CrowdStrike Holdings, Inc. (CRWD) Q2 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary and Q&A session reveal strong financial performance, strategic partnerships, and optimistic guidance. Key highlights include robust ARR growth, high subscription gross margins, and a significant share repurchase plan. The company is confident in its market strategy, with successful product adoption and strategic realignment for growth. While the management was unclear about growth sustainability beyond FY '26, the positive outlook for net retention, acquisitions, and market positioning supports a positive sentiment. The absence of specific market cap data suggests a moderate positive impact on stock price.

Key Financial Performance

Net New ARR $221 million, a record for Q2, showcasing accelerating net new ARR. This was achieved a quarter ahead of expectations, driven by AI-necessitated demand for the Falcon platform and stellar execution across the business.

Ending ARR $4.66 billion, growing more than 20% year-over-year. This growth was attributed to market demand for the AI-native Falcon platform and Falcon Flex subscription model.

Free Cash Flow $284 million, a record for Q2, representing 24% of revenue. This was driven by strong top-line performance and efficiency gains from the strategic plan.

Operating Income $255 million, a record for Q2, representing 22% of revenue. This was achieved through strong top-line performance and efficiency gains.

Total Revenue $1.17 billion, growing 21% year-over-year and exceeding the high end of guidance. This growth was driven by strong Falcon Flex adoption and expansion, as well as broad success across the AI-powered Falcon platform.

Cloud, Next-Gen Identity, and Next-Gen SIEM Platform Solutions Ending ARR $1.56 billion, growing more than 40% year-over-year. This growth was driven by increased adoption of these solutions.

Exposure Management Ending ARR $300 million, reflecting strong adoption and being named a leader in the 2025 IDC Worldwide Exposure Management MarketScape.

Next-Gen SIEM Ending ARR $430 million, growing more than 95% year-over-year. This growth was driven by the adoption of the Falcon platform for AI SOC transformation.

Next-Gen Identity Protection Ending ARR $435 million, growing more than 21% year-over-year. This growth was driven by demand for identity security solutions to safely leverage agentic AI.

Cloud Ending ARR $700 million, growing more than 35% year-over-year. This growth was driven by the need to secure AI and cloud infrastructure at runtime.

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Operating Highlights

AI-powered Falcon platform: Driving strong market demand and adoption, contributing to record Q2 net new ARR of $221 million and ending ARR of $4.66 billion.

Next-Gen SIEM: Achieved over 95% year-over-year growth with ending ARR exceeding $430 million. Announced acquisition of Onum to enhance data pipeline efficiency and reduce costs.

Charlotte (AI SOC analyst): Grew over 85% quarter-over-quarter, automating workflows and improving ROI for customers.

Next-Gen Identity Protection: Extended to nonhuman identities and AI agents, achieving $435 million in ending ARR, growing 21% year-over-year.

Falcon Cloud Security: Secured $700 million in ending ARR, growing 35% year-over-year, with significant wins in Fortune 500 companies.

Falcon Flex model: Surpassed 1,000 customers, driving platform adoption and re-Flex activity, with nearly 10% of customers re-Flexing and achieving a 50% uplift in ARR.

Partnerships: Amazon Business Prime and NVIDIA partnerships expanded market reach, targeting SMBs and AI life cycle protection.

Revenue growth: Achieved total revenue of $1.17 billion, growing 21% year-over-year, with subscription revenue at $1.10 billion.

Profitability: Record Q2 free cash flow of $284 million and operating income of $255 million, highlighting efficiency gains.

Acquisition of Onum: Enhances Next-Gen SIEM capabilities, improving data processing speed and reducing costs.

AI-driven innovation: Positioning CrowdStrike as a leader in AI security, addressing emerging threats and securing AI infrastructure.

