Ben’s Portfolio update end of December 2025
Returns and portfolio holdings:
Portfolio Notes 2022 -15.6%* *Jul-Dec, since I started posting my portfolio on Saul’s and fully adopting my version of Saul’s investing approach. 2023 77.8% 2024 31.7% 2025 24.9% YTD Month Jan 9.1% 9.1% Feb 5.0% -3.7% Mar -10.4% -14.7% Apr -2.4% 8.8% May 19.6% 22.6% Jun 32.7% 11.0% Jul 33.5% 0.6% Aug 29.9% -2.7% Sep 34.2% 3.3% Oct 51.0% 12.5% Nov 30.0% -13.8% Dec 24.9% -4.0%
These are my current positions:
Dec 2025 Nov 2025 First buy* Cloudflare 21.6% 21.4% 11/2/2020 Nvidia 21.5% 19.9% 5/13/2020 Datadog 13.1% 13.9% 5/13/2020 Snowflake 12.6% 14.0% 2/8/2021 Crowdstrike 10.4% 11.1% 5/13/2020 Axon 7.0% 6.5% 4/2/2024 Samsara 3.9% 4.1% 1/8/2024 Zscaler 3.3% 3.6% 3/4/2021 Monday 2.5% 2.4% 9/13/2021 AppLovin 2.1% 1.5% 11/18/2025 Astera Labs 2.0% 1.5% 11/18/2025
*held through today
Company comments
Snowflake:
Key insights:
- Q3 product revenue landed below my expectation, but my interpretation of the Q4 guide is actually higher than it was prior to the Q3 report. So I expect Snowflake to jump back above 30% YoY growth in Q4. The strong Q4 guide is reflecting strong consumption trends.
- Snowflake successfully managed a hyper scaler outage by seamlessly transferring mission critical tasks to backup systems.
- RPO QoQ growth of 13.7% QoQ was the strongest Q3 RPO growth in years (9.6% in FY25, 4.5% in FY24 and 10.6% in FY23), indicating that large enterprises are making significant long-term commitments to the platform.
- A wide range of potential outcomes for Q4 cRPO YoY growth (32% … 37.5% … 54%) will be the critical metric to watch to confirm if this quarter’s booking surge is a one-off or a trend.
- The record addition of 615 net new total customers (up ~5.1% QoQ and up from last Q3’s 343 adds) is a standout metric that directly correlates with the RPO surge.
- Snowflake hit a $100 million AI revenue run rate one quarter earlier than anticipated, with 50% of new bookings now influenced by AI capabilities and AI adoption reaching 57.8% of customers (up from 50.8% in Q2).
- They must deliver about $770M in Q4 (a ~60% FCF margin!!) to reach their 25% margin guide for FY26. Also expect further OM and NM expansion in Q4.
Snowflake reported Fiscal Q3 2026 on 12/03/25. This quarter the company successfully transitioned its AI narrative into tangible financial milestones, even as headline revenue growth pulled back a bit in YoY growth rather than continuing Q2’s strong revenue growth acceleration. While the 2.7% revenue beat was arguably modest by historical standards, the underlying leading indicators - specifically RPO acceleration and record customer additions - suggest a coiling spring for future growth, the start of which is validated by management’s confidence in raising full-year guidance by 1.2%. This will likely bring Q4 YoY growth back to where it was in Q2 and continuing the elevated 30+ percent YoY growth trend that started in Q2 with 31.5% (up from 26.2% YoY growth in Q1).
