Artificial intelligence is one of the hottest topics these days. ChatGPT showcased the power of using AI to generate content on par with human writing. It's driving explosive interest in the technology.
While AI has become a new topic of conversation for many investors, it's not new for CrowdStrike (CRWD 0.89%). The company is a pioneer in using AI in cybersecurity. Its AI-driven Falcon platform continues to win new customers and drive expanding relationships from existing ones, enabling it to grow briskly. With much more growth ahead, it's a no-brainer stock to buy for those desiring to add an AI play to their portfolio.
A pioneer in AI-powered cybersecurity
CrowdStrike's Falcon platform is a leader in the cybersecurity industry. The company's leading-edge technology routinely wins awards for its ability to deliver superior outcomes.
On the fourth-quarter conference call, co-founder and CEO George Kurtz highlighted the role AI plays in enabling the company to deliver industry-leading protection. Kurtz noted that the company has a "longstanding track record of disruptive innovation, including our use of AI and indicators of attack to stop cyber adversaries in real time."
"While the use of AI has become the new topic of the day, it is not new to CrowdStrike," he said. "We were a pioneer in applying AI in cybersecurity."
Kurtz added:
The Falcon platform was designed from the ground up to effectively process and correlate the massive volume of data required for effective AI and leverage it across our entire platform from prevention through -- to detection and response. This enables Falcon to spot fainter signals and identify activity earlier in the kill chain. We have become experts at leveraging data science to deliver best-of-breed attack discovery and prevention for our more than 23,000 customers. This drives immense leverage across the platform and better, more efficient outcomes for our customers.
AI has given the company a technological edge over competing cybersecurity platforms. That's driving more customers to adopt the platform and consolidate their security architecture by subscribing to additional modules the company has available.
No hype; just results
The increasing adoption of CrowdStrike's AI-driven platform is driving robust growth. Kurtz noted on the fourth-quarter call that the company delivered "record new net annual recurring revenue (ARR) of $222 million and record net new customers of 1,873." That grew its total ARR to $2.56 billion, a 48% year-over-year increase, and increased its customer count to more han 23,000, up 41% year over year.
Meanwhile, the company continues to retain customers and expand existing relationships. CrowdStrike delivered a best-in-class gross retention rate of 98% and a dollar-based net retention rate of more than 125%, showcasing its ability to expand customer relationships. Those strong growth rates helped drive "record operating income [and] record free cash flow of $209 million," according to Kurtz.
The company's highly efficient and low-cost platform drives customers to consolidate their security architecture with CrowdStrike. "CrowdStrike's growing market share showcases the Falcon platform's advanced AI and technology leadership that drives better security outcomes, automation, and lower total cost of ownership for customers," Kurtz said.
More growth ahead
CrowdStrike's CEO firmly believes that his company's already expansive opportunity will continue to grow in the future. "We see a massive opportunity to leverage our AI-driven 'collect data once, reuse many times' platform to expand share across our markets," he said. The company's current total addressable market opportunity is over $75 billion. It sees that number expanding to $158 billion by 2026.
That drives the company's view it can nearly double its ARR to $5 billion by the end of 2026. Meanwhile, it sees its growing scale allowing it to reach its targeted operating model of a more than 20% operating margin and 30%-plus free cash flow margin by 2025. That positions it to deliver significant earnings and free cash flow growth.
A great AI-powered stock
CrowdStrike is a pioneer in applying AI in cybersecurity. That enabled it to build a best-in-class platform, which customers are flocking to these days. However, it's only scratching the surface of its potation. It's a great AI stock to buy, especially since it has yet to catch the attention of the hype train, given that shares currently trade about 60% off their peak. It's a no-brainer pick.
