Anyone familiar with CrowdStrike's (CRWD -0.34%) stock probably knows about the global IT outage the company was directly involved in this summer. A faulty security software update provided by CrowdStrike temporarily disabled millions of computers and other Windows-connected systems worldwide. It was a fiasco that gave the company a lot of bad publicity.
Before that misstep, CrowdStrike was arguably the leading next-generation cybersecurity company -- at least, investors treated the stock like it. Shares traded at a valuation that was among the highest on the market. Now, CrowdStrike stock is trading 37% below its peak, and it's natural to wonder: Did Wall Street overreact? The company recently delivered its fiscal 2025 Q2 report -- its first since the IT outage -- and the financial impact it attributed to the event was surprisingly small.
So should investors take this ongoing dip as a buying opportunity, or should they assume that CrowdStrike is not out of the woods yet?
Assessing the short-term outage impact
Those hoping for an epic collapse of CrowdStrike's business due to the outage were sorely disappointed when the company dropped its fiscal 2025 Q2 report. The outage occurred about a week before the quarter ended, so many eyes were focused on CrowdStrike's Q3 revenue guidance to get a sense of its impact. The report came at the end of August, so management had about a month to evaluate how it was affecting the sales pipeline.
Management did lower its full-year sales guidance to a range of $3.89 billion to $3.902 billion. That was a 2.6% drop from its prior guidance for revenue between $3.976 billion to $4.01 billion. CrowdStrike did $3.06 billion in sales in fiscal 2024, so the updated guidance still calls for roughly 27% growth (at the midpoint).
Analysts agree. Their revenue estimates for this year and next year have only come down slightly.
CRWD Revenue Estimates for Current Fiscal Year data by YCharts.
At least for now, the outage doesn't seem likely to dramatically change the conversation about CrowdStrike's place as a top-tier cybersecurity provider.
Is CrowdStrike in the clear?
Cybersecurity is a mission-critical piece of software for corporations, and changing vendors isn't as simple as punching a few keys or flipping a switch. Plus, enterprise software generally is purchased via extended contracts. Switching to a new provider and implementing that new software takes time. As such, the damage that the IT outage did to CrowdStrike's finances is apt to show up in a slow trickle.
Among the best places to look for clues about how it will all play out are in the reports and commentary of CrowdStrike's competitors. SentinelOne stands out as arguably CrowdStrike's fiercest rival. SentinelOne recently reported its own fiscal Q2 2025 results, and on the earnings call, CEO Tomer Weingarten had plenty to say about the outage.
Weingarten referred to CrowdStrike's architecture as fragile, and he cautioned against taking at face value CrowdStrike's apparent self-proclamation that its offering was the best product of its kind. He also noted that customer interest in SentinelOne's platform has risen since the outage. On the other hand, SentinelOne only narrowed its full-year sales guidance to the high end, which remained at $815 million. That's not to say SentinelOne won't see an eventual sales boost due to the outage, but it hasn't yet seen enough for management to raise expectations.
The bottom line here is that, for now, CrowdStrike's IT outage isn't the crisis for its finances that it may have initially appeared to be.
Is the stock a buy now?
Investors have long hailed CrowdStrike as the champion of the cybersecurity sector. In July, it traded at an enterprise value-to-revenue ratio of 24, a gigantic premium to peers including SentinelOne, Palo Alto Networks, and Okta. High valuations demand perfect execution. A global outage and PR black eye don't fit that bill. That's why the stock has fallen by 37%, even though the actual financial impact of the outage appears minor.
CrowdStrike is still more expensive than its peers, though at least the valuation doesn't jump off the page anymore relative to the others.
CRWD EV to Revenues (Forward) data by YCharts.
CrowdStrike isn't perfect; no company is. But the stock isn't valued for perfection anymore, which makes it far more buyable now than it was in July. I don't think one could reasonably argue that the stock is cheap, and investors probably shouldn't expect it to return to its former valuation anytime soon. The good news is that CrowdStrike is still a fast-growing technology stock. Its long-term growth alone should create solid investment returns over the coming years.
The stock isn't a table-pounding bargain, but given how well CrowdStrike seems to be holding up, there is a solid argument to buy the stock for the first time in a while.