The reported product revenue of $1.158b (6.2% QoQ, 28.7% YoY) landed below my expectation of $1.178b (8% QoQ, 30.8% YoY), representing a historically low beat on their guidance that was dampened slightly by a hyperscaler outage impacting revenue by approximately $1-2M. So while not materially impacting Snowflake’s revenue growth, the more important take-away from this outage was that “our disaster recovery capability seamlessly transferred more than 300 mission-critical workloads to backup systems, ensuring business continuity for our customers when it mattered the most”. And while a 2.7% beat is on the lower end historically, the quality of this revenue is high; The narrative shift here is important: Morgan Stanley’s Sanjit Singh characterized the Q4 guidance of $1198M (3.4% QoQ, 26.9% YoY), which I now interpret as $1239M (7.0% QoQ, 31.4% YoY, implying a 3.5% beat), as one of their “best sequential guides” in years, which I think is driven by stabilizing consumption patterns rather than speculative commits: As the CFO explained, “the FY guide is really the most meaningful signal. And I think the guide really reflects the underlying behavior that we see in our customer base going into the fourth quarter”. Let me explain … Unlike seat-based SaaS where a signed contract (RPO) immediately turns into ratable revenue, Snowflake only recognizes revenue when customers use the product. CEO Sridhar Ramaswamy explicitly attributed the strong Q4 guide to "what we see in consumption trends ." This signals that the optimization headwinds have largely subsided. Customers are no longer cutting back; they are returning to predictable usage patterns. This suggests the volatility in consumption that plagued FY24/FY25 is largely subsiding, replaced by a more predictable baseline growth. Management also noted that AI is now driving acceleration in go-lives. Unlike “shelfware” (software that sits unused) these AI workloads consume credits immediately, further validating the consumption driver over the “commit” driver.
I think the most bullish signal in the report was the RPO performance. Total RPO accelerating to 37.5% YoY ($7.88b versus my expectation of $7.35b) is a massive divergence from the dip in revenue growth we saw this quarter, indicating that large enterprises are making significant long-term commitments to the platform. cRPO growing 32% YoY to $3.78b (versus my expectation of $3.67b or 28% YoY) aligns with this strength. The astounding 13.7% QoQ jump in total RPO validates the record booking momentum. If cRPO acts as a reliable precursor to revenue, this acceleration supports the thesis that revenue growth could sustain 30%+ YoY product revenue growth or even accelerate further in FY27, especially as these large contracts ramp into consumption. The seasonally strong Q4 cRPO growth will be very interesting: If RPO grows 25% QoQ and 43.5% YoY, then I expect cRPO to jump to 37.5%, which is my new expectation, but RPO might grow closer to 4Q25’s sequential growth of 20% (implying cRPO YoY growth staying at 32%) or 4Q24’s sequential growth of 40% (implying an insane 54% cRPO YoY growth), which is a wide range of potential outcomes that will be very telling for FY27’s revenue growth. This wide range of potential outcomes for Q4 cRPO will indeed be the critical metric to watch to confirm if this quarter’s booking surge is a one-off or a trend.
The record addition of 615 net new total customers (up ~5.1% QoQ) is a standout metric that directly correlates with the RPO surge. This is a significant acceleration from the 343 adds in the prior year’s Q3, suggesting that Snowflake’s “AI Data Cloud” messaging is resonating with new logos. Crucially, the “AI narrative” is no longer just talk. Snowflake hit a $100 million AI revenue run rate one quarter earlier than anticipated. With 50% of new bookings now influenced by AI capabilities and Snowflake Intelligence seeing the fastest product ramp in company history, the AI-component of the platform is becoming a primary driver of deal closures. The stable edge growth (up 7.8% QoQ), continued marketplace expansion (146 adds, similar to last Q3’s 143 adds) and AI adoption reaching 57.8% of customers (up from 50.8% in Q2), further cement the platform’s stickiness.
Lastly, profitability metrics were very interesting this quarter: While operating and net margins were close to my expectations and expanding nicely to about 11% from last year’s 6-8%, adjusted FCF margin was only 11.2%. Given that they maintain their 25% adjusted FCF margin guide for FY26, Q4 will have to be a monster quarter for free cash flow. While Q3’s FCF was $136M, they must deliver about $770M in Q4 (a ~60% FCF margin!!) to reach 25% margin for FY26. While Q4’s have historically been strong, that would be up from $423M last Q4, so quite a leg up. Also, net income had 53% QoQ growth in 4Q25 and 42% QoQ growth in 4Q24, so if net income again grows by, say 40% QoQ, I expect net margin to jump to 14% and a similar jump for operating margin. So I expect a monster quarter for Snowflake’s profitability coming up in Q4. This seasonality is typical for enterprise software with heavy Q4 renewal cohorts, but the magnitude required this year highlights confident execution on collections and operating leverage. The expansion of operating margins to ~11% (up from 6.3% last year) demonstrates that even while investing aggressively in AI (GPUs, R&D), the core business remains highly leverageable.
Overview of how Snowflake performed versus my prior expectations:
- Product revenue expectation: $1178M (8% QoQ, 30.8% YoY), implying a 4.5% beat; $88M net new product revenue.
