What happened

Shares of endpoint security leader Crowdstrike Holdings (NASDAQ:CRWD) got blasted with a 7% sell-off today. High-growth names were hit especially hard on news that the first case of the coronavirus Omicron variant was confirmed in the U.S. Investor worry is mounting that the next leg of the pandemic could cause a backtrack in broader economic recovery.

However, at the time of writing, Crowdstrike had clawed its way into the black in after-hours trading on a great third-quarter earnings report as thousands of new users continue to adopt cloud-based security for remote workforces. 

Someone in a hard hat uses a laptop on a remote job site.

Image source: Getty Images.

So what

As for the Q3 fiscal 2022 earnings update (for the three months ended Oct. 31, 2021), revenue increased 63% year over year to $381 million. On an annualized basis, revenue was $1.5 billion, up 67% from the same period last year. Free cash flow in Q3 was up 62% to $124 million, good for an incredibly healthy free-cash-flow-profit margin of 33%.  

The quarterly earnings beat led to an increase in management's fiscal year 2022 guidance. Full-year revenue is now expected to be about $1.43 billion, up about $30 million from the previous outlook.

Now what

Though Crowdstrike is growing at a rapid pace and is poised to continue its advance in the cybersecurity industry, valuation is an oft-cited concern. Crowdstrike is now some 25% off its all-time highs but still trades for over 120 times trailing 12-month free cash flow. Given a few more years of continued growth momentum, this valuation isn't so unreasonable for this security software disruptor. Nevertheless, the Omicron news is proving to be the deciding factor for some investors in convincing them to take some gains off the table (Crowdstrike stock is up over 300% since the start of 2020).  

Clearly, though, Crowdstrike's growth story is the real deal, and it's putting its $1.9 billion in cash and short-term equivalents to use through both organic development and acquisition; its latest takeover is zero trust software security start-up SecureCircle. For investors eyeing the ultra-long potential for CrowdStrike, recent stock-price action isn't all that concerning.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.