To The Moon

$CrowdStrike Holdings, Inc.(CRWD)$

CrowdStrike (NASDAQ: CRWD) released its earnings for Fiscal Q1 2026 (covering the calendar first quarter of 2025) after the bell on Thursday, June 3rd. While the report showed strong top-line growth, excellent customer metrics, and robust cash generation, the stock fell over 6% in after-hours trading.

The reason? Valuation and guidance, not operational performance.

In this long-form breakdown, I’ll walk you through:

• What happened in Q1

• Why the market reacted negatively

• Where the company stands in terms of long-term growth potential

• And finally, whether I think the stock is a buy, hold, or sell today

Stock Reaction: A Pullback After an Incredible Run

Before we dig into the numbers, it’s important to put this sell-off into context.

CrowdStrike entered this earnings report with extremely high expectations. The stock was already up over 42% year-to-date in 2025. Investors had been pricing in near-perfect execution, margin expansion, and continued hypergrowth. So even a solid report, if not accompanied by explosive forward guidance, could disappoint.

And that’s exactly what happened.

Let’s remember: when a stock trades at a forward P/E over 140, the market is expecting:

• Top-tier execution

• Beat-and-raise quarters

• Exceptional unit economics

• And bullish commentary about the future

Anything less leads to a valuation reset.

Q1 Highlights – Solid Fundamentals

Now, onto the numbers. CrowdStrike’s Fiscal Q1 2026 results showed:

• Revenue: $921 million (up 33% YoY)

• Annual Recurring Revenue (ARR): $3.65 billion (up 33% YoY)

• Non-GAAP EPS: $0.93 (vs. $0.89 expected)

• Free Cash Flow: $384 million

• GAAP Operating Loss: -$125 million

• Customer Count: Over 29,600 customers (+24% YoY)

These are healthy, high-growth metrics for any company—especially one of CrowdStrike’s size. The company continues to gain market share in a growing cybersecurity industry. But to truly understand this earnings report, we have to dig into the quality of these numbers—not just the quantity.

Retention and Customer Spend

Let’s start with customer retention. This is one of the six pillars of my investing framework, and CrowdStrike continues to excel here:

• Gross retention remained at 97% — nearly every customer is renewing

• Net retention was over 120% — existing customers are increasing spend

What this tells us is simple but powerful: not only do customers stick with CrowdStrike, but they’re adding more seats, adopting new modules, and upgrading existing services. This behavior is a strong signal that the company offers a sticky, mission-critical product—exactly what we want in a durable compounder.

This level of customer loyalty is not accidental. It’s driven by a strong platform (Falcon), continuous feature additions, a robust ecosystem of integrations, and high switching costs. These are all characteristics of a deep competitive moat.

Segment Expansion and Cross-Sell Strategy

CrowdStrike isn’t just an endpoint protection company anymore. Over the last few years, it has expanded into multiple adjacent categories, including:

• Cloud security

• Identity protection

• Managed detection and response (MDR)

• Threat intelligence

The company’s ability to cross-sell these new products to its existing base is a major driver of the 120%+ net retention rate. According to management, the number of customers using 5 or more modules increased meaningfully this quarter.

This is exactly what you want to see in a SaaS business: horizontal product expansion, rising ARPU (average revenue per user), and platform entrenchment.

Cash Flow and Profitability

Let’s talk cash.

CrowdStrike generated $384 million in operating cash flow, essentially flat compared to the $383 million in the same quarter last year. Free cash flow margin remained at 35%, which is still elite for a growth SaaS business.

However, the lack of operating leverage might concern some investors. With revenue growing 33%, many expected cash flow to increase in parallel or faster. So why the stagnation?

Management pointed to:

• One-time customer service costs related to previous outages

• Elevated headcount and R&D investments

• Expansion into international markets

These costs are explainable—and arguably wise if they lead to durable growth—but they’re a reminder that even best-in-class businesses can’t always scale margins linearly.

GAAP Operating Loss – Worth Watching

The company reported a GAAP operating loss of $125 million, compared to a modest profit of $6.9 million in the year-ago quarter. This was largely driven by stock-based compensation (SBC) and elevated expense growth.

