My case for CRWD over NET

I’ve been clearly losing the battle for the board’s opinion on Crowdsrike, mostly because I’ve tried to throw bits and pieces of data out there in reply to other threads without a comprehensive rebuttal, and I’m not as frequent a poster as I’d like to be.

But alas! I’ve dispensed with the lazy replies. I’m here for one last masochistic attempt to persuade you all that you are WRONG/CRAZY to be ditching CRWD, ESPECIALLY if it’s for NET.

I’m going to stick to quantitative over qualitative, because I think the qualitative is more subjective and you can manipulate the narrative to make either of CRWD or NET sound better than the other. For instance, with CRWD, I can go on and on about their recent partnerships (eg. Deloitte) and how CrowdXDR Alliance is going to be game changing, and how they have sales reps collaborating with Zscalar, but I could also go on and on about NET is creating a “flywheel for developers” and the differentiation in the optionality of their architecture, and how their main competitor Fastly has floundered and they have no competition, but honestly when it comes down to it, we all know at the end of the day, the objective measures of the business on paper in numeric form is what matters.

Saul has punished my argument (twice!) for framing CRWDs deceleration in revenue growth as “modest, gradual, etc”. These are all subjective terms of course, but the data is not, and I think with CRWD many are having tunnel vision on the direction of the revenue growth, and are losing sight of what a great hyper-growth Saul stock behemoth this still is, and why in a relative sense, NET hasn’t proven anything near what CRWD has to-date, nor has it shown that it’s prospects for the future are superior.

Since I believe valuation always matters to some degree, here’s CRWD vs NET

¦      ¦ P/S (TTM diluted) ¦ FWD P/S (+1Yr) ¦ FWD P/S (+2Yr) ¦
¦ CRWD ¦ 32.30             ¦ 19.94          ¦ 12.82          ¦
¦ NET  ¦ 55.28             ¦ 35.12          ¦ 22.32          ¦

Forward on CRWD +1 year I took 13% quarterly growth, +2 year I took 11% quarterly growth.
Forward on NET +1 year I took 12% quarterly growth and I kept that through year 2.
12% annualized is 57%, 13% annualized is 63%
FWD P/S is subjective, TTM P/S is objective. Take those as you will. It’s just one way to look at valuation, and as flawed as it is, still the most useful IMO.

The summary from my perspective is, NET is way more expensive than CRWD, and it would take a long time and with a lot of friendly assumptions for NET for the price to make sense to me relative to CRWD.

I’m going to present data from both CRWD and NET going back to Q119. I would normally include Gross Margins and DBNRR, but they’re mostly a wash between CRWD and NET so I didn’t bother.

Here’s CRWD’s growth since Q119

|                             | Q119    | Q219    | Q319    | Q419    | Q120    | **Q220**    | Q320    | Q420    | Q121    | Q221    | Q321    |
| Rev (in millions)           | $96.10  | $108.10 | $125.10 | $152.10 | $178.10 | **$199.00** | $232.50 | $264.90 | $302.84 | $337.70 | $380.10 |
| Rev Growth (YoY)            | 103.21% | 94.08%  | 88.46%  | 89.06%  | 85.33%  | **84.09%**  | 85.85%  | 74.16%  | 70.04%  | 69.70%  | 63.48%  |
| Operating Margin (Adj)      | -23%    | -19%    | -13%    | -4%     | 1%      | **4%**      | 8%      | 13%     | 10%     | 10%     | 13%     |
| Free Cash Flow Margin (Adj) | -16.76% | -26.98% | 5.64%   | 33.32%  | 48.85%  | **16.29%**  | 32.73%  | 36.76%  | 38.73%  | 21.81%  | 32.49%  |
| Subscription Customers      | 3,059   | 3,789   | 4,651   | 5,431   | 6,261   | **7,230**   | 8,416   | 9,896   | 11,420  | 13,080  | 14,687  |
| Subscription Growth (YoY)   |         |         |         |         | 105%    | **91%**     | 81%     | 82%     | 82%     | 81%     | 75%     |

So, since Q119, you have an average deceleration per quarter of about 4% for CRWD, from an initial base of 103%. In my book, from that high of a number and starting from $100M in revenue, that’s gradual, but again it’s a subjective term.

