On July 19, CrowdStrike(NASDAQ: CRWD) released a corrupted update to its industry-leading cybersecurity software, which led to a computer outage for millions of businesses around the world. CrowdStrike stock sank 42% following the news, as investors feared the incident would lead to a significant loss of customers and revenue.
However, CEO George Kurtz has since put some of those concerns to rest, and CrowdStrike stock has jumped 58% from its low point, which was set on Aug. 2. The company is scheduled to release its latest financial results for its fiscal 2025 third quarter (ended Oct. 31) on Nov. 26, and it will give investors some fresh insights into the recovery.
Here's why I think CrowdStrike stock will continue to move higher once the Q3 report is released.
CrowdStrike is recovering from the worst event in its history
The July 19 software glitch primarily affected devices running the Microsoft Windows operating system. It crashed around 8.5 million computers worldwide and plunged businesses -- from airlines to banks -- into a state of disarray. Some estimates suggest that CrowdStrike's top customers suffered over $5 billion in losses because of the outages.
CrowdStrike is facing some legal action, including a $500 million lawsuit from Delta Airlines, but the company isn't experiencing the customer exodus that many investors feared. In fact, during a conference call with investors on Aug. 28, Kurtz said some new deals are being delayed, but the vast majority remain in the sales pipeline.
Additionally, CrowdStrike recently revised its fiscal 2025 revenue forecast down by just 2.5%, and left its long-term goal to reach $10 billion in annual recurring revenue by fiscal 2031 unchanged.
In other words, potential customers might be monitoring CrowdStrike's response to the July 19 incident, and making sure it isn't a recurring issue before they make a commitment -- but they don't appear to be abandoning the company.
CrowdStrike remains a leader in AI-powered cybersecurity
One possible reason there hasn't been a customer exodus is because there aren't many good alternatives to CrowdStrike. The cybersecurity industry has a history of fragmentation, meaning businesses used to piece their security stack together from different vendors. However, CrowdStrike is a true platform solution that covers cloud security, identity management, endpoint protection, and more, so it's extremely convenient and cost-effective.
In fact, CrowdStrike's flagship Falcon platform offers 28 different modules (products), and during the fiscal 2025 second quarter (ended July 31), 65% of customers were using at least five of them. The company also experienced a whopping 66% year-over-year growth in the number of deals it signed for eight or more modules. That's where the spending really ramps up -- almost half of customers who are spending $100,000 or more annually are using at least eight modules.
Plus, CrowdStrike is an industry leader when it comes to artificial intelligence (AI), which it uses to automate everything from threat detection to incident response. The company's AI models are trained on over 2 trillion security events every single day, so their accuracy is constantly improving.
CrowdStrike also launched a virtual assistant called Charlotte AI last year, which integrates with Falcon. It can autonomously generate incident summaries, and since it uses a chatbot-style interface, it can be prompted to provide further details or even to hunt for a specific threat. Those capabilities can significantly reduce manual workloads for cybersecurity managers, and CrowdStrike says they are already saving customers two hours per day, on average.
Image source: Getty Images.
CrowdStrike stock could soar with help from its Q3 results
As I mentioned, CrowdStrike stock is up 58% from its low point after the incident. Most of that gain occurred after the company released its fiscal 2025 second-quarter results on Aug. 28. I predict it will continue moving higher after the Q3 report is released on Nov. 26, and perhaps even soar by 14% to retake its previous all-time high, as long as the following things happen.
First, CrowdStrike needs to meet or exceed its revenue forecast of $981.9 million (at the midpoint of the range), because it will prove that customers are staying put. Second, the company needs to either increase its fiscal 2025 full year forecast, or at least keep it unchanged. It would be a sign that management is confident in the sales pipeline, meaning new deals are expected to close without issue.
Finally, Kurtz needs to strike a reassuring tone in his commentary. Investors want to feel comfortable that July 19 won't happen again, and that the business effect is gradually fading away. Based on the recent statements from Kurtz, I think there is a good chance of the above things happening.
But any missteps could lead to some temporary downside for CrowdStrike stock. After all, it isn't cheap. It currently trades at a price-to-sales (P/S) ratio of 24.3, making it notably more expensive than its main rival, Palo Alto Networks, which trades at a P/S ratio of 17.3.
CRWD PS Ratio data by YCharts.
With that said, CrowdStrike grew its revenue by 32% in the recent quarter compared to just 12% for Palo Alto, so it does deserve a premium valuation. Plus, management's long-term revenue forecast of $10 billion by fiscal 2031 implies 159% growth over the next six years, which means the stock might be a bargain at the current price for long-term investors.
As a result, I think CrowdStrike stock will continue to march higher in the weeks and months following its Nov. 26 report.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and Microsoft. The Motley Fool recommends Delta Air Lines and Palo Alto Networks and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
