Story Stocks^®

Despite CrowdStrike (CRWD) surpassing 1Q26 EPS expectations and announcing a new $1.0 bln share repurchase program, the stock is selling off sharply as the cybersecurity company's Q2 and FY26 guidance disappointed investors. Specifically, CRWD's downside Q2 revenue guidance of $1.145-$1.152 bln, and its essentially unchanged FY26 revenue guidance of $4.744-$4.806 bln, is the primary source of disappointment. With shares trading at record highs prior to the report, and with CRWD's strong historical performance, it was evident that expectations were high, setting the stage for today's profit-taking pullback.

The lingering effects of CRWD’s Customer Commitment Packages (CCPs), introduced in response to the July 2024 Falcon sensor outage that disrupted millions of Windows systems, continue to create a revenue headwind. In Q1, CCP-related incentives reduced revenue by approximately $11 mln, with the company anticipating a further $10-$15 mln quarterly impact through the remaining quarters of FY26. While the CCP program concluded in 4Q25, the extended terms offered to affected customers, such as subscription discounts or additional services, are deferring revenue recognition into future periods.

• CRWD's annual recurring revenue (ARR) in Q1 grew 22% yr/yr to $4.44 bln, a solid increase but slightly below some analyst expectations. More critically, net new ARR, a closely watched metric for gauging growth momentum, came in at $193.8 mln, down sequentially from $224.3 mln in Q4 and $211.7 mln in 1Q25. This decline reflects several factors, including the revenue deferrals caused by CCPs, which temporarily suppress ARR recognition as customers utilize extended contract terms. Additionally, macroeconomic headwinds and elongated sales cycles, particularly among smaller customers, have impacted deal closures, echoing challenges noted in prior quarters.
• Despite these challenges, CRWD demonstrated significant success in Q1 with large deal wins, as enterprises increasingly consolidate their cybersecurity solutions onto the Falcon Platform. The company reported a module adoption rate of 48% for customers using six or more modules, 32% for seven or more, and 22% for eight or more, reflecting the platform’s growing appeal as a comprehensive, AI-native cybersecurity solution.
• This multi-module adoption underscores CRWD’s ability to displace point solutions and compete effectively across endpoint security, cloud security, identity protection, and next-gen SIEM. Strategic partnerships with Microsoft (MSFT), Google Cloud (GOOG), and NVIDIA (NVDA), along with innovations like Falcon Privileged Access and Charlotte AI Agentic Workflows, further bolster its competitive moat.
• CRWD’s management expressed confidence in a rebound in net new ARR growth, driven by the momentum of its Falcon Flex subscription model, early expansions of existing Flex contracts, strong competitive win rates, and a robust pipeline for 2H26. Falcon Flex, a flexible subscription framework launched less than two years ago, allows customers to tailor their adoption of Falcon Platform modules, resulting in larger deal sizes, longer contract durations, and faster deployment. The model has driven $3.2 bln in total deal value across more than 820 accounts, with 39 customers already returning for “reflex” expansions within an average of five months.

CRWD’s Q1 earnings reflect a solid performance overshadowed by revenue headwinds from the Customer Commitment Packages, which have contributed to a cautious guidance outlook and investor disappointment. Nevertheless, CRWD remains a premier name in cybersecurity, with its strong win rates, multi-module adoption, and Falcon Flex momentum positioning it for robust growth once the CCP impact subsides.