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Risk or Challenges

AI Security Challenges: The emergence of shadow AI, controlling data entering AI systems, and securing AI agents are complex and expensive challenges. Adversaries are using AI for mass-scale attacks, such as North Korean group Famous Chollima infiltrating enterprises with AI-generated deepfakes.

Supply Chain and Data Integration Risks: The acquisition of Onum aims to address frustrations with incomplete data and high costs from third-party tools. However, integrating Onum's technology and ensuring seamless data pipeline operations could pose challenges.

Competitive Pressures: CrowdStrike faces intense competition in the cybersecurity market, including from legacy SIEM products and other AI-driven security solutions. Maintaining leadership and differentiation is critical.

Economic and Cost Pressures: Customers' frustration with the cost and limited efficacy of legacy tools highlights the need for cost-effective solutions. Additionally, the company faces elevated costs related to outage and strategic plan expenses.

Regulatory and Compliance Risks: Changes in tax legislation and compliance with cybersecurity regulations could impact financial performance and operational strategies.

Strategic Execution Risks: Achieving ambitious growth targets, such as $10 billion in ARR by FY '31, requires flawless execution of strategic initiatives, including the Falcon Flex model and AI-powered innovations.

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Guidance & Outlook

Revenue Guidance for Q3 FY '26: Total revenue is expected to be in the range of $1,208.0 million to $1,218.0 million, reflecting a year-over-year growth rate of 20% to 21%.

Revenue Guidance for FY '26: Total revenue is expected to be in the range of $4,749.5 million to $4,805.5 million, reflecting a growth rate of 20% to 22% over the prior fiscal year.

Net New ARR Growth: High single-digit sequential net new ARR growth is expected from Q2 to Q3, with at least 40% year-over-year net new ARR growth for the back half of the fiscal year. Ending ARR growth for FY '26 is projected to exceed 22%.

Free Cash Flow Margin: Expected to exit FY '26 with a free cash flow margin of 27% in Q4, expanding to more than 30% for the full year FY '27.

Non-GAAP Income for Q3 FY '26: Non-GAAP income from operations is expected to be in the range of $256.0 million to $262.0 million. Non-GAAP net income attributable to CrowdStrike is expected to be in the range of $238.1 million to $242.8 million.

Non-GAAP Income for FY '26: Non-GAAP income from operations is expected to be between $1,000.1 million and $1,040.1 million. Non-GAAP net income attributable to CrowdStrike is expected to be between $922.4 million and $954.0 million.

Fal.Con 2025 Event: Fal.Con 2025 will be held in September, featuring over 100 sponsors and 8,000 attendees, highlighting CrowdStrike's customer engagement and innovation.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Is the partner rebate program factored into the revenue guidance for Q3 and the full year?

A:Yes, the partner rebate program is factored into the revenue guidance. The guidance assumes back half net new ARR will grow at least 40% versus last year, with high single-digit sequential net new ARR growth in Q2 to Q3. The impact of CCP and special partner programs is expected to subside starting in Q4 of FY '26.

Q:How is CrowdStrike targeting the identity market and how does it compare to competitors?

A:CrowdStrike identified the importance of identity early on, starting with the Preempt acquisition in 2020. The company has integrated identity solutions into its platform, including the recent PAM solution and Shield. These solutions address enterprise SaaS breaches and provide alternatives to legacy solutions. CrowdStrike believes it is well-positioned in the identity market due to its early recognition and integrated approach.

Q:What is the outlook for net retention in the second half and the role of Falcon Flex in this process?

A:CrowdStrike expects strong net retention in the second half, with 95%-plus renewal rates for modules. The CCP program, delivered through Falcon Flex, has been successful in seeding the market. The company is confident in renewals and sees Falcon Flex as a key enabler for customer success and market penetration.

Q:How does the Onum acquisition impact CrowdStrike's Next-Gen SIEM business?

A:The Onum acquisition is expected to supercharge CrowdStrike's Next-Gen SIEM business by enabling real-time analysis on streaming data and in-pipeline detection. This technology reduces data movement and provides quick results, offering a disruptive pricing model where customers do not pay for data generated by CrowdStrike. The acquisition enhances scalability and value for customers.

