Cyber threats to businesses do not disappear in economic downturns. So said George Kurtz, CEO of CrowdStrike. However, after reporting revenue growth of 42 percent in the first quarter, the US cloud cybersecurity firm expects growth for the full year to drop to around 35 percent. This is the slowest of all.
CrowdStrike is not alone. Okta also expects slowing revenue growth. Both share prices have declined accordingly.
This is despite Crowdstrike adding to the familiar generative AI market with an “AI Security Analyst” called Charlotte. It says it uses artificial intelligence to identify threats across the Falcon software platform. Then again, investment in artificial intelligence by software companies has not yet resulted in appreciable rises in revenue.
CrowdStrike was part of a bumper crop of initial public offerings in 2019. While others in the group, including Uber and Lyft, struggled to live up to early market interest, CrowdStrike shares jumped from a listing price of $34 to more than $157. In projected sales, it trades for about 15 times. This may sound high but software companies like Snowflake and Datadog trade at higher multiples.
The $37 billion company’s so-called “go-to-market” strategy, in which free trials and demos attract enterprise customers, has been widely praised. As its client base grew, users purchased more of its services. Last quarter, the number of customers using five or more CrowdStrike services increased 62 percent year-over-year.
Like many software companies that spent the era of low interest rates focusing on growth, CrowdStrike also began to pay more attention to profits. Last quarter, it reported net income for the first time. It is expected to be profitable for a full year next year.
So why is growth slowing? Note that Microsoft makes its presence known in cloud cybersecurity. The company was mentioned nine times in CrowdStrike’s latest earnings call. Curtis claimed that customers preferred its products. But if the slowdown is driven by competition it could become permanent.