While SBC is a non-cash expense, it still results in shareholder dilution. Over time, if the company fails to reduce SBC as a percentage of revenue, it can become a drag on shareholder returns. It’s something to monitor—but not yet a dealbreaker.

Guidance – Still Strong, Just Not Strong Enough

Here’s what the company is guiding for in Fiscal 2026:

• Revenue: $4.75–$4.80 billion

• Non-GAAP Operating Income: ~$1 billion

• Free Cash Flow Margin: 30–35%

Let’s be clear—this is a strong outlook by most standards. But relative to a forward P/E of 140+, investors wanted to see accelerating growth and expanding margins. Instead, they got stable but not upwardly revised numbers.

That’s why the stock sold off. It wasn’t what CrowdStrike said—it was what they didn’t say.

Industry Context: The Cybersecurity Boom Continues

I remain bullish on cybersecurity over the next 5–10 years. It’s one of the few sectors where spending is non-cyclical—companies can’t afford to cut cybersecurity budgets, even in downturns.

CrowdStrike’s leadership in endpoint protection, combined with newer offerings in identity protection and cloud workload security, position it well to keep expanding wallet share.

That said, I do believe cybersecurity could become commoditized in the long run. As more platforms offer similar functionality, pricing power may erode. But in the current environment, CrowdStrike continues to show clear differentiation and command premium pricing.

It’s important to zoom out here. The cybersecurity market is one of the most promising secular growth themes over the next decade. Gartner forecasts the industry to grow at a 13–15% CAGR through 2030.

Why?

• Threat volume and complexity are rising

• AI is introducing new attack vectors

• Remote work, IoT, and cloud migration are creating broader attack surfaces

Companies like CrowdStrike, Palo Alto Networks, and Zscaler are well-positioned to benefit. But even in a booming market, valuation still matters.

Share Buyback Announcement – A Strategic Signal?

CrowdStrike also announced a $1 billion share repurchase program, which I interpret as a vote of confidence by the board. While some buybacks are simply capital return mechanisms, in this case, I believe it suggests management views the stock as undervalued or at least fairly valued relative to long-term intrinsic value.

Still, this move might surprise some given the current premium valuation. It’s possible they are attempting to provide a floor under the stock price during periods of volatility, which is strategic during high-growth, high-expectation environments.

Valuation: The Elephant in the Room

Let’s face it: CrowdStrike’s stock price has been flying high. Too high.

• Forward P/E: ~141

• Price-to-Free-Cash-Flow: ~95x

• Price/Sales: ~25x

• My DCF Value Estimate: $189 per share

• Current Price: ~$489

To justify this valuation, the company must execute flawlessly over the next 5–10 years. That includes:

• Sustaining >30% revenue growth

• Expanding margins significantly

• Maintaining high net retention

• Avoiding meaningful competition or commoditization

That’s a tall order. Great business? Absolutely. Great stock at this price? Less certain.

Share Repurchase Program – A Sign of Confidence?

The company also announced a $1 billion share repurchase program. That might seem strange for a high-growth company, but it could signal that:

1. Management believes the stock is undervalued based on internal forecasts

2. They expect significant free cash flow and want to return capital to shareholders

3. They want to offset dilution from SBC

It’s a positive signal, but it doesn’t change the reality of the current valuation.

Final Take: CrowdStrike Is a Hold

CrowdStrike is: ✅ A high-quality, founder-led business ✅ Operating in a secularly growing industry ✅ Showing strong customer economics and retention ✅ Expanding product lines and increasing TAM

But it’s also: ❌ Trading at extreme multiples ❌ Seeing slowing margin expansion ❌ Facing sky-high expectations baked into the stock

I last rated CrowdStrike a Hold , before this earnings call, and even though I’ve missed out on a big run since then, I stand by that rating.

When growth stocks trade at perfection-required valuations, you have to be disciplined. I’d rather miss out on a few points of upside than be caught holding an overvalued stock into a re-rating.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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