→ $1158M (6.2% QoQ, 28.7% YoY), a 2.7% beat (lowest quarterly revenue guidance beat in their history). Net new product revenue was $68M. - Q4 new product revenue guide: $1190M (1% QoQ, 26% YoY) which I would interpret as $1237M (5% QoQ, 31% YoY), implying a 4% beat and that revenue growth will be roughly stable YoY.
→ $1198M (3.4% QoQ, 26.9% YoY), which I now interpret as $1239M (7.0% QoQ, 31.4% YoY), implying a 3.5% beat. - NRR around 125%.
→ NRR was 125%. - I would like to see RPO around $7.35b and cRPO around $3.67b, corresponding to 28% YoY growth; note: this is a tough comp this quarter and expect RPO and, more importantly cRPO to accelerate to around 40% YoY in Q4.
→ RPO was $7.881b, accelerating to 37.5% YoY from 32.5% in Q2 and growing an astounding 13.7% QoQ. cRPO was $3.783b with YoY growth of 32.0%, similar to Q2’s 32.5% and grew 9.1% QoQ. Q4 cRPO growth will be very telling: If RPO grows 25% QoQ and 43.5% YoY, then I expect cRPO to jump to 37.5%, which is my new expectation, but RPO might grow closer to 4Q25’s sequential growth of 20% (implying flat cRPO YoY growth) or 4Q24’s sequential growth of 40% (implying an insane 54% cRPO YoY growth), which is a wide range of potential outcomes that will be very telling for FY27’s revenue growth. - I would like to see total customer growth around 4% QoQ (~482 adds) and $1M+ customer growth around 5% QoQ (~33 adds).
→ total customers grew 5.1% QoQ with 615 adds, which is strongly up from 343 adds last Q3 and 533 adds in Q2. This nicely explains part of the strong RPO growth this Q and signals future revenue growth strength as those new customers scale their consumption. $1M+ customer growth was 4.9% QoQ with 32 adds. - I would like to see stable edge customer growth very roughly around 8.6% QoQ (~413 adds) and market place listings growth very roughly around 5.5% (~187 adds) and AI adoption to reach about 53% of customers.
→ Stable edge customers grew 7.8% QoQ with 372 adds. Market place listings grew 4.3% QoQ with 146 adds, similar to last Q3’s 143 adds and AI adoption reached about 57.8% of customers (7300+). - I would like to see continued strength in profitability margins, with OM ~11.5%, NM ~12%, FCFM ~30%.
→ Operating Margin was 10.8%, Net Margin was 10.8% and adjusted FCF margin was 11.2%. Given that they maintain their 25% adjusted FCF margin guide for FY26, Q4 will have to be a monster quarter for free cash flow. While Q3’s FCF was $136M, they must deliver about $770M in Q4 (a 60% FCF margin!!) to reach 25% margin for FY26. That would be up from $423M last Q4. Also, net income had 53% QoQ growth in 4Q25 and 42% QoQ growth in 4Q24, so if net income again grows by, say 40% QoQ, I expect net margin to jump to 14% and a similar jump for operating margin. So I expect a monster quarter for Snowflake’s profitability coming up in Q4. - Detailed thoughts: Ben’s Portfolio update end of September 2025
Zscaler:
Key insights:
- Two acquisitions (Red Canary and SPLXAI) added significant inorganic growth to various metrics this quarter, with Red Canary alone contributing $83M in ARR and nearly 1000 customers ($83k per customer on average), also explaining the surge in $100k+ ARR customers this quarter.
- They stopped reporting billings removing a key metric that was highly correlated to future revenue growth. Inferred billings this quarter was likely poor based on inverting my billings model (with uncertainty).
- The switch from billings guidance to ARR guidance currently doesn’t allow reasonable revenue predictions at least for now, due to lack of historical ARR data.
- Their new ZFlex program, which allows customers to easily adopt new modules like those gained from Red Canary and SPLXAI, generated over $175M in total contract value in Q1 alone (growing 70% QoQ), demonstrating the initial value of those acquisitions.
- The profitability highlight was free cash flow which achieved a margin of 52.4%, up from 46.5% last Q1.
