CrowdStrike (CRWD) Up 13.9% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for CrowdStrike Holdings (CRWD). Shares have added about 13.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CrowdStrike due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
CRWD Q2 Earnings Beat Estimates on ARR and Falcon Flex Strength
CrowdStrike reported non-GAAP earnings of 31 cents per share for the second quarter of fiscal 2027, surpassing the Zacks Consensus Estimate by 6.9%. The bottom line increased 34.8% year over year.
Revenues of $1.47 billion beat the consensus estimate by 2.2% and increased 25.8% year over year. Record net new annual recurring revenue (ARR), with accelerating Falcon Flex adoption and AI-security demand, supported the quarter.
CRWD's Subscription Growth Drives Top Line
Subscription revenues increased 27% year over year to $1.4 billion. Professional services revenues rose 7% to $70.61 million.
Management said international revenue growth accelerated for the fifth consecutive quarter. The geographic revenue mix was approximately 65% from the United States and 35% from international markets.
CrowdStrike's ARR and Flex Momentum Builds
Ending ARR reached $5.84 billion, up more than 25% year over year. Net new ARR hit a record $333 million and increased 51% from the year-ago period. New-logo net new ARR also reached an all-time high, while dollar-based gross and net retention improved sequentially.
Falcon Flex remained a major expansion engine. Ending ARR from Flex accounts surpassed $2.29 billion, up 101% year over year. The company had more than 2,900 Flex customers and over 630 customers that had re-Flexed as of quarter-end. Customers converting from standard subscriptions to Flex delivered an average ending ARR uplift of more than 40%.
CRWD's AI Security Portfolio Expands
Cloud Security ending ARR exceeded $905 million and grew more than 29% year over year. Next-Gen SIEM ending ARR surpassed $695 million, up more than 60%, while Next-Gen Identity exceeded $585 million and grew more than 33%. Together, these businesses generated record second-quarter net new ARR.
AI Detection and Response, or AIDR, also gained traction, with ending ARR nearly tripling sequentially. CrowdStrike said customers are increasingly deploying AI while seeking visibility, data protection and identity controls around AI agents. Subscription customer adoption reached 51% for six or more modules, 35% for seven or more and 26% for eight or more.
CrowdStrike's Profitability Improves
Non-GAAP subscription gross profit increased 28.4% year over year to $1.14 billion. The corresponding margin expanded to 81% from 80%. Total non-GAAP gross margin was 79% compared with 78% a year earlier.
Non-GAAP operating income surged 45.8% to $371.65 million, while the operating margin expanded to 25% from 22%. Non-GAAP sales and marketing expenses rose 13.3% to $412.87 million, research and development expenses increased 31.1% to $284.79 million, and general and administrative expenses grew 24% to $87.89 million.
CRWD's Cash Generation Remains Strong
Cash and cash equivalents totaled $5.01 billion as of July 31, 2026.
CrowdStrike generated $530.3 million in cash from operations, up 59.3% year over year. Free cash flow increased 33.1% to $377.4 million and represented 26% of revenues.
CrowdStrike Raises Fiscal 2027 Outlook
For the third quarter of fiscal 2027, CRWD expects revenues between $1.52 billion and $1.53 billion. ARR is projected between $6.184 billion and $6.188 billion, while non-GAAP earnings are expected to be approximately 31 cents per share.
For fiscal 2027, revenues are now projected between $5.991 billion and $6.011 billion, with ARR of $6.603 billion to $6.612 billion. Non-GAAP earnings per share are expected between $1.25 and $1.26. Management raised its full-year net new ARR growth outlook by 630 basis points to 34% at the midpoint, supported by record pipeline and continued Falcon Flex momentum.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -93.51% due to these changes.
VGM Scores
At this time, CrowdStrike has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock has a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise CrowdStrike has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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This article originally published on Zacks Investment Research (zacks.com).
