Kurtz said the company's data moat creates a structural advantage. "Delivering cybersecurity at scale requires more than a prompt. Our global sensors require expert tag telemetry from MDR. [managed detection and response] analysts and elite incident response teams. This is a structural advantage that no LLM provider can replicate. In addition, agency cybersecurity requires in-line prevention and real-time remediation." Masters are not stopping breaches in real time, and when a breach occurs, every second counts. Kurtz made a compelling argument that we agree with, so why can't the rest of the market get behind it? If AI is an accelerator for the industry, then why isn't the quarterly bigger and the guidance even better? The market wants to see the material on the upside. During the Q&A portion of the call, one analyst said AI is for subscription-based businesses. When asked when it would meaningfully hit annual recurring revenue (ARR), a key financial metric, Kurtz's response was that it was happening today, but we left this quarter reiterating our belief that top providers are in a sustained growth mode and remain insulated from broader macro trends, which is why Jim explained at our February Monthly Meeting on Friday that he was waiting to see if the stock moves one step lower before adding to the position again. We reiterate our 1 rating but lower our price target to $500 to reflect pressure on the group's price-to-earnings multiple. This total of $331 million is above analysts' estimates of about $304 million and represents year-over-year growth of about 47%, an opportunity the company discussed during the call. Management said last year that its leadership with these cloud computing providers differentiated it from other cyber companies. Recently, CrowdStrike's Falcon platform was launched on Microsoft Marketplace, allowing customers to redeem their Azure consumption commitment dollars in Falcon. Finally, CrowdStrike finished the quarter with a net retention rate of 115%, unchanged from the fiscal year, and a net retention percentage of over 100%. Overall, management's new fiscal year forecast was ahead of analyst expectations, given the view that some enterprise companies may try their luck with a Masters provider for their security needs, but the first quarter appears roughly in line with estimates for fiscal 2027, with CrowdStrike management expecting revenue of $5.87 billion to $5.93 billion at the midpoint, versus the FactSet consensus estimate of $5.86. billion Adjusted earnings per share are expected to be between $4.78 and $4.90, beating the FactSet consensus estimate of $4.80, which guided for revenue of $1.36 billion to $1.364 billion, above CrowdStrike's consensus estimate of $6.40 billion for the first quarter, ahead of the FactSet consensus estimate of $1.355 billion. slightly higher adjusted earnings per share were guided to $1.07 from $1.06, in line with the FactSet consensus estimate of $1.06, and ARR was guided to $5.504 billion from $5.502 billion, above the FactSet consensus of $5.466 billion (Jim Cramer's Charitable Trust is long CRWD. 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