Dive Brief:
- The financial impact from last month’s ill-fated CrowdStrike Falcon sensor update that caused a global IT network outage will continue through the first half of 2025, company executives said Wednesday during an earnings call.
- Executives warned investors of temporary delays in its sales pipeline generation, longer sales cycles due to increased scrutiny from new and existing customers, and muted upsell potential.
- CrowdStrike expects an impact of about $60 million in net new annual recurring revenue and subscription revenue due to what it dubbed its “customer commitment packages,” discounts it’s offering some customers through the second half of this year, CFO Burt Podbere said during the Wednesday earnings call for the company’s fiscal 2025 second quarter, which ended July 31. “When we get to the back half of next year, we’ll start to see an acceleration in the business.”
Dive Insight:
Despite the temporary financial impact, CEO George Kurtz disputed competitors’ claims of customer defections in the wake of CrowdStrike’s error.
“We’ve built a lot of trust with our customers over time,” Kurtz said, “and we put a lot of trust in the bank.” During the earnings call, Kurtz recounted conversations with customers who remain loyal since the incident and said he’s encouraged about the company’s long-term outlook.
“Consistently the calls have been, ‘you have saved us way more times than this incident, and we are all in on CrowdStrike,’” Kurtz said.
That message is counter to recent comments executives from Palo Alto Networks and SentinelOne made during recent earnings calls. Both competitors said CrowdStrike customers have reached out since the outage to explore a potential change in security vendors.
Yet, Kurtz is confident CrowdStrike has maintained traction with its customer base. “Customers’ comments back to me are, they don’t want to go backwards. They don’t want a bunch of disparate products. They don’t want a bunch of different consoles,” Kurtz said. “And they specifically told me that the adversary lives in the gaps between products, in the seams between products.”
The financial impact from the outage was apparent, but minimal during the quarter. The company expects to endure the toughest conditions from the fallout during its third quarter, which ends in October.
CrowdStrike reported $5.1 million in total costs during the quarter related to the channel file 291 incident, the basic field input error that caused an out-of-bounds memory read that rendered global IT networks non-operational.
The incident was “the most challenging event in our company history,” Kurtz said. “The magnitude of the July 19 incident will never be lost on me, and my commitment is to make sure this never happens again.”
CrowdStrike banked nearly $47 million in net income on almost $964 million in revenue during the quarter. Net income increased 451% from the year-ago period and revenue was up almost 32% year over year.
However, the company cut its revenue and profit forecasts for the remainder of fiscal year 2025. Compared to projections shared at the end of the previous quarter, CrowdStrike cut its full-year revenue forecast nearly 2.2% at the low end of its guidance range and 2.7% at the top end. Non-GAAP net income forecast was cut 7.8% at the low end and 9.3% at the top end of the range.
The global incident CrowdStrike caused has a half life, Podbere said. “The closer you are to the sun, the hotter it is, the more difficult it is in terms of headwinds, and as you move farther and farther out you see more relief, so the impact gets less.”
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