Zscaler reported Fiscal Q1 2026 on 11/25/25. Revenue was $788M (9.6% QoQ, 25.5% YoY), versus my prior expectation of $787M (9.4% QoQ, 25.3% YoY). While I was happy to see my expectation exceeded, the revenue number was likely increased due to two acquisitions the company made. Unfortunately they didn’t break out any organic growth numbers that would give us a clue as to what it would have been without those acquisitions.
As discussed before (Ben’s Portfolio update end of November 2025 - #6 by SlowAndFast), Zscaler stopped reporting billings even though it was an excellent metric to predict future revenue growth. It is definitely a yellow flag if a company stops reporting one of their flagship numbers that was highlighted (and guided for) for many years in every earnings report. That is especially true if that metric would reveal some trouble. But we can’t know that. Or can we? The fact that billings correlated perfectly with revenue allows us to actually take the Q2 revenue guide, add the typical 2% beat (beat the last few quarters was 2.2%, 1.8%, 1.9% and 2.0%) and infer what billings approximately was this Q1. So assuming the 2% revenue beat in Q2, my billings model infers a 48% QoQ billings decline from Q4 to Q1. That is worse than typical (and seasonal) Q1 declines, which were -35%, -37% and -43% in the last three Q1’s and actually continues the worsening trend. Every inference like this has uncertainty. If we assume a 1.8% beat instead of 2.0% I would infer a QoQ billings decline of -48.4% and if we assume a 2.2% beat the QoQ decline would be -47.3%. But again, it is difficult to say at this point if the lower than typical billings is a bigger problem or maybe just due to the timing of deals as “We expect customer cautiousness to continue in the near term, elongating our sales cycles and the timing of large deals.”
So, instead of focusing on billings, Zscaler’s new CFO has shifted the focus on ARR as “a key metric to measure our periodic performance”. Since ARR is a new metric for Zscaler, it is worth pointing out that “ARR refers to the next 12 months of revenue from subscription contracts as of the measurement date. To establish ARR for a customer, we assume that any contract expiring during the next 12 months will be renewed under the existing terms, excluding Red Canary’s subscription contracts expiring in fiscal year 2026”. I interpret the highlighted part such that any subscription renewals for Red Canary’s contracts give upside to the ARR guide. Zscaler increased their ARR guide by 0.5% sequentially to $3718M and accelerating ARR YoY growth to 25.5%, up from 21.9% in Q4. I have tried to build a similar model to the billings model where a given ARR is correlated to the next 4 quarters of revenue growth, but the correlation is way worse that what we had with billings. That may be because we only have 4 datapoints so far where we can compare ARR figures to 4Q revenue actuals following the corresponding ARR quarter. So it would be worth revisiting this again in a couple of quarters to see if the correlation gets any better. In any case it is always good to see an ARR YoY growth acceleration, even though it just accelerated to the YoY growth rate of current revenue.
Secondary growth metrics were all very good, but there is the caveat of them being inorganic and quite likely inflated due to the two acquisitions Zscaler made (Red Canary and SPLXAI). RPO, which normally doesn’t grow sequentially in Q1, grew 2.6% QoQ to $5.933M, accelerating YoY growth to 34.5%, up from 30.8% in Q4. cRPO grew 29% YoY, up from 25.4% in Q4 and 21.4% last Q1. NRR stayed at 115% and $100k+ ARR customer adds jumped to 260, from 137 in Q4 and 67 last Q1. $1M+ ARR customer adds was 34, from 31 in Q4 and 20 last Q1.
Again, I can’t really give them any brownie points for those strong secondary growth metrics because we don’t know how much these two acquisitions juiced the numbers. For example, at the time the acquisition closed, Red Canary contributed $83M in ARR (according to the CFO at the Barclays 23rd Annual Global Technology Conference). With nearly 1000 customers (according to a recent Red Canary’s blog post: Red Canary joins Zscaler | Red Canary), this averages roughly $83k per customer, meaning a significant portion of their enterprise base was likely already at or near the $100k threshold before further cross-selling. On the other hand, Zscaler highlighted its new ZFlex program, which allows customers to easily adopt new modules like those gained from Red Canary and SPLXAI. This program generated over $175M in total contract value in Q1 alone (growing 70% QoQ), specifically helping existing customers double or even triple their spend, often pushing them into higher ARR brackets.