Here’s NET’s growth over that same time period + Q4 of this year.

|                             | Q119   | Q219   | Q319   | Q419   | Q120   | Q220   | Q320    | Q420    | Q121    | Q221    | Q321    | **Q421**    |
| Rev (in millions)           | $61.73 | $67.42 | $73.94 | $83.90 | $91.30 | $99.72 | $114.20 | $125.90 | $138.10 | $152.40 | $172.30 | **$193.60** |
| Rev Growth (YoY)            | 47.61% | 48.90% | 47.67% | 51.17% | 47.90% | 47.91% | 54.45%  | 50.06%  | 51.26%  | 52.83%  | 50.88%  | **53.77%**  |
| Operating Margin (Adj)      | -26%   | -28%   | -25%   | -22%   | -16%   | -10%   | -4%     | -4%     | -5%     | -3%     | 1%      | **1%**      |
| Free Cash Flow Margin (Adj) | -36%   | -25%   | -45%   | -28%   | -34%   | -20%   | -16%    | -19%    | -2%     | -6%     | -23%    | **4%**      |
| $100k+ Customers            | 336    | 387    | 451    | 526    | 556    | 637    | 736     | 828     | 945     | 1,088   | 1,260   | **1,416**   |
| $100k+ Customers (YoY)      | 71%    | 65%    | 73%    | 79%    | 65%    | 65%    | 63%     | 57%     | 70%     | 71%     | 71%     | **71%**     |

So, since Q119, you have an average acceleration of 0.6% for NET (with benefit of Q421 report), from a base of 47.6%.

Let’s look at Q220 when CRWD’s revenues were comparable to NET’s today

When CRWD was doing NET’s revenue numbers in Q220, they grew 84% vs. NET’s 54% growth. CRWD had 4% Adj. Operating Margins vs. NET’s 1.2%. CRWD was FCF positive with FCF Margin of 16.3% vs. NET’s 4%. CRWD had 7,230 subscription customers growing at 91% YoY vs. NET’s 1,400 100k+ customer base growing at 71% YoY.

Now, trace that revenue growth compare back a few quarters and you’ll see that, for equivalent revenues, it’s even more favorable to CRWD in almost all cases.

“BUT WHAT HAVE YOU DONE FOR ME LATELY?” - yes that was then and this is now, I get it.

Even at the scale they are at today in revenue (more than double NETs revenue) CRWD has 75% growth in Subscription customers at 14,687 total. Compare that to NET’s Q421 of 71% growth against their $100k+ cohort of 1,416 customers. CRWD is going on 9 straight quarters of FCF positive margins with an average of 30% FCF Margin, and 7 straight quarters of positive operating margins!! NET just posted their very first FCF Positive Margin this quarter, and has had a shallow 1% operating margin the past 2 quarters.

These aren’t just niche numbers friends, these are really important metrics that have been discussed on this board for years as part of the hypergrowth metrics that need to be considered.

From Saul’s knowledgebase - “I look for positive and growing Free Cash Flow (FCF). If the company isn’t there yet I’d want to see progress in that direction…I look for rapidly improving metrics like rapidly dropping losses as a percent of revenue or increasing profits if they are already profitable, increasing gross margins, rapid customer acquisition, improving cash flow, dropping operating expenses as a percent of revenue, etc.

Can NET get to where CRWD is today and maintain or surpass the growth numbers listed above? Sure it’s possible, but they still have to prove it, and it’s not like quantitatively there’s a huge surplus of evidence that the path is paved with gold for them to get there.

We’ve all been watching our growth stocks report over the past 2 weeks, and judging by the consistently excellent results from the likes of BILL and DDOG as well as the cloud growth in Azure, Google Cloud, and AWS, there’s little reason to believe CRWD will do anything less than an average beat of their guidance from recent history when they report March 9th.

