Is CrowdStrike Stock A Buy Today As AI Threats Lift Demand?
The popular view of CrowdStrike (CRWD) is that AI has made a fast-growing security company grow even faster. The stock returned 98% over the past year. The S&P 500 returned 18.5% over the same period. For that view to be right, two things must both be true. The faster growth has to last, and it has to turn into real profit. So far, only the first one clearly holds.
Can CrowdStrike Keep Growing This Fast?
So far, yes. In fiscal Q2 2027, revenue reached $1.47 billion. That was up 26% from a year earlier. Management said revenue growth sped up for the fifth quarter in a row.
That pace is not new. Over the past three years, revenue grew 27% a year on average. The S&P 500 as a whole grew 5.8% a year. Management tied the recent speed-up to AI. It says AI is widening the ways attackers can get in, which pushes customers to spend more on security.
In the fiscal Q2 2027 earnings call, an analyst asked whether that demand will last. Management said it will, because it sees AI as still in its early days, and it raised its fiscal 2027 outlook again. Fast sales growth is only half of the case, though. The other half is what that growth earns.
Is CrowdStrike Turning Its Growth Into Profit?
Not yet at the operating level, by standard accounting. Over the past year, CrowdStrike’s operating margin was -2.2%. So its main business ran at a small loss. The S&P 500 as a whole kept 18.6% of its revenue as operating profit.
Cash tells a better story. In fiscal Q2 2027, free cash flow, the cash left after running and investing in the business, was $377 million. That was 26% of revenue. Management expects free cash flow of at least 30% of revenue for the full fiscal year.
So the business brings in cash, but its main business still runs at a loss under standard accounting. Anyone buying at today’s price is counting on that changing, and the price itself shows how much.
What Does CrowdStrike’s Valuation Not Tell You?
The stock trades at 47.1 times its sales. The S&P 500 trades at 3.1 times sales. The multiple has climbed mainly because the share price rose much faster than sales. Over the past year, revenue rose to $5.4 billion. A year earlier, it was $4.3 billion. The share price roughly doubled.
The multiple does not show how fast customers are moving to the Falcon Flex subscription model, or what they spend there. Yearly subscription value from accounts on Falcon Flex passed $2.29 billion. That was up 101% from a year earlier. Part of that jump is customers moving over from standard subscriptions. Customers who make that move spend over 40% more on average, management said.
The stock can also fall hard when the market turns. In the sharp market drop of July to August 2024, it fell 42% from its peak. The S&P 500 fell 7.8%.
Right now, growth is holding and profit is the weaker of the two. The next quarterly report, for fiscal Q3 2027, will show more. Management expects a free cash flow margin of 27.5% for that quarter, at the midpoint of its guidance. A result at or above that, with revenue growth near 26%, would support the profit side. Slower growth or weaker cash would leave a stock priced at 47.1 times sales with less support.
How To Act On CRWD?
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