From a profitability point-of-view, Zscaler displayed the same operational discipline it always has. Operating expenses were 58.1% of revenue, down from 59.2% last year and grew 23.2% YoY, significantly below their 25.5% revenue growth, showing nice operational leverage. As a result, their operating income margin grew to 21.8% from 21.4% last year and net margin grew to 20.2%, up from 19.8% last year. The profitability highlight was free cash flow which achieved a margin of 52.4%, up from 46.5%.
Overview of how Zscaler performed versus my prior expectations:
- Revenue expectation: $787M (9.4% QoQ, 25.3% YoY), expectation from billings model and implying a 1.8% beat.
→ $788M (9.6% QoQ, 25.5% YoY), a 2.0% beat. - Q2 new revenue guide: $811M (3% QoQ, 25% YoY) which I would interpret as $825M (4.8% QoQ, 27% YoY) as my expectation from billings model, assuming Q1 QoQ billings decline of -44% (seasonal!)
→ $798M (1.3% QoQ, 23.2% YoY), which I now interpret as $814M (3.2% QoQ, 25.6% YoY), implying a 2.0% beat. - I would like to see Q1 billings of around $673M (-44% QoQ, seasonal!).
→ They stopped reporting billings, but assuming they’ll beat Q2 revenue by 2.0%, reverse-engineering my billings model suggests that billings was about $626M (-48% QoQ). - I would like to see RPO growth of around 0% QoQ (at $5.8b) and cRPO of about $2.7b.
→ RPO grew 2.6% QoQ to $5.933b and cRPO was $2.788b and grew 29% YoY. - I would like to see >100k ARR customer growth around 2.9% QoQ (~100 net adds).
→ $100k+ ARR customers grew 7.4% QoQ (inorganically), adding 260 new large customers. - I would like to see >1M ARR customer growth around 4.5% QoQ (~30 net adds).
→ $1M+ ARR customers grew 5.1% QoQ, adding 34 new very large customers. - I would like to see an operating income around $173M (22.0% margin).
→ Operating income was $172M (21.8% margin). - Thoughts from previous quarter: Ben’s Portfolio update end of September 2025.
Samsara:
Key insights:
- Q3 was another playbook quarter with naturally decelerating top-line growth offset by unlocking massive operating leverage and successfully layering in new product growth.
- Achieved GAAP profitability (potentially including the stock in various screens).
- 20% of Net New ACV in Q3 came from new products launched since last year (up from 8% in Q2), led by AI Multicam, Asset Maintenance, and Asset Tags.
- Asset Tags grew >400% YoY and Public Sector Net New ACV grew ~100% YoY.
- They collect over 10 trillion data points annually, a massive and unique data asset that they are leveraging to train their AI models, creating a potentially powerful moat.
- RPO and cRPO growth continued to accelerate YoY to 39.1% YoY 29.2% YoY, respectively, the latter growing in-line with revenue growth.
- While $100k+ ARR customer growth was weaker than I had expected, they again added 17 $1M+ customers, tying their recent Q2 record, demonstrating that the value of large customers is increasing.
Samsara reported Fiscal Q3 2026 on 12/4/25. In short, Q3 was another playbook quarter, further cementing the thesis that Samsara is one of the most disciplined executors in the space. While top-line growth is naturally decelerating as they scale past $1.75B in ARR, the company is expertly managing this transition by unlocking massive operating leverage and successfully layering in new product growth. The former resulted in the achievement of first-time GAAP profitability. Achieving GAAP net income removes a major bearish overhang. It allows institutional investors who screen for GAAP profitability to enter the stock, potentially broadening the shareholder base.
On the top-line, they essentially met my revenue expectation, delivering $416M (6.3% QoQ, 29.2% YoY), a 4.3% beat of their guide, versus my expected $417M (6.5% QoQ, 29.5% YoY). Their new Q4 guide was also close to my expectation, which I now interpret as $442M (6.3% QoQ, 27.7% YoY). And while they raised their FY revenue guide by 0.6%, the standout top-line metric was the delivery of $105M Net New ARR (beating my $102M target) as it signals that despite macroeconomic noise, Samsara’s “system of record” value proposition is sticky.
