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01/10 21:36
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Net New ARR $265 million, grew 73% year-over-year, beating expectations by more than 10%. This growth was driven by strong customer demand and platform consolidation.
Ending ARR $4.92 billion, accelerated to 23% growth year-over-year. This reflects the success of the single platform strategy and increased customer adoption.
Free Cash Flow $296 million, representing 24% of revenue. This was a record quarter for free cash flow, driven by strong operational performance.
Operating Income $265 million, representing 21% of revenue. This marks the second consecutive quarter of record operating income, driven by strong top-line performance and operational efficiency.
Falcon Flex Ending ARR More than $1.35 billion, growing more than 200% year-over-year. This growth was attributed to the adoption of the Flex subscription model, which facilitates faster platform adoption.
Revenue $1.23 billion, grew 22% year-over-year. Subscription revenue grew 21% to $1.17 billion, and professional services revenue was $65.5 million. Growth was broad-based across geographies and customer segments.
Non-GAAP Gross Margin 78%, with subscription gross margin at 81%. This improvement reflects operational efficiencies and strong revenue growth.
Non-GAAP Operating Expenses $703.2 million, representing 57% of revenue. This includes a typical increase in sales and marketing expenses due to the annual Falcon conference.
Non-GAAP Net Income $245.4 million, or $0.96 per diluted share. This was a record quarter for net income, driven by strong revenue growth and operational efficiency.
Falcon Next-Gen SIEM: Achieved record net new ARR quarter, integrated into a unified single platform, and expanded partnership with AWS to provide access to millions of AWS customers.
Falcon Shield: Had a record net new ARR quarter, growing nearly 50% sequentially, addressing SaaS application security needs.
Falcon Cloud Security: Delivered Q3 record net new ARR, positioned as a leader in cloud runtime security, and expanded with acquisitions like Pangea.
AWS Partnership: Expanded partnership with AWS, making Falcon Next-Gen SIEM the default SIEM for AWS customers, enabling federated search and prepopulated AWS data.
Global Expansion: Strong performance in U.S. federal and higher education sectors, and significant international growth, particularly in APAC.
Falcon Flex Subscription Model: Ending ARR from accounts adopting Flex grew to $1.35 billion, more than tripling year-over-year, and driving platform consolidation.
Operational Efficiency: Achieved record Q3 free cash flow of $296 million and record operating income of $265 million, reflecting strong execution and cost management.
AI-Driven Cybersecurity: Positioned as a leader in securing AI infrastructure and addressing AI-driven threats, leveraging acquisitions like Pangea and Onum.
Ecosystem Partnerships: Strengthened partnerships with EY, Deloitte, and Wipro for SIEM and SOC transformations, and announced a significant MSSP partnership with Kroll.
AI-driven attack surface expansion: The rapid adoption of AI technologies is expanding the attack surface, creating new vulnerabilities and risks for businesses. Each AI agent increases the risk profile, necessitating robust cybersecurity measures.
AI-enabled adversarial threats: AI is being used by adversaries to create sophisticated cyber intrusion agents, as evidenced by state-sponsored attacks. This democratization of destruction poses significant challenges to cybersecurity.
Fragmented cybersecurity platforms: The use of multiple cybersecurity platforms creates inefficiencies and vulnerabilities, as adversaries exploit the gaps between systems. A unified platform is critical for effective protection.
Third-party SaaS application risks: The elevated risk environment for third-party SaaS applications, including data exfiltration and shadow instances, demands immediate visibility and protection.
Cloud security challenges: As the cloud security market matures, customers are realizing that posture management alone is insufficient. Active defense within cloud environments is necessary to prevent breaches.
Endpoint vulnerabilities: The rapid adoption of AI-driven applications and browsers on endpoints introduces significant new risks, making endpoints a critical vulnerability point.
Incident-related costs: The company incurred $26.2 million in costs related to a cybersecurity incident, highlighting the financial impact of breaches.
Economic pressures on customers: Customers are consolidating their security needs to reduce total cost of ownership, which could impact the company's pricing power and revenue growth.
Revenue Guidance for Q4 FY '26: Total revenue is expected to be in the range of $1.290 billion to $1.300 billion, reflecting a year-over-year growth rate of 22% to 23%.
Revenue Guidance for Full FY '26: Total revenue is expected to be in the range of $4.797 billion to $4.807 billion, reflecting a growth rate of 21% to 22% over the prior fiscal year.
Net New ARR Growth: Low to mid-teens sequential net new ARR growth is expected from Q3 to Q4, bringing ending ARR growth for FY '26 to 23% year-over-year. Second half net new ARR growth is expected to be at least 50% year-over-year.
FY '27 Net New ARR Growth: FY '27 year-over-year net new ARR growth is expected to be at least 20% from the increased FY '26 net new ARR assumptions.
Free Cash Flow Margin for Q4 FY '26: Free cash flow margin is expected to be 27%, including cash payments of approximately $33 million in connection with incident-related costs.
Free Cash Flow Margin for Full FY '26: Full year FY '26 free cash flow margin expectation is 25%.
Non-GAAP Operating Margin for Q4 FY '26: Non-GAAP income from operations is expected to be in the range of $315 million to $319 million.
Non-GAAP Net Income for Q4 FY '26: Non-GAAP net income attributable to CrowdStrike is expected to be in the range of $282 million to $287 million, with diluted non-GAAP net income per share of approximately $1.09 to $1.11.
Non-GAAP Net Income for Full FY '26: Non-GAAP net income attributable to CrowdStrike is expected to be between $950 million and $954 million, with diluted non-GAAP net income per share of $3.70 to $3.72.
The selected topic was not discussed during the call.
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.
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.
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