A modest prediction on revenue alone would be $429M (which I’d be happy with), which would put CRWD at 62% YoY, but I expect something more like $435M, which would be 64% YoY and satiate the “re-acceleration” narrative that everyone craves. Then the Q1 guide becomes important, and for that I’d like to see $470M at the top end to show confidence that they’ve got another quarter or 2 above 60% YoY and perhaps some signs that their recent investments in tech (eg. Humio, XDR, etc) and partnerships (eg. Deloitte) are winning competitive deals. But just like anything else, we just have to wait and see.

As a bit of a tangential observation - as someone who’s studied this board and digested the most rec’d posts all the way back to 2014 (thanks to this -, my sense is that, if you had to put a weighted priority to the metrics we all track and how important they are to us, then revenue growth ACCELERATION, sometimes with little regard to how much, hasn’t just become the most important, it’s become orders of magnitude more important than any other metric to this board. This is purely anecdotal, but that’s the sense I get, and I don’t think it was always that way. In fact, I think that’s a pretty recent evolution.

So, there you have it, I’ve made the best (quantitative) case I think I can make. If I’m wrong, I will come back and admit it with no shame, just as I did with ZM and TDOC, but from my vantage point, way more people have dumped CRWD in conformity-like-fashion than I would have expected (while still propping up NET), and I guess this is my super-contrarian-fringe rejection of that! :slight_smile:

Hope you found this insightful and worth the read.



Brother Chris!

Turns out there’s still money in the banana stand and the CRWD stand, and for years to come! Thanks for doing this work!

Monkey has also written upstream about the problem of dismissing your long-term gunslinger of a Heavyweight Boss in Kurtz for the new security guard who’s still wet behind his ears here:…

So add to the “data set” this recent blog by Kurtz in which he spells out how all the other companies are lying when they say they offer XDR, which is a fancy name for something you need to have or your company will be fried:

Best of all for our customers, Falcon XDR is an extension of the industry’s leading EDR. Why does this matter? It’s plain and simple — if you don’t start with EDR, you don’t have XDR.

And Kurtz makes explicit that when competiton–S, ahem, cough, cough-- calls it XDR doesn’t make it actually so.

Is Monkey smart enough to understand the tech and its imposters like Brother muji can? No. But it does seem likely that a CEO of Crowdstrike can’t just up and start lying about what’s what. Yes, he is also marketing, but his claims do not have the appearance of falsehood; to the contrary, if I’m holding bags of the other guys’ and suspect they’re masking some fundamental tech inequalities, and there’s some hacker comes along and breaches one of your clients because these gaps in your actual tech offering that looked sturdy but wasn’t actually, your security companies’ stock might go how low, how quickly, exactly? Not trying to be doomsday, but the board’s context requires at least this:

  1. Most of y’all have sold CRWD because “it’s slowing down.”
  2. Chris’s numbers above beg to ask "is slowing down to a mere 63% from such a high base in locked up forever customers what you think it is?
  3. Kurtz’s blog post once again reminds us CRWD has the best and complete platform (unless they’re lying).

Does not smell like a sell to Monkey, hence he’s sitting on his pile of CRWD shares and will poke out any gorilla’s eyes who tries to snatch even one.


M (long CRWD, NET, ZS, S, DDOG, OKTA) for a happy little cybersecurity basket)

@cxddesign on twitters


Absent link to Kurtz’s “you frontin’” exposé about imposter non-XDR wannabees:…



All that is great–and I used to think that way until very recently.

I have plenty CRWD in my 401k via my 2 ETFs (LRNZ and WCBR). And I am fine with that because my 401k is stuck with ETFs and hence TMF LTBH applies.

But in my “learning” Saul-style port, I sold CRWD but repurchased yesterday most of the NET I had sold previously.

Why? Because your analysis does not offer a tentative explanation for why:

“…revenue growth ACCELERATION, sometimes with little regard to how much, hasn’t just become the most important, it’s become orders of magnitude more important than any other metric to this board.”

At the end, we need to formulate a hypothesis for why this matters so much/why some companies that look worse in an analysis like yours deliver better short-term returns than others.

And mine is that it does because it impacts DPV models used by institutions and funds to calculate “fair value.” An acceleration leads to upward revision of current value and a deceleration leads to a downward revision of current value.

