CrowdStrike announced lower-than-expected revenue forecasts for Q2 on Tuesday, pointing to a slowdown in government and corporate spending on cybersecurity. Following the announcement, its shares fell 5.7% in after-hours trading.
Despite increased cyber threats and a resurgence of ransomware attacks, demand for security solutions is suffering from the tense economic climate. Persistently high interest rates and stubborn inflation have led many customers to tighten their technology budgets, affecting the growth of companies such as CrowdStrike.
In April, broker William Blair had already warned that cost-cutting measures by the federal agency responsible for government efficiency could weigh on the sector's outlook in 2025. The firm cited a more challenging contracting environment at all levels of the US government. Customs tariffs and macroeconomic uncertainties are also likely to influence customers' investment decisions.
CrowdStrike also faces stiff competition, particularly from Palo Alto Networks and Fortinet.
However, Joseph Gallo, the analyst who tracks the stock at Jefferies, remains confident: "Despite a slight disappointment in annual recurring revenue and net income from ordinary operations, we are confident in CrowdStrike's market position, which should lead to an acceleration in new annual recurring net revenue in the second half of 2026. We expect 22% year-over-year growth in NBI for fiscal 2026 and believe upside remains possible."
During its post-results conference call, the company said its free cash flow in Q2 would be impacted by approximately $29m due to an outage and related costs.
In Q1, CrowdStrike generated revenue of $1.10bn, in line with expectations from analysts surveyed by LSEG. Adjusted EPS came in at 73 cents, compared with 79 cents a year earlier.
For Q2, the company anticipates revenue of between $1.14bn and $1.15bn, compared with consensus estimates of $1.16bn.
The board of directors also approved a share buyback program of up to $1bn on Tuesday.
