CrowdStrike Posts 21% Gain in Fiscal Q2

CrowdStrike (CRWD 1.17%), a leading provider of cloud-native cybersecurity solutions, reported results on August 27, 2025. The company delivered GAAP revenue of $1.17 billion, up 21% from a year ago, and net new Annual Recurring Revenue (ARR) of $221.1 million, a record for any second quarter in its history. Management projected non-GAAP EPS in the $0.82–$0.84 range. Despite posting record cash flow and year-over-year growth across key segments, the quarter also saw a GAAP operating loss, reflecting higher expenses and charges tied to strategy and a July service disruption.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2026 earnings report.

Business Overview and Core Focus

CrowdStrike is known for its Falcon platform, a cloud-native cybersecurity suite that protects organizations against a wide variety of digital threats. Falcon operates through the cloud, uses artificial intelligence (AI), and collects massive amounts of data from global customers to identify and stop cyber attackers in real time. The company’s business depends on subscription contracts that generate steady, recurring revenue, making it a major player in the growing software-as-a-service (SaaS) sector focused on security.

Recently, the company has targeted expanded platform use, accelerating AI-powered features, and growing its number of “modules”—individual feature sets that allow customers to customize their protection. Key success factors include the depth of platform adoption, growth in ARR, security automation to address the ongoing skills shortage in cybersecurity, international expansion, and the successful rollout of new offerings such as advanced identity protection and AI-powered detection tools.

Quarter in Detail: Financial and Strategic Highlights

This period marked renewed growth momentum. Net new ARR hit $221.1 million, the best second-quarter addition CrowdStrike has ever posted. This was a point CEO George Kurtz underscored by noting the “exceptional” quarter and the fact that ARR acceleration came a quarter sooner than management had expected.

GAAP revenue rose to $1.17 billion, above the company’s guidance range of $1,144.7 million to $1,151.6 million. Subscription revenue (GAAP), the core of CrowdStrike’s business, reached $1.10 billion, up 20%. Professional services—consulting and expert-led security offerings—grew 45% year-over-year to $66.0 million (GAAP). The company’s ARR, an important measure of future recurring business, reached $4.66 billion, up 20% from a year ago, confirming that both new customer wins and cross-selling to existing customers remain solid drivers.

While growth continued at a rapid pace, profit measures presented a mixed picture. Non-GAAP net income increased to $237.4 million with non-GAAP earnings per share at $0.93, both record results. Operating cash flow and free cash flow reached new highs, supporting a strong balance sheet with $4.97 billion in cash and equivalents. However, this was offset by a GAAP operating loss of $113.0 million and a net GAAP loss of $77.7 million. These losses were tied to increased stock-based compensation ($284 million, GAAP), $35.7 million in GAAP costs related to the July 19 Windows sensor outage, and $38.4 million in strategic plan charges.

CrowdStrike’s module adoption rose, with 48% of customers now using at least six modules, 33% adopting seven, and 23% with eight or more. These increases highlight the company’s ability to deepen its relationship with existing customers, a strategic goal, as each additional module makes customers more reliant on the platform and increases revenue per account. More than 1,000 organizations now use the Falcon Flex licensing approach, and more than 100 customers underwent “reflexes”—expanding their deployment faster than originally planned.

On the product front, the period saw the launch of Falcon Next-Gen Identity Security, offering complete identity protection for humans and AI agents, and the rollout of CrowdStrike Signal, an AI-powered threat detection engine. The company also integrated its AI with platforms like OpenAI’s ChatGPT Enterprise Compliance and announced the acquisition of Onum Technology, a real-time telemetry firm that will bolster Falcon’s data collection and analysis capabilities. Recognition from industry analysts continued, with inclusion as a Leader in the 2025 Gartner Magic Quadrant for endpoint security for the sixth year running.

Margins faced some pressure. Subscription gross margin fell a percentage point compared to last year, ending at 77% (GAAP) and 80% (non-GAAP), as investment in the platform, growth in professional services (which carry lower margins), and incident-related costs weighed on overall profitability. Professional services gross margin declined as well, down to 14% (GAAP) and 34% (non-GAAP). Despite these challenges, overall non-GAAP operating margin remained strong at 22%, though below the prior year’s 25%.

Material one-time events shaped the results, most prominently the July 19 incident, which led to direct costs of $35.7 million. Additionally, charges for strategic plan realignment totaled $38.4 million. Management expects these restructuring efforts to contribute to improved non-GAAP margins in future periods. There was no dividend payment or change to note for the quarter.

Looking Ahead: Guidance and Future Topics for Investors

FY2026 revenue is now projected to be between $4.75 billion and $4.81 billion, with non-GAAP EPS expected in the range of $3.60 to $3.72. For Q3 FY2026, management projects GAAP revenue of $1.208 billion to $1.218 billion, indicating continued growth in the high teens. Non-GAAP net income for Q3 FY2026 is guided to $238.1 million to $242.8 million, with EPS expected between $0.93 and $0.95.

Investors should monitor several areas in coming quarters. Key points include whether net new ARR continues to accelerate, the pace at which new product modules are adopted, and normalization of the gap between ARR and revenue growth. Ongoing costs related to previous outages or restructuring, especially if legal or operational risks increase, could weigh on short-term results. Trends in gross margin—both subscription and services—are also important, as increased investment and product mix changes continue to affect profitability. CRWD does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.