CrowdStrike's Q2 earnings were 'better than feared': Analyst

CrowdStrike Holdings reported better-than-expected second quarter results. It was the cybersecurity company's first quarterly report since a software update knocked out systems for many of its customers around the globe.

RBC Capital Markets Managing Director and Head of Global TIMT Research Matt Hedberg tells Asking for a Trend that the report was "better than feared," though he would like more information about potential customer churn following the outage. He also expects CrowdStrike to offer discounts to keep customers happy. However, thinks this incident "could be in the company's rearview mirror later this year," given that "CrowdStrike's in business to secure devices from malicious attacks, which didn't happen."

Hedberg says that ultimately he believes, CrowdStrike will emerge from the crisis "as a stronger vendor [with] even better controls in place."

Watch the video above to hear what Hedberg thinks will drive CrowdStrike's business in the future.

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Stephanie Mikulich.

Video Transcript

Welcome to asking for a trend crowdstrike reporting Q two earnings just a few minutes ago.

Its first report since a software defect triggered a global Windows outage back in July, the company beating on both the top and bottom lines but lowering its third quarter for you and for your guidance and joining us now is Matt Hedberg R BC Capital Markets, managing director and head of Global TIMT Research.

Matt.

It is good to see you.

So let's talk about this print.

I know you, you, you're a fan of crowdstrike.

Uh Matt, you got an outperform on the name stocks up about 3% here in the after hours.

Give it, give us your take Matt on the results.

Sorry.

Yeah, thanks for having me on.

You know, I I would say that there was a lot of obvious fear uh about the quarter following the outage.

I I think just in kind of skimming through the numbers you noted they beat both top and bottom line.

I think overall I would characterize the results is better than expected, better than fear.

Um You know, I think a lot will depend on the guide.

They, they guided to, you know, kind of top and bottom line metrics in, in the press release.

But, um, what we're looking for is additional commentary on, uh A RR on the call and, and I think that would be some of the bigger swing factors in, you know, how the stock trades and Matt, I guess, more specifically, what are you looking for within that?

Like, what are your expectations?

You, how long do you expect this outage here to be an overhang for the stock going forward?

It's, I mean, that is a million dollar question.

I, I think what I would like to hear is that churn is not an issue, which we don't think it is.

We think the crowd strike still has best in class technology.

Um We're assuming and we previously cut our A R and revenue estimates based on what we presume to be higher levels of discounting uh to really keep pe customers happy and engaged through this whole uh a bad situation.

Um I, I've, I've, I've said before, I do think though that, you know, depending on how this is handled at the customer level, this could be in the company's rearview mirror later this year.

Uh And I think we looked at 22 results as a bit of a clearing event in terms of trying to get an investor expectations centered around what the second half impact will be to financials.

And, and why, why do you think that Matt why, why do you think maybe, you know, near term, there's some bumps here, but long term this company is gonna be just fine.

Uh You know, I think the critical thing from my perspective was that this was not a hack, no customer data was lost.

It was obviously a horrible situation from an outage perspective.

Um But uh you know, the crowds strikes in business to secure devices from malicious tax, uh which didn't happen as a result of this.

And so I do think as, as the customer, as, as Crowdstrike has been working really around the clock with customers to get them back up.

And, and I think I've said before, I think ultimately crowdstrike um emerges from this as a stronger vendor, even better controls in place.

Uh but the fact that it wasn't a breach, it wasn't uh a hack.

Um although the outage was bad, I, I it's a different level in my mind, which is why I think this will sort of drift into the, into the background in the coming quarters.

Matt, what do you think is gonna drive some of that future adoption?

And when you take a look, you're evaluating this market opportunity that Crowdstrike has ha has that changed at all because of the outage or, or is it still the same in terms of that future growth and what that could look like for years to come?

Yeah, it's a, it's another good question.

We've long thought that crowd strikes in a really strong position to consolidate what is a very fragmented cyber security landscape.

Um You know, the company noted in their press release that some of their newer products like their next gen sim product, identity protection and cloud security are now over a billion dollars in a RR that's a significant milestone and really one of the hallmarks of why we like this company in that it's one code based multiple modules, additional points of up sell.

And while the outage, um you know, puts them in a tough situation, we think in terms of offering some free or discounted modules.

Ultimately, we think customers will continue to consolidate spend on this platform uh given really the underlying architecture of, of, of the Falcon platform, Matt, you know, this company.

So well, I'm also curious just to get your take on the job, you think uh co George Kurtz has done in just managing uh the outage, Matt and the fallout.

Listen, it was, it was an um it was a tough situation for anyone and I think the company was as transparent as they could be.

This is the first time that they'll talk really in more depth publicly.

So I think a lot of people are gonna be paying attention to George's words.

Um You know how he's talking about how customers are reacting.

There's obviously been some large customers in the news um that have had some prolonged outage in the airline industry.

And so I think a lot of people are really gonna be paying attention to, um, you know, how he addresses this, the outage.

But, uh, you know, I think thus far, uh, listen, they've been transparent with what they can be, uh, I think they've really been, you know, trying to help customers, uh, through this difficult time, but I think a lot it's gonna be, you know, I think we're all gonna be listening to pretty much every word that he says on, on the earnings call and, and like I said, I think some of the swing back in the stock will be how the CFO talks about, uh, analy recurring revenue, which that's one of the main metrics that investors are looking for.

And I think we'll get a better sense of that on the, on the, on the prepared marks.

All right, we gotta move after hours up just about 3.5%.

Matt.

Thanks so much for breaking down this report here for us.