In fact, Samsara continues to prove that they are not just a “dashcam company”, but a true multi-product platform with a repeatable R&D engine: Management revealed that 20% of Net New ACV in Q3 came from new products launched since last year (up from 8% in Q2), led by AI Multicam, Asset Maintenance, and Asset Tags. The latter was specifically highlighted as growing >400% YoY, including their largest-ever Asset Tag deal. This moves Samsara beyond “fleet” into broader “operations” tracking (equipment, pallets, cargo), significantly expanding their TAM. This is a critical validation of their R&D engine. The call also highlighted accelerating momentum in the Public Sector, Construction, and International markets. A specific narrative update worth noting is the ~100% YoY growth in Public Sector Net New ACV. This vertical is becoming a legitimate second engine for growth, diversifying them away from pure-play commercial logistics. And CEO Sanjit Biswas emphasized they now collect over 10 trillion data points annually, a massive data asset that they are leveraging to train their AI models, creating a feedback loop that smaller competitors cannot match and thus creating a powerful data moat. Biswas pushed the “Age of Intelligence” messaging. While buzzword-heavy, the practical application (e.g., “AI Multicam” usage) is driving the NRR of 115% (unchanged from last Q) by incentivizing multi-product adoption.
Remaining Performance Obligations grew to $3.38b, or 39.1% YoY, up from 38% last Q and cRPO grew to $1.50b, or 29.2% YoY, up from 28.8% last Q and now growing at the same rate as revenue.
On the “land” side of their land-and-expand motion, adding 219 net new customers here (vs. my ~250 target) might look light on volume, but the value of these customers is increasing. This cohort now represents over $1B in ARR - a massive psychological and financial floor for the business. More importantly, adding 17 net new $1M+ customers for the second consecutive quarter is exceptional. This ties their quarterly record and proves that Samsara is successfully displacing legacy incumbents in massive fleet; e.g. the 44% safety incident reduction cited for a large mechanical contractor win. This figure, by the way, is quite typical as Samsara reports an aggregate reduction in crash rate by 37% after 6 months with Samsara, 47% after 12 months and 73% after 30 months.
On the profitability front, the results were again stellar. The jump in operating margin to 19.2% vs. 10.5% a year ago is the most dramatic improvement in the report. It demonstrates significant operating leverage - revenue is growing much faster than OPEX. Net margin also jumped to 21.5%, up from 13.5% last year and FCF margin expanded to 13.4%, up from 9.7% last year.
Overview of how Samsara performed versus my prior expectations:
- Revenue expectation: $417M (6.5% QoQ, 29.5% YoY), implying a 4.5% beat.
→ $416M (6.3% QoQ, 29.2% YoY), a 4.3% beat. - Q4 new revenue guide: $425M (2% QoQ, 23% YoY) which I would interpret as $444M (6.5% QoQ, 28% YoY).
→ $422M (1.4% QoQ, 21.9% YoY), which I now interpret as $442M (6.3% QoQ, 27.7% YoY). - I would like to see net new ARR around $102M.
→ $105M. - I would like to see RPO around $3.36b (6% QoQ) and cRPO around $1.48b (27.8% YoY).
→ RPO was $3.378b (6.7% QoQ) and cRPO was $1.50b (29.2% YoY, up from 28.8% last Q and growing the same as revenue). - I would like to see core customer NRR around 115%.
→ 115%. - I would like to see large customer NRR around 120%.
→ not given. - I would like to see around 250 new $100k+ ARR customers (3020 total, 31.8% YoY) and more than 136 total $1m+ ARR customers (wasn’t reported the last couple quarters).
→ 219 new $100k+ ARR customers (2990, 30.5% YoY) and total $1m+ ARR customers wasn’t reported, but they again managed to add 17 new $1M+ ARR customers, for the second quarter in a row, tying the previous quarterly record. - I would like to see around $76M operating income, corresponding to a 18.3% operating margin.
→ $79M operating income, a 19.2% margin, up from 10.5% last Q3. - Thoughts from previous quarter: Ben’s Portfolio update end of October 2025
Crowdstrike:
Key insights:
- Crowdstrike is firing on all cylinders with ending ARR from Falcon Flex customers exceeded $1.35 billion, growing more than 200% YoY and now a primary driver of the massive 73% growth in Net New ARR in Q3.
- H2 Net New ARR growth guide was raised from 40% to 50%: A 15% QoQ growth or 36.1% YoY growth on net new ARR in Q4 would bring them to 51.2% net new ARR YoY growth in 2H26, signaling increased confidence in the pipeline.
