Cybersecurity firm Crowdstrike Holdings Inc (NASDAQ: CRWD) was up 12% in after-hours as it crushed earnings. Here’s why long-term investors should still like this company.
Earlier this week there was some doubt over the durability of cloud stocks after Zoom Video Communications Inc (NASDAQ: ZM) fell despite posting 367% year-on-year revenue growth.
Crowdstrike, a cybersecurity specialist that provides endpoint protection, also blew past expectations after it reported its latest quarterly earnings on Thursday.
I’ve written previously about Crowdstrike’s ability to generate quality growth and the company didn’t disappointed in its latest set of results.
Crowdstrike posted impressive revenue growth of 86% year-on-year as it saw sales rise to US$232.5 million during its fiscal third quarter.
Perhaps even more impressively, its annual recurring revenue (ARR) rose 81% year-on-year to US$907.4 milllion as it added a record 1,186 net new subscription customers.
The beauty of that recurring revenue exemplifies how management have been able to execute on delivering a product that enterprise customers want to have.
Security in the age of Covid-19
Providing the security that all remote workers need to deal with during Covid-19 has been a huge tailwind for Crowdstrike.
The company is one of the leaders in the field given its cloud-native approach to endpoint security (which is basically the devices that are remotely bridged to corporate computer networks – so think of your phone or home laptop).
Shares of Crowdstrike are already up over 200% so far in 2020 as demand accelerates for a comprehensive endpoint security offering.
Yet management, led by co-founder and CEO George Kurtz, are not resting on their laurels. Crowdstrike has built a compelling product suite which uses its Falcon Platform as a gateway product to the larger offerings.
Utilising artificial intelligence (AI) and the power of the cloud, Crowdstrike Falcon can continuously learn from previous attempted attacks to better protect users the next time a breach is detected.
New Crowdstrike offerings
Yet what Crowdstrike offers goes beyond that. That’s because by using a “land-and-expand” Software-as-a-Service (SaaS) model, it has been able to upsell existing customers to more products.
The latest earnings attest to that. The company’s subscription customers that have adopted four, five, and six or more modules increased by 61%, 44% and 22%, respectively, over the same quarter last year.
That demonstrates the value of Crowdstrike’s product suite. Admittedly, the vaccine news for Covid-19 could take some of the tailwinds out of its stock in the near term.
However, over the longer term, a partial work-from-home and work-from-office hybrid model is looking increasingly likely.
Whatever happens in 2021 and beyond, Crowdstrike’s products are likely to see solid demand for years to come.
Disclaimer: ProsperUs Head of Content owns shares of Crowdstrike Holdings Inc and Zoom Video Communications Inc.