Q:What is the competitive landscape for EDR and how does CrowdStrike differentiate itself?

A:CrowdStrike views EDR as foundational for the modern SOC and Next-Gen SIEM. The company leads in EDR innovation and integrates it with AI and other modules. Its service layer, including OverWatch and Complete, provides a significant competitive advantage. CrowdStrike's focus on stopping breaches and its comprehensive platform approach differentiate it from competitors.

Q:What is the state of the cloud security market and CrowdStrike's position in it?

A:The cloud security market is in its early stages, with a shift from CSPM to cloud workload protection. CrowdStrike is a leader in cloud security, offering a comprehensive solution that includes ASPM, DSPM, and SaaS security posture management. The company sees strong interest and conversions, driven by market disruption and its innovative offerings.

Q:What is the strategy for CNAPPs and shifting left in the development process?

A:CrowdStrike invests in technologies like ASPM, container scanning, and AI to address vulnerabilities and misconfigurations early in the development process. The company aims to provide guardrails and visibility to secure build environments and code, leveraging AI to solve future challenges.

Q:What is the approach to acquisitions and the use of the $5 billion on the balance sheet?

A:CrowdStrike focuses on strategic, tuck-in acquisitions that align with its platform and customer experience goals. The company prioritizes thoughtful integration and does not pursue acquisitions solely for ARR growth. It continues to evaluate opportunities that fit its long-term strategy.

Q:How does CrowdStrike view the growth of its core EDR business?

A:CrowdStrike sees EDR as an integral part of its platform, enabling telemetry collection and supporting other modules like identity, cloud, and Next-Gen SIEM. The company continues to innovate and drive new business, emphasizing the platform's overall value rather than isolating EDR growth.

Q:What is the outlook for the identity and SIEM businesses?

A:CrowdStrike sees strong potential in both identity and SIEM. Identity adoption is expected to grow, supported by the next-gen offering and CCP packages. The SIEM market is ripe for disruption, with customers seeking better, faster, and cheaper solutions integrated into CrowdStrike's platform. Both areas are critical to the company's future.

Q:What is the strategy for cybersecurity in the context of agentic AI?

A:CrowdStrike aims to secure AI models, deployment, and workflows, creating guardrails and visibility for AI agents. The company leverages its expertise in protecting users, identities, and data to address the security needs of AI agents, positioning itself as a leader in this emerging area.

Q:What is the traction for Exposure Management and its role in the platform?

A:Exposure Management is a rapidly growing business for CrowdStrike, recognized as a leader in the IDC MarketScape. The company offers agent vulnerability management, network vulnerability management, and attack surface management, addressing customer needs for consolidation and comprehensive risk management.

Q:What are the assumptions for public sector growth and the outlook for FY '27?

A:The public sector is not a significant part of CrowdStrike's business today, but it represents a growth opportunity. The company is focused on landing the right deals and leveraging its certifications. Comments on FY '27 will be provided at the end of Q4, but the 40% acceleration in net new ARR in the back half signals confidence in the business.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the sustainability of growth beyond FY '26, particularly regarding the acceleration of net new ARR in FY '27. Additionally, while discussing the use of the $5 billion on the balance sheet, the response lacked clarity on any potential transformational acquisitions or specific plans for the funds.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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The earnings call highlights strong financial performance, with record net income and high subscription gross margins. Product development is robust, with emerging segments performing well and AI integration enhancing offerings. Market strategy is solid, with strategic partnerships and a focus on observability. Financial health is strong, despite high operating expenses. Shareholder returns are not explicitly mentioned, but overall guidance is optimistic. The Q&A section supports these positives, with analysts showing interest in growth areas. The absence of market cap data suggests a moderate reaction, leading to a positive stock price prediction.

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