CrowdStrike reported record results in several key metrics during the second quarter, following robust earnings from rivals like Palo Alto Networks that indicate enterprise spending on cybersecurity remains strong in face of high inflation and rising interest rates.
CrowdStrike reported non-GAAP earnings of $85.9 million or 36 cents a share during the second fiscal quarter ended July 31, which beat consensus estimates of 28 cents a share.
Revenue rose 58% to $535 million, compared with $337.7 million in the year-ago quarter.
The company reported a record annual run rate of $218 million and reported a record of 1,741 net new subscription customers during the quarter.
“We continue to see strong demand even as organizations responded to macroeconomic conditions,” CEO, President and Co-Founder George Kurtz told Wall Street analysts Tuesday on the quarterly conference call.
The economic conditions led to deals requiring additional levels of corporate approval “as companies evaluated investment priorities,” which in some cases could delay the close of agreements, Kurtz said.
But, he said, cybersecurity is not a discretionary line item.
“Cybersecurity is a priority for CIOs, CEOs and CFOs and boards of directors,” Kurtz said. However, he emphasized companies want “fewer point products, fewer agents and technologies that consume fewer resources,” and organizations need to reduce complexity and simplify operations in their IT and security stacks.
CrowdStrike is raising its forecast to between $569.1 million and $575.9 million for the fiscal third quarter and between $2.22 billion and $2.23 billion for the fiscal year.
CrowdStrike said it is seeing increased strength in the public sector, with new business wins from federal and international government contracts. The company also won a deal with New York State, which is putting its new Joint Security Operations Center exclusively under Falcon EDR. This will be used to protect New York City and local counties under a shared service model.
CrowdStrike is not alone in its strong earnings report. Palo Alto Networks last week reported non-GAAP net income of $254.1 million, or $2.39 a share during the fiscal fourth-quarter ended July 31, compared with $161.9 million or $1.60 per share in the year-ago quarter.
Fiscal fourth-quarter revenue rose 27% to $1.6 billion from a year ago. Palo Alto Networks also raised its revenue guidance for the first fiscal quarter and fiscal year 2023.
Regarding the impact of the macro economy, Palo Alto Networks Chairman and CEO Nikesh Arora said, “in the last year, we arguably saw the most challenging supply chain conditions the technology industry has ever seen.”
The company does expect conditions to eventually ease. Some customers are extending the life of hardware, however the vast majority of its customers are continuing to invest in transformational projects, despite short-term macro impacts.
Gartner said the major trends impacting IT spending are stronger, longer and/or deeper due to Russia's invasion of Ukraine and the resulting sanctions. However, inflationary concerns and a possible recession have shortened planning horizons and overall spending growth in 2022 has fallen to 3% from 4% in Gartner’s most recent update.
“Gartner believes that cybersecurity will hold up better than many other segments in IT in a recessionary environment given the challenging threat landscape (i.e. ransomware), cloud services adoption and and the continuing digital business transformation by enterprises,” Frank Marsala, VP analyst at Gartner said via email.