- All three cohorts of 6+, 7+ and 8+ product customers increased by one percentage point (48% to 49%, 33% to 34% and 23% to 24%, respectively).
- Management highlighted marquee partnerships with AWS (named Global Marketplace Partner of the Year) and system integrators like EY and Kroll, who are building their managed services on top of Falcon LogScale (Next-Gen SIEM).
Crowdstrike reported Fiscal Q3 2026 on 12/2/25. Following up on the same key points I highlighted in my last two Crowdstrike recaps (Q1 and Q2), here is an update on Falcon Flex, reaccelerated ARR growth, platform adoption, partner pipeline and the customer choice program as well as the related July 19th incident. In summary, the reacceleration seen in Q2 has not only continued but intensified. Management characterized Q3 as "one of our very best quarters in company history”, driven by record Net New ARR (in comparison to past Q3s) and a raised outlook for the remainder of the year. The v-shaped recovery from the July incident appears complete regarding sales momentum.
Falcon Flex Momentum went from adoption to scaling:
The Falcon Flex program has evolved from a rapid expansion story to a massive revenue engine. While Q1 and Q2 focused on customer count growth (820+ in Q1 to 1,000+ in Q2), management pivoted to highlighting the sheer scale of value. Ending ARR from Falcon Flex customers exceeded $1.35 billion, growing more than 200% YoY.
While Q2 highlighted “Reflex” deals (customers returning for more) growing to 100+ versus 39 in Q1, management highlighted the program is now a primary driver of the 73% growth in Net New ARR in Q3, validating that Flex is structurally changing how large enterprise customers consume the platform.
Path to Reaccelerated ARR Growth - Beating the 2H26 Expectations:
The “reacceleration” narrative from Q2 has been upgraded significantly in Q3 moving from a Q2 record $221M net new ARR to a Q3 record of $265M. This represents a massive 73% year-over-year growth in Net New ARR, signaling a complete return to high-velocity sales. As a reminder they had guided for 40% net new ARR YoY growth for the second half of the FY. In this report they have increased that guide to 50%. Having delivered already 73.4% YoY net new ARR growth in Q3, a 15% QoQ growth or 36.1% YoY growth on net new ARR in Q4 would bring them to 51.2% net new ARR YoY growth in 2H26, signaling increased confidence in the pipeline. RPO reached $7.9 billion, aligning with my expectations, but the cRPO acceleration is the critical signal. Growing 30.9% YoY (up from 29.5% last quarter and 25.4% in Q1), this metric confirms that the booking momentum is immediate and real, rather than just back-weighted into long-term contracts. This acceleration provides high visibility into FY27, supporting the bullish decision to raise the H2 Net New ARR growth guide from 40% to 50%.
The standout products from Q2 continued to accelerate as management noted “broad-based acceleration” across Cloud Security, Next-Gen Identity, and Next-Gen SIEM collectively. Next-Gen SIEM remains a critical displacement driver, with major wins (e.g., EY, Kroll) standardizing on the platform, further fueled by the new Falcon Flex licensing model.
Deep Platform Adoption: Stickiness Increases
Customers continue to consolidate more modules onto the CrowdStrike platform, with adoption rates ticking upward sequentially. All three cohorts of 6+, 7+ and 8+ product customers increased by one percentage point (48% to 49%, 33% to 34% and 23% to 24%, respectively).
Partner Pipeline & Ecosystem:
While in Q2 partners sourced >60% of new business, in Q3 the partner ecosystem remains central to the strategy. Management highlighted marquee partnerships with AWS (named Global Marketplace Partner of the Year) and system integrators like EY and Kroll, who are building their managed services on top of Falcon LogScale (Next-Gen SIEM).
Effective Navigation of Challenges (July 19th Incident)
While my Q2 assessment was that they successfully navigated the aftermath, the Q3 results validated this as the July 19th narrative has largely shifted from recovery to validation of stickiness. And while profitability metrics still reflects some one-time incident costs, the record operating income ($265M) and record Free cash flow ($296M) demonstrate that the incident did not derail the company’s financial engine. And while margins did expand YoY (OM up from 19.9% in Q3 FY25), the shortfall against my target likely stems from the costs associated with the massive overachievement in sales. Higher commission payouts driven by the $265M Net New ARR result, combined with aggressive investments in the SIEM and Cloud Security roadmaps, weighed slightly on the bottom line.
