I realize that the Crowdstrike fiasco unleashed a torrent of posts on this board. But much of that thread was technical in nature and less about the impact on the biz itself. It’s also old, so I decided to post this standalone rather than as a reply. It seems that there are quite a few ppl on this board that actually are tech workers. How many are customers and what kind of impact has it made on CRWD’s reputation?
My wife works on a dev team for a large private tech company that I’ll decline to name. They are a CRWD customer and haven’t altered anything. But the mood among the rank-and-file developers is not very positive and it only took them 24 hours or so to fix their issues. I suspect others that were more impacted could be really cranky. A comment from her boss interested me as a (now ex-) CRWD shareholder. The decision to use CRWD’s services was not that CRWD provided the best, that it was easiest to use, or anything of the like. It was that using Falcon made security audits so much easier. Auditors love it and push for it. In other words, they use it bc they’re effectively told to. Not bc they particularly like it.
I found that an interesting insight. Their decision was less theirs than their auditors. From that perspective, this may not impact churn to any great degree bc Falcon is so entrenched. But it could significantly blunt cross-selling and slow growth of the newer modules if there is a significant set of customers that feel the same way.
Anyone else have any scuttlebutt from the front lines now that the dust has settled?
Peter
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As I post this, Crowdstrike has not yet reported for its last quarter, so it seems premature to say the dust has settled. Give it a few more hours at least, after the report and Mr. Market had disgested it.
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Seems like a pretty good report and decent price reaction after hours. They had solid results for this quarter, but reduced forward guidance.
Personally, I sold 90% of my shares at $290 the day after “the incident”. I did this so that I could think more clearly about the situation while I tried to decide what to do longer term. After reading input from as many sources as I could, I bought back 2/3 of my shares at $250. The stock kept dropping (around the time of the Japan carry trade blow up) and I was able to buy back the final 1/3 at $214.
The main driver for my decision to get back in so quickly was that I felt like the management of this company had built up trust with me over many years and I was willing to trust that a great management team would work through the short term issues. The fact that I was able to lower my cost basis was a somewhat lucky side benefit.
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Good summary of the CRWD ER by Brian Stoffel.
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This is kinda nit-picky, but I think it should be made clear that security auditors and financial auditors are not the same. At least, the reports are very different. However, some outside auditing firms (PWC for example) may provide services for both audits.
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This is way to early to say “the dust has settled”. The short thesis here would be the following four points:
- Fewer customers are going to buy Crowdstrike services
- Existing customers will be able to leverage better prices at contract renewals
- Lawsuits are going to eat into Crowdstrike’s cash
- Crowdstrike may screw up again making everything worse.
None of these were going to show up in their recent quarterly report.
I wouldn’t consider the lawsuits too pressing, they will take a decade to resolve. The most imminent is the first point. I’d say the very next quarter is going to show us how bad the fall-off of new customers is going to be. The renegotiations of new contracts are going to take 2-3 quarters. Within three quarters Crowdstrike could prove that they are not likely to screw up that hard anymore.
So I’d say the dust will settle in 3 quarters.
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Management stated they anticipate 12 months of headwinds on the call.
Regardless, all four of those factors apply. The initial hit to ARR is expected to be $60M in the second half. I’d say the net new ARR and RPO trends will be things to watch as leading indicators along with the annual customer count they will release in Q4.
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Yeah, there will still be some renegotiations left 4 quarters down. But after 3 of them there should be no more surprises coming.
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At the risk of stating the obvious, remember that “the event” occured on July 19th. So, 90% of the quarter was already locked in by then, with just 8 days left to go. And since this was Q4, the fiscal year numbers were hardly affected at all, lucky for them. Not surprisingly that there were able to make some good numbers, since the business had been doing well.
I found their guidance to be lacking, in that they claimed they’ll still achieve $10 billion in ARR by 2031, yet would not give an ARR for 2025. Really?
They did acknowledge a $120m hit to revenue for next year, basically about $30m per quarter. They said some end of FY deals got pushed out, but they still expect to close them, just not as profitably.
We’ve previously discussed the switching costs, which I think is what is saving Crowdstrike right now. But, new business is going to be harder to get, and not as profitable, at least for a while.
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I’m not trying to influence anyone, but I thought I should post this since I publicly stated above that I bought back my CRWD shares last month. This morning I sold ~ 90% of my CRWD shares. There are many reasons for this decision, but most of them are off-topic so I’m not going to list them.
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