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CrowdStrike (CRWD) is getting struck down after issuing soft guidance for 1Q26 and FY26 as the cybersecurity company continues to feel the effects of last July's outage that crashed millions of Windows operating systems around the world. In the wake of that event, CRWD sought to temper the blow to its financials by launching a "customer commitment package program" that offered one-time discounts. Those discounts will continue to create a headwind to annual recurring revenue (ARR), especially in the first half of this year.

At the same time, CRWD plans to ramp up investments in marketing and AI infrastructure, while higher taxes will also impact its profitability. Taken altogether, these factors caused the company to guide Q1 and FY26 EPS well below expectations.

• As far as 4Q25 goes, CRWD turned in a solid performance, beating EPS and revenue estimates as subscription revenue surpassed the $1.0 bln mark for the first time. Specifically, subscription revenue jumped by 27% yr/yr to $1.01 bln.
• From a product perspective, the company is seeing strong interest in its Cloud Security, Identity Security, and LogScale NextGen SIEM products, which generated ARR growth of 45%, 20%, and 115%, respectively. Increasingly, customers are adding on more tools as they consolidate the entire cybersecurity stack onto CRWD's Falcon platform. This is illustrated by the fact that CRWD's module adoption rates grew to 32% and 21%, respectively, for seven or more and eight or more modules.
• ARR also surpassed expectations, increasing by 23% to $4.24 bln. However, the issue is that net new ARR decreased by 20% to $224.3 mln, due to the impact of the aforementioned customer commitment package promotion. For Q1, the company is anticipating a typical seasonal decline of 21-23% for net new ARR.
• While CRWD stated that it expects net new ARR growth to reaccelerate in the back half of FY26, creating momentum into FY27, the company opted not to provide FY26 ARR guidance. This may be causing some uneasiness among investors who may be worried that a meaningful number of customers that are currently on the customer commitment package won't renew their contracts when the promotion ends.

The main takeaway is that CRWD is still contending with outage-related uncertainties and given the rising anxieties around economic growth, concerns surrounding contract renewals are only being amplified.