Shares of CrowdStrike Holdings (CRWD 0.74%) have shed more than a third of their value since hitting an all-time high in November. A lot of high-growth tech stocks have stumbled in recent months, but CrowdStrike and most of its cybersecurity peers have come under laser-focused bearish selling pressure since late February.
Many publicly traded software-as-a-service companies (SaaS stocks) have been suffering since January. The release of agentic AI tools -- along with the potential for more powerful solutions down the line -- poses a challenge to enterprise software companies. If their clients can automate tasks with fewer licenses or modules, many SaaS leaders can stumble as a chunk of their client budgets go elsewhere.
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Cybersecurity stocks were initially spared the brunt of the malaise, but the narrative turned bearish late last month, after Anthropic's Claude coding model previewed a new security tool. Suddenly, CrowdStrike and its industry-leading Falcon endpoint security platform became vulnerable. If Falcon's specialty of protecting a company's devices from breaches can be done effectively at a lower price point, wouldn't CrowdStrike be in for a world of hurt?
That's not an easy question to answer, but largely because it's an unfair question to ask. There isn't a CrowdStrike killer on the market right now. CrowdStrike has served its clients well, and the cloud-based platform operator has consistently delivered top-line growth north of 20% or better. In a potential plot twist, the agentic AI revolution offers a higher ceiling rather than a lower floor for CrowdStrike investors.
Let's use these Falcon wings to swoop a little closer.
NASDAQ: CRWD
Key Data Points
Birds of prey
I wasn't a CrowdStrike bear before. I've been an investor for years. However, it remains one of my smaller positions. The stock's sharp correction over the past four months hasn't been a dinner bell. It's been more of an alarm. Bullish exclamation points have turned into concerned question marks about its future. However, a look at its past offers insight into its future.
CrowdStrike's AI-native security solutions are popular for a reason: They work. Engagement has only increased as customers who trust CrowdStrike rely on more of its offerings, which now include 33 modules. A year ago, 21% of its customers were paying for at least eight CrowdStrike modules. Today, the penetration rate is up to 24%. Revenue rose 22% last year, making it at least the eighth consecutive year of decelerating top-line growth. However, guidance it initiated earlier this month for the new fiscal year calls for a 22% to 23% increase.
Why is CrowdStrike's business growing, and potentially accelerating for the first time as a public company in the new fiscal year, if the agentic AI revolution is a bigger threat than an opportunity? I'm not buying the bearish narrative. The growing adoption of agentic AI will only heighten client demand for CrowdStrike's services, if only because it raises the stakes on the need to keep their platforms secure.
Will businesses really trust AI startups with the keys to the gate protecting the loyalty they can't afford to squander? I have been nervous as a small CrowdStrike investor amid the recent decline. I'm starting to get excited about the situation.
