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The big story, of course, heading into CrowdStrike's (CRWD) Q2 earnings report was the massive outage that occurred on July 19 that crashed about 8.5 mln Windows devices, creating major disruptions for its customers, most notably including Delta Air Lines (DAL). With many investors bracing for the worst, as illustrated by the stock's 23% plunge since the incident occurred, CRWD edged past EPS and revenue expectations and provided Q3 and FY25 guidance that was better-than-feared.

• After the close on Tuesday afternoon, competitor SentinelOne (S) issued a solid beat-and-raise Q2 report, fanning the flames surrounding CRWD and generating more concern that the outage is causing some of its customers to migrate to SentinelOne. In fact, according to SentinelOne CEO Tomer Weingarten, some large global companies are now engaging with the company and are making the decision to switch.
• However, CRWD CEO George Kurtz downplayed the purported customer migration, stating that while some deals have been delayed, the vast majority of them are still in play. In fact, CRWD has launched a new "customer commitment package" that's designed to keep its customers on board by offering incentives and discounts. In each of the next two quarters, the package is expected to negatively impact revenue by approximately $30 mln as CRWD chooses to take a short-term hit in hopes that it will retain most of its customers.
• When accounting for these discounts and giveaways, CRWD's Q3 and FY25 revenue guidance doesn't look too bad. At the midpoint of its new FY25 revenue guidance of $3.890-$3.902, CRWD's outlook is only lower by about $95 mln, so it's clear that the company isn't expecting a mass exit of customers.
• CRWD still faces significant litigation risks, though. DAL, which said that the outage caused 7,000 flight cancellations and a corresponding $380 mln revenue hit in its September quarter, is suing CRWD for $500 mln. For its part, CRWD stated that DAL refused its help during the outage and that it's too early to determine what its legal responsibilities will be.
• Outside of the noise related to the outage, CRWD turned in another solid performance in Q2. Annual Recurring Revenue (ARR) increased 32% yr/yr to $3.86 bln, with $217.6 mln derived from new ARR in the quarter. For some context, ARR totaled $3.65 bln last quarter, of which $211.7 mln was net new ARR added in the quarter.
• The company's unified and streamlined platform also continues to resonate with customers. In Q2, deals with eight or more modules jumped by 66% yr/yr and 48% of customers with $100,000 or more in ending ARR adopted at least eight modules.

Overall, while CRWD will take a near-term hit, it appears that the company has averted a disaster in the wake of one of the worst incidents to ever inflict the cybersecurity industry.