Shares of CrowdStrike Holdings Inc. fell in extended trading on Tuesday after the cybersecurity company said new sign-ups came in below expectations amid macro difficulties and longer customer buying cycles.
Faced with concerns that businesses are cutting spending, CrowdStrike
CRWD,
the stock plummeted nearly 20% in hours, after falling 1% in the regular trading session to close at $138.
George Kurtz, CrowdStrike’s co-founder and chief executive officer, told analysts on a conference call that the company reported $198.1 million in new annual recurring net revenue, or ARR. , during the quarter, not as much as they expected.
ARR is a software-as-a-service metric that indicates how much revenue a company can expect based on subscriptions. That number jumped 54% to $2.34 billion from the previous quarter, while Street expected $2.35 billion. Kurtz says that about $10 million has been deferred for future quarters.
“We expect these macro headwinds to last through the end of Q4.
Burt Poddere, CrowdStrike’s chief financial officer, explains that the company relies on ARR because it’s “an X-ray in the contract of sale.”
“As George mentioned, although we entered Q2 with record revenue and we are expecting a prolonged sales cycle due to macro concerns to continue, we are not expect to see regular Q4 budgets increase due to tighter budget supervision.”
“It’s prudent to assume” the new net ARR in the fourth quarter will be up to 10% lower than in the third quarter, Podbre said. That means about 10% year-over-year will happen in the first half of next year, and “the new full-year net ARR will be mostly flat or slightly increased year-on-year.”
“This means low late 30s ARR growth and low to mid-30s subscription revenue growth for fiscal 2024,” Podbre said.
Read: Cloud software is suffering from the cold November rain. Can Snowflake and Salesforce turn the tide?
The company expects adjusted fourth-quarter financial earnings of 42 cents to 45 cents a share on revenue between $619.1 million and $628.2 million, while analysts surveyed by FactSet forecast earnings of 34 cents a share on revenue of $633.9 million, according to analysts.
CrowdStrike expects full-year earnings of $1.49 to $1.52 a share on revenue of $2.22 billion to $2.23 billion. Wall Street expects $1.33 a share on revenue of $2.23 billion.
The company reported a loss for its fiscal third quarter of $55 million, or 24 cents a share, compared with a loss of $50.5 million, or 22 cents a share, in the same period last year. last. Adjusted net income, excluding compensation based on stocks and other items, was 40 cents a share, compared with 17 cents a share for the year-ago period.
Revenue rose to $580.9 million from $380.1 million in the previous quarter.
Analysts expect CrowdStrike to report earnings of 28 cents a share on revenue of $516 million, based on a company outlook of 30 cents to 32 cents a share on revenue from 569, $1 million to $575.9 million.
So far in November, cloud software stocks have been battered. While the S&P 500
SPX,
was up 2% and the Nasdaq Composite was heavy on technology
COMPUTER,
flat, iShares Expanded Tech-Soft Sector ETF
IGV,
fell more than 2%, Global X Cloud Computing ETF
CLOUD,
fell more than 4%, the first cloud ETF
SKY,
fell more than 6% and the WisdomTree Cloud Fund
WCLD,
fell by more than 11%.
