As many companies rush to integrate artificial intelligence (AI) into their offerings, others have used the technology for years. CrowdStrike (CRWD -2.95%) has already built its offering from the ground up employing AI. It uses machine learning, a segment of AI, at the heart of its products.

With CrowdStrike sitting at the crossroads of two important technology trends, is it a buy? Let's find out.

Wall Street reacted strangely to CrowdStrike's latest quarter

CrowdStrike's primary focus is on endpoint security, which protects devices utilized to access a network (like a phone or laptop). By automatically analyzing the trillions of signals generated weekly across all clients, CrowdStrike's software can evolve to better protect its clients.

But CrowdStrike's platform isn't limited to endpoint security; it has over 20 modules ranging from threat intelligence to identity protection. Customers are also rapidly adopting these ancillary offerings, as 62% of clients utilize five or more products, and 23% or more deploy at least seven. When that many products are utilized, it makes it difficult for customers to switch away from the platform due to deep integration.

CrowdStrike recently reported results for the first quarter of fiscal year 2023 (ending April 30) that were quite strong.

Revenue was up 42% year over year to $693 million, which exceeded the high end of the guidance management gave in Q4 of $678 million. Furthermore, CrowdStrike broke even for the first time in history, producing $491,000 in net income. Although that's not a massive profit, it shows CrowdStrike is committed to becoming profitable.

However, Wall Street analysts didn't like the quarter as they wanted greater revenue growth and stronger guidance. As a result, the stock traded down by 11% to open trading the next day. However, smart investors saw the folly in this, and CrowdStrike only finished the day down 1.5%.

CRWD Chart

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This is a classic example of why investors need to read the actual earnings release and not the headlines, as CrowdStrike's FY 2024 guidance increased in the quarter. After giving a revenue guidance range of $2.96 billion to $3.01 billion for FY 2024 at the start of the year, management bumped its guidance to $3 billion to $3.04 billion.

With a revenue beat and guidance raise, CrowdStrike's stock looks attractive.

CrowdStrike's stock isn't overvalued

A key valuation metric for CrowdStrike is its free cash flow (FCF), or how much cash it produces from operations at the end of the quarter. FCF is a great way to measure CrowdStrike's success, as it hasn't produced enough profits to be meaningful, so it's smart to look at the next best thing: cash flow. For Q1, CrowdStrike produced a strong FCF margin of 33%. That brings its price-to-FCF ratio down to 50 times FCF, which is still quite expensive.

However, that doesn't account for the massive growth CrowdStrike is expected to deliver over the next year. Should CrowdStrike deliver at the top end of its FY 2024 guidance and maintain its 33% FCF margin, it will produce $1 billion in FCF this fiscal year. That means it's trading for 37 times forward FCF, a much more palatable (although not cheap) valuation.

Despite Wall Street's worries about slowing growth, CrowdStrike's stock still looks like a great buy. The company isn't keeping any secrets, as it continues to convey what growth it expects with its guidance. With the full-year revenue guidance increasing, I'm not worried about the slight deceleration in overall growth (42% revenue growth is nothing to complain about in this operating environment).

CrowdStrike is a solid stock for its AI and cybersecurity exposure; investors should use its slight weakness after a great quarter to establish or add to a position in the stock.