So how did I get money for NET? I sold DOCS which is relevant to this conversation. I had bought DOCS in Nov and added in early Jan. Ultimately, insane profitability and FCF did little to nothing to prevent a short-term share price collapse. And while DOCS delivered a stupendous quarter, its hyper-growth seems all but done. I am sure they will beat their guidance by quite a bit, but that won’t suffice and I was happy to pocket a 20% gain (for a change selling after a big rise than after a punitive AH action).

In sum, yes, I do think that acceleration or at least holding steady is key to short-term price movement though what I say above is a just an informed guess.


Hi Chris,

This is a great, detailed post outlining your thesis for why CRWD is currently a stronger company to buy than NET. I thought I’d post a reply since I agree with some of your thoughts, but don’t fully agree with your conclusions.

First, it’s absolutely true that on a yoy basis, CRWD is still growing revenue faster than NET, and it’s doing so at greater scale (64% yoy growth for CRWD vs. 54% for NET in their most recent quarters). In fact, NET is the slowest growing company in many of the portfolios on this board (including mine).

As well, CRWD definitely has better looking numbers with regards to operating margin and FCF margin. As you pointed out, NET has just hit positive non-GaaP operating margin last quarter and positive FCF margin this quarter for the first time. Meanwhile, CRWD’s margins have been positive for a while now.

I think you are also right about valuation. NET has been rewarded by the market with a very high P/S ratio relative to its growth rate. NET has always struck me as more of a “story” stock rather than a “numbers” stock, which may explain why its valuation is so high. There seems to be a perception (and it may be true) that its TAM is huge and expanding, its revenue growth will be extremely durable for a long time, and it’s on its way to becoming the 4th major public cloud. I personally tend to focus more on the numbers now rather than the story/narrative, as it’s hard to predict the future with any high degree of certainty. So from that standpoint, you’re right that NET is slower growing relative to our other companies while also commanding a higher P/S multiple than most. And when you compare NET’s numbers to something like DDOG, which just posted an absolute blowout of a quarter, it’s certainly much weaker and there isn’t really much of a comparison. In a portfolio of 5 stocks, NET probably wouldn’t make the cut.

That being said, most of us hold more than 5 stocks, and if you’ve got 8-12 stocks, then NET might make the cut (since there aren’t 8-12 stocks that are on the level of DDOG). NET’s growing slower than our other companies, but in the grand scheme of the whole market, or even just the SaaS sector, durable growth in the low 50%s is phenomenal (combined with improving operating margins, FCF, and net retention rate).

Back to the comparison with CRWD, NET’s revenue growth may currently look significantly slower on a yoy basis, but if you look at qoq revenue growth rate, it tells a different story. The last 2 quarters, NET posted qoq revenue growth of 12.3% and 13.1%, whereas CRWD posted qoq revenue growth of 12.5% and 11.5%. So CRWD may already be growing at the same rate or slightly slower than NET, even though the yoy growth rate doesn’t reflect that (since it includes growth from 3-4 quarters ago). And whereas NET’s revenue growth is incredibly steady (their 2022 guidance also supports this), CRWDs revenue growth has been decelerating for a while now, and it’s hard to predict when this bleeding will stop. I totally agree with Saul that yoy revenue growth decelerating from 86% a year ago to 64% today is quite concerning, and I wouldn’t exactly call the magnitude of this deceleration “gradual”.

In the end, I think there are significant bear cases to make for both NET and CRWD. Neither NET nor CRWD is among my very best ideas, so while they make it into my portfolio of 11 stocks, they are relatively small positions. I agree with some of your concerns about NET, but I don’t agree that CRWD is a clear-cut better investment.

-tiger (long NET 4.8%, CRWD 4.2%)



"At the end, we need to formulate a hypothesis for why this matters so much/why some companies that look worse in an analysis like yours deliver better short-term returns than others."

Is there a comprehensive, definitive dataset to present here that proves this to be true? Define “short-term”. YTD, CRWD is down 11.2%, and NET is down 20.2% even with the benefit of a “good” Q4 report. Price action, especially “short-term” price action, can be easily cherrypicked (as I just demonstrated, only for illustration).

