Generative artificial intelligence (AI) applications have gained a lot of popularity since the end of 2022 thanks to the technology's user-friendly nature, which allows users to quickly get answers to their queries with the help of simple text prompts.

From generating search results to creating marketing campaigns, writing code, and creating images, the use cases of generative AI applications such as chatbots have increased tremendously this year. The good part is that generative AI adoption is expected to jump significantly over the next decade. Bloomberg Intelligence forecasts that the generative AI market could be worth a whopping $1.3 trillion in 2032 as compared to just $40 billion last year.

The cybersecurity market is set to be one of the big beneficiaries of the growth in generative AI. According to Bloomberg Intelligence, generative AI-based cybersecurity spending could jump from just $9 million last year to almost $14 billion in 2032, clocking a terrific compound annual growth rate (CAGR) of 109% over the next decade.

CrowdStrike (CRWD -1.80%) allows investors to tap into this lucrative niche. Share prices of the cybersecurity specialist have more than doubled this year, securing gains of 123%. More importantly, its latest results sent the stock up 10% on Nov. 29 and also indicate that it is built for more upside in the future. Let's see why that may be the case.

Generative AI could accelerate CrowdStrike's impressive growth

CrowdStrike released fiscal 2024 third-quarter results (for the three months ended Oct. 31, 2023) on Nov. 28. The company's revenue increased 35% year over year to $786 million, exceeding the $777 million consensus estimate. CrowdStrike's adjusted earnings, meanwhile, increased to $0.82 per share last quarter from $0.40 per share in the prior-year period. Analysts would have settled for $0.74 per share in revenue.

More importantly, CrowdStrike ended the quarter with annual recurring revenue (ARR) of $3.15 billion, an increase of 35% over the year-ago quarter. The company calculates ARR as the annualized value of its subscription contracts at the end of a period, so the healthy growth in this metric indicates that the company is building a solid revenue pipeline for the future.

One of the reasons why the company's ARR is growing at a robust pace is that customers are purchasing more cybersecurity solutions from the company. For instance, the number of CrowdStrike subscription customers using seven or more modules from the company stood at 26%, up from 21% in the year-ago period. What's more, the number of CrowdStrike customers using five or more of its modules was up to 63% last quarter compared to 60% a year ago.

One of the reasons behind the growing customer adoption of CrowdStrike's security offerings could be the company's focus on integrating AI into its solutions. The company's AI-powered extended detection and response platform, known as Falcon, is witnessing "strong demand," which is "driving our pipeline to new heights," according to CFO Burt Podbere, speaking on the company's Q3 earnings call.

The Falcon platform harnesses the power of AI to collect data across multiple security endpoints to improve the pace of threat detection, investigation, and response. In May this year, CrowdStrike added a generative AI-powered virtual security analyst known as Charlotte AI to Falcon, pointing out that it built this security assistant into the "core" of the platform.

CrowdStrike points out that Charlotte AI has been designed to "help users of all skill levels improve their ability to stop breaches while reducing security operations complexity." The company claims that even novice users on the Falcon platform could operate like power users with Charlotte AI, as they can simply ask questions to the generative AI-powered assistant to get relevant answers concerning the organization's cybersecurity operations.

On the Q3 earnings call, CrowdStrike CEO George Kurtz claimed that generative AI "can turn hours of work into minutes while democratizing cybersecurity," and he believes that this has been a key factor in the growing adoption of the Falcon platform. Management points out that Charlotte AI is currently in preview mode, but customers who are using it are "able to do things way faster than they ever could and they're able to explore and ask questions that they haven't been able to do in the past."

CrowdStrike says Charlotte AI's pricing has been "incredibly well received," so there is a good chance that this solution could drive even stronger growth for the company once it is commercially released.

Stronger growth could be in the cards

CrowdStrike expects to finish the current fiscal year with revenue of almost $3.05 billion, which would be a 35% increase over last year. That's impressive considering that CrowdStrike is currently witnessing a "challenging macro environment and geopolitical tensions" that's leading customers to scrutinize their cybersecurity budgets.

Analysts anticipate CrowdStrike will clock 25%-plus revenue growth over the next couple of years.

CRWD Revenue Estimates for Current Fiscal Year Chart

CRWD Revenue Estimates for Current Fiscal Year data by YCharts

What's more, the company's bottom line could increase at an annual pace of 40% over the next five years as per analyst estimates. However, the advent of generative AI within the cybersecurity market and the steps taken by CrowdStrike to capitalize on this opportunity could eventually help the company grow more quickly.

Assuming CrowdStrike's earnings do increase at an annual rate of 41% for the next five years, its bottom line could hit $15.22 per share at the end of fiscal 2029 (using fiscal 2024's estimated earnings of $2.83 per share as the base). CrowdStrike is currently trading at 60 times forward earnings, which is on the expensive side. But that's well below its five-year average forward earnings multiple of 388.

Even if CrowdStrike trades at 30 times forward earnings after five years, its stock price could increase to $456 based on the projected earnings of $15.22. That would be nearly double the company's current stock price, which is why investors looking for a fast-growing cybersecurity company that's benefiting from the AI boom may want to buy CrowdStrike stock before it flies higher.