CrowdStrike sinks after issuing brutal guidance worse than any analyst expected

Shares of cybersecurity software maker CrowdStrike slipped 6% in after-hours trading following the release of the company’s fourth-quarter earnings report.

The report itself was strong: CrowdStrike saw a 25% spike in revenue to $1.06 billion for the quarter, subscription revenue climbed 27% to just over $1 billion, and annual recurring revenue rose 23% to $4.24 billion. 

The reason for the sell-off likely has to do with CrowdStrike’s Q1 and full-year guidance, both of which missed expectations by a lot.

Management’s Q1 guidance calls for earnings per share between $0.64 and $0.66; the consensus estimate was $0.96 and the low forecast among analysts polled by Bloomberg was $0.84!

CrowdStrike’s operating expenses rose to nearly $3.1 billion on the year, up from $2.3 billion in the year prior. At a 33% growth rate, expenses are rising faster than revenue, which rose 29% annually.  

The report caps a wild year for CrowdStrike. The company’s shares plunged by more than a third in the weeks following its July software glitch that caused thousands of canceled flights, computer crashes, and hospital system glitches across the world. The so-called “largest IT outage ever” cost Fortune 500 companies more than $5 billion. 

CrowdStrike reported another $21 million in costs related to the July incident in its report, bringing the annual total to $60 million.

CrowdStrike appears to be on the road to recovery from the outage. By the end of January, its market cap had more than recovered the $30 billion lost amid its botched update. Shares were up around 12% year to date prior to its earnings report, despite having dipped in late Februrary following news that the DOJ and SEC were investigating one of its contracts with the IRS.