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CrowdStrike stock plunges on weaker outlook

Yahoo Finance Live anchors discuss third-quarter earnings for CrowdStrike.

Video transcript


- Taking a look as well at a number of earnings this morning. Speaking of technology, we've got a number of software companies out with numbers, and it's a mixed bag. Crowdstrike shares are plunging 17% after the company's beat on earnings and revenue in the third quarter, but missed on its revenue forecast for the fourth quarter.

So we'll start there, and we've got a couple of others to run through. I thought what was really interesting about Crowdstrike is that its earnings actually looked pretty good. Its earnings beat last quarter, and its earnings forecast is above estimates in the fourth quarter. So the sales is where the shortfall is.

- Yeah, more like brutal strike. I mean, this is a tough reaction here, and our top ticker on our site. And, Julia, really, just looking at some of the notes from this morning. I'm going to highlight Joey Gallo. Joseph Gallo, I should say, at Jefferies, noting that Crowdstrike provided guidance for annual recurring revenue growth in fiscal year 2024, or those outyears, as analysts would say, of 30%. That was about almost 8% below consensus estimates. And number two, wasn't a good conference call. Jorge Kurtz, the CEO of this company, really wasted no time kicking off this call, saying we have seen a slowdown in business, notably within small business customers.

- Yeah, and, particularly, that's also going to show up within some of the subscription gross margins going forward. You only saw a slight tick down in the year-over-year comparisons there. 75% gross margin on the subscription side compared to 76% in the third quarter of fiscal 2022, so last year's fiscal quarter.

But if we continue to see any of that tick down, or some of their customers decide, you know what? We don't need as many licenses. We don't need as many subscribers that, ultimately, when we buy into a service like this. And you see a lot of businesses that are really evaluating where those spends are taking place on the data, the application front.

You hope that they're not compromising too much of what they need to spend on the cybersecurity front too here because this still is a period where there needs to be high privacy protections for all of your end users. And so, we'll see exactly where some of the decisions get made about how many licenses a business will need in this near term period of time where they're evaluating and restructuring costs.