Shares of CrowdStrike Holdings (CRWD) tumbled roughly 8% in after-hours trading Wednesday, as the market focused on rising expenses tied to artificial intelligence and new product development, overshadowing a quarterly earnings beat and an improved full-year forecast.
The Austin, Texas-based cybersecurity leader reported first-quarter revenue of $1.39 billion, a 26% increase from a year earlier and above the $1.36 billion consensus estimate compiled by LSEG. Adjusted earnings per share came in at $1.10, also surpassing the $1.07 that analysts had expected, according to Barron’s.
Despite the solid top- and bottom-line performance, investors zeroed in on operating expenses, which jumped to $1.07 billion from $934.3 million in the year-ago period. Management attributed the higher spending to investments in AI capabilities and new product development, areas that have become central to CrowdStrike’s growth strategy but have yet to deliver clear returns.
“We are seeing strong adoption from existing customers, new logos coming in, and expanding partner activity,” CEO George Kurtz said in a statement, describing CrowdStrike as an “AI security infrastructure” company. CFO Burt Podbere noted that the company beat its own targets on “all guided metrics” and highlighted record cash flow generation in the quarter.
Annual recurring revenue (ARR) reached $5.51 billion, up 24% year over year, while net new ARR came in at $255.8 million, a 32% increase from the prior year. The company also announced a four-for-one stock split, effective for shareholders of record as of June 25, with trading on a split-adjusted basis expected to begin July 2.
CrowdStrike raised its fiscal 2027 revenue guidance to a range of $5.91 billion to $5.96 billion, up from the previous $5.87 billion to $5.93 billion. Adjusted earnings per share are now expected between $4.88 and $4.96, compared with the earlier forecast of $4.78 to $4.90.
However, the elevated expense trajectory and uncertainty around the payback period for AI investments weighed on sentiment. The company flagged competitive pressures, longer sales cycles, and lingering risks from the July 19, 2024 software incident as potential headwinds.
Coming into the report, CrowdStrike shares traded at a 59% premium to Morningstar’s fair value estimate, according to analyst David Sekera, who questioned what the company could do to satisfy such lofty market expectations. The broader cybersecurity sector also felt pressure, with Palo Alto Networks (PANW) sliding despite its own quarterly beat, as investors wrestled with high valuations and growth mix debates.
CrowdStrike continues to compete against Palo Alto Networks, SentinelOne (S), and Microsoft (MSFT) across the endpoint and broader security market, and the competitive dynamics are intensifying. The after-hours selloff suggests that even strong execution may not be enough to sustain the stock’s premium multiple in the near term.