"And mine is that it does because it impacts DPV models used by institutions and funds to calculate “fair value.”

I have no idea what DPV is (happy to be educated here), but I am certainly aware of the “algos” causing gyrations, but it seems a bit foolhardy to try to understand how those work, unless there’s a dataset that proves in aggregate that if you input X, you get Y with some confidence ratio above Z%. Couldn’t someone take another side of this argument at say that there are discounted cash flow algos that kick in when interest rates start to rise that cause growth stocks to sell off? This just gets a bit too dicey for me. You might have a point here, this just isn’t an area where I feel like I’ll get an ROI on my time to try to figure it out.

“I had bought DOCS in Nov and added in early Jan. Ultimately, insane profitability and FCF did little to nothing to prevent a short-term share price collapse.”

I don’t think DOCS is a good comp at all here. Yes, they had high revenue growth, EBIDTA, and FCF, but we know they had an unsustainable COVID bump and had already penetrated the TOP 20 pharmaceutical manufacturers and hospitals in the US by mid-2021, and even if they blow their next quarter guide out of the water like they did this quarter, they would be at approx 2% QoQ and 50% YoY, and THAT is what I would call rapid deceleration from 100% YoY just 3 quarters ago, but hardly unexpected.


“The last 2 quarters, NET posted qoq revenue growth of 12.3% and 13.1%, whereas CRWD posted qoq revenue growth of 12.5% and 11.5%. So CRWD may already be growing at the same rate or slightly slower than NET, even though the yoy growth rate doesn’t reflect that (since it includes growth from 3-4 quarters ago).”

I think your numbers a just a bit off there. NET’s QoQ growth in Q3 was 13% and Q4 (just reported) was 12%. CRWD Q2 QoQ was 12% and Q3 was 13%. And most importantly, keep in mind that we still have to see CRWD’s Q4 report, and as I mentioned in my OP, pretty much every growth stock has outperformed their guidance this earnings season. A neutral beat for CRWD would be $429M, which is 13% QoQ, but again if I was a betting man I’d take the over based on what we’ve seen reported this past week. I think $435M is very reasonable and would be 14% QoQ. Let’s come back to it on March 9th when CRWD reports and then its a better apples-to-apples compare with your statement above.



Hi Chris,

Our qoq numbers are the same, it’s just that I’m using 1 decimal point, while you’re rounding to a whole number. NET’s most recent qoq revenue growth in Q4 was 12.3%, and in Q3 it was 13.1%. CRWD’s most recent Q3 qoq revenue growth was 12.5% (which you rounded to 13%) and in Q2 it was 11.5% (which you rounded to 12%).

But yes, you’re right that CRWD has not reported Q4 yet, so it’s not an apples-to-apples comparison. We’ll have to re-assess after they report.


I think this is a fantastic post and discussion.

There is certainly a lot to like about CRWD but the deceleration is ultimately what drives the share price. The key is to get out when that starts. Look at the CRWD chart for the past year or so, it’s gone nowhere. But if Q4 suggests a fight back and actually we can expect stable or even increased growth in the 60% range, then we may well have a Zscaler situation on our hands. I’ll be watching Q4 very closely but until then I can’t find a place in my portfolio.


Chris, I read your post and truly appreciate the effort you’ve put in!

I’m not a numbers guy as much as I’m a techie. So your research and presentation of the numbers are of great help to someone like me!

There’s no doubt that both CrowdStrike and Cloudflare are great companies with amazing leadership. A couple of years back I had owned both stocks and have written extensively about both of these companies on this board.

However, about a year and a half ago, I sold my NET position but had maintained my CRWD position. At a point of time, my CRWD position grew really large ( way more than the 25% that I’m comfortable in); which was an exception with ONLY Datadog getting to that level now!

