CRWD revenue growth smaller than customer growth

CRWD did grow the number of customers by 82% last quarter. But revenue growth was only 74.2%.

How is this possible, it they have a net retention rate of 120%?

Shouldn’t be revenue growth > customer growth with a net retention rate above 100?


More customers but lower average revenue per customer because the customers are smaller.

Management talked about this a little bit on the Q2 call:

“we’ve had a lot of success in the SMB market, I can tell you. We’ve got a very well refined inside selling motion combined with the trial”

I think it’s actually a positive. More small customers that will spend, on average, 20% more every year.

  • Fish

It’s also possible that they did not recognize revenue yet in the quarter for some of the new customers. This is the definition of subscription customers from the company:

We define a subscription customer as a separate legal entity that has entered into a distinct subscription agreement for access to Falcon platform for which the term has not ended or with which we are negotiating a renewal contract. We do not consider our channel partners as customers, and we treat
managed service security providers, who may purchase our products on behalf of multiple companies, as a single customer.

And Dollar-Based Net Retention Rate:

Our dollar-based net retention rate compares our ARR from a set of subscription customers against the same metric for those subscription customers from the prior year. Our dollar-based net retention rate reflects customer renewals, expansion, contraction, and churn, and excludes revenue from our incident response and proactive services. We calculate our dollar-based net retention rate as of period end by starting with the ARR from all subscription customers as of 12 months prior to such period end, or Prior Period ARR. We then calculate the ARR from these same subscription customers as of the current period end, or Current Period ARR. Current Period ARR includes any expansion and is net of contraction or churn over the trailing 12 months but excludes revenue from new subscription customers in the current period. We then divide the Current Period ARR by the Prior Period ARR to arrive at our dollar-based net retention rate.

Net Retention Rate is only looking at the customer cohort from the prior year. Revenue growth is looking at the whole pie. It’s really impossible to make an apples-to-apples comparison. It’s certainly not Net Retention Rate + New Customers Growth = Total Revenue Growth. There are so many puts and takes… contract length, initial contract size, renewal timing, customer size, etc… I guess that’s why these companies give us investors all these different metrics so we can try to see the whole picture.



And finally, the customers may even be large enterprises but are just starting out with one or two modules and will add more later, while current customers may provide more revenue per customer because their “land and expand” has already expanded.


With new tech like CRWD, DDOG, OKTA, SNOW, etc. there is usually a ramp-up period where the corporate buyers are navigating their internal change-control, while also learning to overcome the technical hurdles of installing, configuring, and leveraging the toolset. Typically, most corporations will deploy new tech in a limited scope to minimize risk, while they work on identifying the best scenarios and use cases for the new tech. Once the IT or SW engineers get comfortable with the toolset and understand its value. then they start using it more and more. That is why you see a positive net retention rate, especially in the hyper-growth phase. Rollouts of a key tech like this can easily take a quarter to several years.

As Saul stated, this fits in with the land and expand methodology. The beauty of these techs is they make so easy to expand and turn up the burn rate. Once a company like CRWD gets their foot in the door, and the initial implementation work is done, there is a repeatable, reusable pattern added to the corporate knowledge-capital. Sometimes the rollout is planned and starts out small, then follows the roadmap. But in other cases one division in the company will make the investment, and then as the product starts to shine, word spreads and other leaders across the enterprise take notice. At that point ramping up usage is easy since there is already knowledge and expertise to leverage.

These are common corporate analogies playing out across the world on a regular basis. SaaS just makes it so simple and easy to take advantage of good things like CRWD and other innovative tech.


Hi zerohedge12,

Others have already touched on what I will say, but I figured I would throw a little math in the mix.

NRR (net retention rate) applies to the spend of customers that existed in the prior year. New customers, clearly would not be included in those calculations. Also, new customers start with one or two of the many services that Crowdstrike offers. So, the average revenue per new customer is likely much less than the average revenue for old customers. Let’s say a new customer spends 60% as much as a typical old customer (a number I just made up, for illustration purposes only).

If there are N existing customers, and the customer count increased by 82%, then there are 0.82N new customers. But, my assumption is that new customers only spend 60% as much. If old customers spend, on average, R; new customers would spend, on average, 0.6R So, the total revenues (ignoring churn) would be:

Total revenues = NR + 0.82N0.6R = 1.49N*R

So, in my example, revenue growth is 49%, much lower than customer growth. Clearly, this made-up example is wrong, because revenue growth is 74.2%. But, it illustrates the mechanism.

The good news is that all of those new customers will, for the most part, become old customers, and should exhibit similar growth in spend with CRWD. Be patient. :slight_smile:

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