Overview of how Crowdstrike performed versus my prior expectations:
- Revenue expectation: $1239M (6% QoQ, 22.6% YoY), implying a 2.2% beat this Q.
→ $1234M (5.6% QoQ, 22.2% YoY), a 1.8% beat. - Q4 new revenue guide: $1289M (4% QoQ, 22% YoY) which I would interpret as $1313M (6% QoQ, 24% YoY), assuming roughly stable QoQ growth.
→ $1295M (4.9% QoQ, 22.3% YoY), which I now interpret as $1318M (6.8% QoQ, 24.5% YoY) - Net new ARR of around $237M (7.4% QoQ and ARR +5.1% QoQ).
→ new new ARR was $265M (20% QoQ and ARR +5.7% QoQ). As a reminder they had guided for 40% net new ARR YoY growth for the second half of the FY. In this report they have increased that guide to 50%. Having delivered already 73.4% YoY net new ARR growth in Q3, a 15% QoQ growth or 36.1% YoY growth on net new ARR in Q4 would bring them to 51.2% net new ARR YoY growth in 2H26. - I would like to see around $7.92b RPO (10% QoQ, 47% YoY); cRPO around $4.0b (51% of RPO, 31% YoY).
→ RPO was $7.9b (9.7% QoQ, 46.3% YoY) and cRPO was around $4.03b, 51% of RPO and growing 30.9% YoY. This continues the acceleration from 24.8% last Q4, to 25.4% in Q1, to 29.5% in Q2 to finally 30.9% this Q3. - I would like to see NRR greater or equal to 115%.
→ not yet reported (expect an update on this in the coming Q4 report). - I would like to see about $286M operating income.
→ While operating expenses grew again finally less than revenue 19.8% YoY versus revenue growth of 22.2%, after four consecutive quarters where they grew more than revenue, operating income was lower than I had expected, at $265M, resulting in a margin of 21.4%, up from 19.9% last Q3. - I would like to see about $267M net income.
→ similar to operating income, net income was also lower than I had expected at $245M. - I would like to see no multi-product customer decline.
→ All three cohorts of 6+, 7+ and 8+ product customers increased by one percentage point (48% to 49%, 33% to 34% and 23% to 24%, respectively). - I would like to see gross retention close to 97%.
→ CFO: “we are going to be giving out dollar-based net retention and gross retention rates at the end of the year.” - Thoughts from previous recap: Ben’s Portfolio update end of October 2025
Wrap up
As we close out 2025, the portfolio remains heavily concentrated in its top two conviction companies - Cloudflare (NET up 75% in 2025) and Nvidia (NVDA up 35% in 2025) - which now represent over 43% of total holdings. While the year ended with a pullback in November/December, the underlying fundamental strength of these core positions is undeniable. Cloudflare’s stunning 31% YoY revenue growth acceleration and record-breaking customer adds suggest its role as a primary AI infrastructure player is just beginning to bear fruit. Similarly, Nvidia’s massive $500B+ order visibility provides a multi-year floor for growth that few companies in history have ever enjoyed. Despite the inevitable lumpiness seen in names like Axon and Monday this quarter, I am heading into 2026 with high confidence that the super-cycle in accelerated compute and the resulting software explosion, seen for example in Datadog’s massive RPO explosion, will continue to drive outsized returns.
I am wishing you all a great new year!
Ben
Past recaps
2022: Jul 2022 | Aug 2022 | Sep 2022 | Oct 2022 | Nov 2022 | Dec 2022
2023: Jan 2023 | Feb 2023 | Mar 2023 | Apr 2023 | May 2023 | Jun 2023 | Jul 2023 | Aug 2023 | Sep 2023 | Oct 2023 | Nov 2023 | Dec 2023
2024: Jan 2024 | Feb 2024 | Mar 2024 | Apr 2024 | May 2024 | Jun 2024 | Jul 2024 | Aug 2024 | Sep 2024 | Oct 2024 | Nov 2024 | Dec 2024
2025: Jan 2025 | Feb 2025 | Mar 2025 | Apr 2025 | May 2025 | Jun 2025 | Jul 2025 | Aug 2025 | Sep 2025 | Oct 2025 | Nov 2025