CrowdStrike (CRWD 1.86%) has emerged as a global leader in cybersecurity, capturing strong demand for its cloud-based platform while delivering a spectacular return for investors. Since the company's 2019 initial public offering, the stock has gained over 800%, significantly outperforming the S&P 500 index. CrowdStrike continues to innovate, integrating new artificial intelligence (AI) capabilities that have added to its long-term growth outlook.
Can the stock's rally keep going? Let's discuss where CrowdStrike might be in five years.
NASDAQ: CRWD
Key Data Points
Rapid platform growth into 2025
As technology increasingly plays a larger role in society, addressing digital threats has become more important than ever.
CrowdStrike is capitalizing on the opportunity through its Falcon platform, which automates and simplifies the security management process by combining products like endpoint security, threat intelligence, and identity protection into a singular solution. This model reduces the need for specialized hardware while limiting system friction points, potentially offering customers a lower total cost of ownership compared to competitors focusing on just one segment of cybersecurity.
The results have been impressive. Between fiscal 2021 and 2024, total revenue increased at a compound annual growth rate of 52% with the story over the past year being CrowdStrike's accelerating profitability. In its fiscal 2025 second quarter (ended July 31), a key metric for the company was its annualized recurring revenue (ARR), which reached $3.9 billion, up 32% year over year. Adjusted earnings per share (EPS) reached $1.04, up 41%.
Image source: CrowdStrike.
Management highlighted the momentum from "hypergrowth" businesses like cloud security and log-scale services where the combined ARR was up 85% during the quarter. Customers are adopting additional modules within their subscription ecosystem, supporting a continued rise in CrowdStrike's operating margin and free-cash-flow generation.
CrowdStrike expects that trend to continue with a fiscal 2025 revenue outlook of $3.9 billion, up 28% from the previous year. Management's adjusted EPS guidance of around $3.63 represents a 17% annual increase.
But a key question heading into the fiscal third-quarter update will be what ongoing headwinds CrowdStrike faces from the global outage it caused due to a faulty update to its Falcon software. While the company has been eager to frame the incident as a temporary hiccup, another downward revision to guidance could signal longer-term challenges for the business.
High expectations for the next few years
Beyond any quarterly noise, there's a lot to like about CrowdStrike with its fundamentals further supported by a rock-solid balance sheet with more than $3 billion in net cash.
However, investors are forced to pay a hefty premium for the stock, which warrants some caution. Shares of CrowdStrike are trading at 85 times the midpoint of management's fiscal 2025 EPS forecast. The multiple only slightly narrows to 72 based on analysts' consensus EPS estimate of $4.27 for fiscal 2026. Some investors may believe CrowdStrike's long-term tailwinds and positive industry outlook justify that valuation, but not everyone will agree.
CrowdStrike estimates it operates within a $100 billion addressable market, covering all its AI-native cybersecurity solutions. The company also forecasts the market will more than double in size to $225 billion by 2028. By this measure, if CrowdStrike manages to at least maintain its current market share, such an outlook suggests revenue can climb 125% from fiscal 2024 levels to approach $7 billion in 2028.
A few factors can make this path possible. First, the international market remains largely untapped, representing less than a third of its current business. Expanding into new regions and building on existing customer relationships should keep CrowdStrike's operating trends humming.
Second, several segments of cybersecurity are still underpenetrated. CrowdStrike solutions gain new use cases as enterprise-level customers invest in high-growth areas of technology like AI infrastructure. There is also an expectation the company can leverage its growing scale and subscription-based business model to boost margins and cash flows.
A 2030 prediction for CrowdStrike stock
I believe shares of CrowdStrike will double in value in the next five years as company earnings ramp up through 2030. Acknowledging the potential for volatility and near-term risk should results disappoint, investors with a long-term mindset can consider a position in the stock within a diversified portfolio. It likely won't be a straight line higher, but CrowdStrike's ability to execute its strategy and consolidate its market position should continue to reward shareholders.