There was a lot of reason to do that from a technical standpoint ( as I normally invest in SaaS companies that are disruptive and ones’s that I understand well). CrowdStrike was one such unique cloud native end point security company with great leadership (one that I knew about much before they IPO’d.) As of today, I don’t see any other company providing a complete platform as they do. I’ve explained in one of my prior posts why I currently have a 2:1 allocation in SentinelOne:CrowdStrike despite the reasons I’ve laid out against SentinelOne. This difference in allocation is purely from a short time investment perspective.

On the other hand as much as I liked Cloudflare, I could see them coming under immense pressure being a CDN provider. With the entire CDN market being commoditized and the hyperscalers weighing in a lot, most of them are having to find ways to keep growing revenue. Have you ever wondered why Fastly isn’t being acquired despite of it’s current valuation? Cloudflare, surely is doing an amazing job trying to innovate and coming up with products in different areas. They are trying to compete against Zscaler, Amazon and all the hyperscalers to be the 4th cloud. However, those are lofty goals and none of those are truly “zero to one disruptions!” and they are trying to compete against formidable players. The hyperscalers with their platforms, ecosystems and cash reserves are not easy to disrupt; nor are some of the proven and tested cloud native solutions from the likes of Zscaler and CrowdStrike. All of those companies have spent a lot building those products in the past decades. Specially, services like AWS have millions of developers on the ecosystem. Amazon itself has thousands of the best developers in the world working on those products. So when you look at the big picture, competition between Cloudflare R2 vs Amazon S3 is not something that is looks very consequential. All of those developers who have built S3 and their APIs haven’t done that in one day and even they are “innovating every day”; look at the AWS latest quarter numbers!

I could go on writing pages on the technical details about these companies but for the sake of the argument on this thread, I think I stand with Chris and CMFMonkey, specially about the hype about XDR (Extended detection and response). This term was coined by Nir Zuk of Palo Alto Networks but recently many companies are talking about XDR as if it’s their USP :grinning:

ronjonb (

Disclosure. I have a 5% position in CRWD.


Hi All,

  1. Why own CRWD and HOPE it comes back ?

  2. Why not strive to own stocks that are either accelerating revenue or holding serve? You can always buy back into CRWD if it shows that it is re-accelerating growth ala Zscaler the last few quarters.

  3. Besides dropping from the 80’s to the 60’s, YoY, Quarterly Revenue Growth is a leading indicator and CRWD hasn’t proven re-acceleration their either.

  4. IMHO, NET was a wider MOAT than CRWD. Cloudflare owns and operates all of its 250+ PoPs. It also controls the network traffic between PoPs and has access to all of its equipment down to the hardware level and this allows them to fully optimize network performance and their compute/storage layers. This insulates Cloudflare from potential competitors.

  5. NET has vastly increased it’s TAM over the last 6 months. According to Peter Offringa at Software Stack Investing, Cloudflare added $100B of incremental TAM last fall during birthday week, including Email Security, R2 Storage, Cloudflare for Offices, Real Time Communications and Web3 Gateways. Overall, it’s breathtaking pace of innovation and TAM expansion warrants a premium valuation.

I think this post at Software Stack Investing does an amazing job of explaining the MOAT and TAM expansion in detail.…


These are the metrics I use to compare two companies when I need to:

                                             **CRWD    NET**
Rev Gr YOY                                    63%    54%
Rev Gr FWD                                    55%    49%
Rev Gr QOQ avg (past 3 qtrs+next qtr est)     12%    11%
Gross margins avg (past 4 qtrs)               74%    78%
EBITDA trend (# of incr in past 4 qtrs)        1      3
Cust incr. QOQ avg (past 4 qtrs)              15%     6%
Cash on hand                                $1.9B  $1.8B
Oper CF trend (# of incr in past 4 qtrs)       3      2
Free CF trend (# of incr in past 4 qtrs)       3      2
Debt to cash ratio                          0.41   0.71
RPO/Def Rev QOQ avg (past 4 qtrs)             16%    21%

CRWD comes ahead in 8 of the 11 metrics, although NET scores well too in several areas.
I own a 7% CRWD position and a 6% NET position - each of them for different reasons.

NOTE: I do not look at valuation when doing this analysis. This is by design - I do not want to be swayed by the stock price movements. I want to evaluate the companies purely based on current business performance and future business prospects.