Cybersecurity specialist CrowdStrike (CRWD 0.18%) has had a very strong week, with shares rising about 12% since late February. The gain has been, in part, fueled by a strong fiscal fourth-quarter earnings report. The company, which operates a massive cybersecurity platform that protects endpoints, cloud workloads, and identity, posted revenue and adjusted earnings per share that both exceeded consensus analyst estimates. In addition, the company provided an upbeat outlook.
But investors should think twice before they race to buy shares of the cybersecurity stock. It's still risky -- maybe too risky.
Image source: Getty Images.
Strong top-line momentum
Overall, CrowdStrike's fiscal fourth quarter of 2026 (ended Jan. 31, 2026) was exceptional. Starting with its top line, revenue grew 23% year over year to $1.31 billion in fiscal Q4, up from 22% growth in fiscal Q3.
Zooming out to its full-year fiscal 2026 results, they were also impressive. The company delivered 22% revenue growth.
Driving the quarter, the company's annual recurring revenue (ARR), which represents the annualized value of its subscription contracts (assuming any contract expiring over the next 12 months is renewed on existing terms) grew 24% year over year to $5.25 billion in the fourth quarter, of which a record $331 million was net new ARR.
Highlighting how entrenched its customers are, 50% were using six or more of its modules, 34% were using seven or more, and 24% were using eight or more. Importantly, the number of customers adopting six or more modules is up from 49% in the prior quarter and 48% in the year-ago quarter.
A swing to GAAP profitability
Further, CrowdStrike swung to generally accepted accounting principles (GAAP) net profit of $38.7 million in the fourth quarter, compared to a net loss of $86.3 million in the year-ago period.
The company also continued to generate substantial cash, delivering $376 million in free cash flow during the quarter, which pushed its cash and cash equivalents to $5.23 billion as of Jan. 31, 2026.
Looking ahead, management is upbeat. For its first quarter of fiscal 2027, CrowdStrike forecast revenue of $1.36 billion to $1.364 billion, implying year-over-year growth of 23% to 24%.
Why I'm staying on the sidelines
But a great business doesn't automatically make for a great investment, and there are two main reasons why I'm still not buying shares of this growth stock.
The first issue is valuation, as CrowdStrike commands a market cap of about $107 billion as of this writing, giving the stock a price-to-sales ratio of about 22. A valuation like this not only bakes on persistent double-digit top-line growth for years to come but also huge improvement in profitability over time.
NASDAQ: CRWD
Key Data Points
The second major concern is the fiercely competitive nature of the cybersecurity market, requiring heavy investments in both product and marketing just to maintain growth. CrowdStrike's non-GAAP sales and marketing expenses jumped 15.5% year over year to $384.7 million in fiscal Q4. More concerning, big tech giants like Microsoft also offer robust cybersecurity solutions that can be seamlessly bundled with their other enterprise software offerings. And in the long term, I expect competition to intensify, which could eventually pressure CrowdStrike's pricing power and lead to higher customer acquisition costs.
There are real tailwinds here, and CrowdStrike's platform is clearly resonating with customers. Still, the valuation arguably prices in too much future success, and the looming threat of bundled big-tech security solutions adds a layer that forces me to only consider buying the stock if I think it's trading at a significant discount.
So, is now the time to buy CrowdStrike stock?
Unfortunately, the risk-reward profile just doesn't look compelling enough, even with accelerating top-line growth and a swing to profitability.
