CrowdStrike Capitalizes on AI for Growth and Security Solutions

As the AI revolution gains momentum, industries worldwide are transitioning from experimentation to tangible outcomes. Businesses and governments alike are eager to see their AI investments translate into enhanced efficiencies and innovative solutions. At CrowdStrike, we are mandating that every team utilize AI’s capabilities, which we anticipate will play a crucial role in achieving our target of $10 billion in annual recurring revenue (ARR).

In this evolving landscape, organizations face significant challenges in securing their environments. The rise of AI leads to an increase in data, access points, and processes requiring robust cybersecurity measures. AI adoption is often concentrated in cloud workloads, data centers, or edge devices, areas where CrowdStrike excels in employing AI-native technologies to prevent breaches.

Rethinking identity and data protection has become essential as more third-party and internal applications require access to sensitive information. Understanding who accesses data and where it travels is increasingly critical. As a result, executives—chief information security officers (CISOs), chief information officers (CIOs), and CEOs—are reevaluating their technology frameworks, focusing on AI-driven platforms that can support their goals for the next decade.

For our clients, CrowdStrike’s Falcon platform has quickly evolved into an AI-native Security Operations Center (SOC). Our generative AI assistant, Charlotte, streamlines SOC operations and enhances threat response times. In over 100 Q4 Charlotte AI deals, clients have reported significant efficiency improvements. One European financial firm noted that Charlotte AI quickly summarized host and user activity in 10 to 15 seconds, a task that previously took over 20 minutes manually.

In response to the escalating threat landscape, our intelligence team has observed a marked increase in state-sponsored cyber operations. Our latest global threat report revealed that targeted attacks from adversaries associated with China increased state-sponsored cyber operations by 150%, particularly against sectors like financial services and manufacturing, some seeing rises of up to 300%.

Adversarial AI is becoming more accessible with tools like DeepSeek, leading to a rapid increase in its adoption. This intensifying threat landscape showcases CrowdStrike’s expertise in threat intelligence. Q4 marked our most successful quarter for threat intelligence, with growing interest from governments and enterprises in a competitive market that has seen many traditional vendors merge or disappear.

As the top authority on threat intelligence, CrowdStrike specializes in identifying and naming adversaries to help unify cyber defenders in thwarting attacks. The democratization of powerful AI tools amplifies the need for our services. Moreover, CrowdStrike is committed to providing the solutions necessary to navigate the AI-driven cybersecurity landscape, leveraging our innovation engine and extensive security data.

In this AI-driven environment, standalone product vendors face challenges in meeting customer needs. CrowdStrike serves as the leading AI-native SOC in cybersecurity, holding a unique position with one of the richest sets of threat data. Our dataset, enriched by millions of annotations from Falcon Complete analysts, enhances the context and usability of threat intelligence.

Recently, we have witnessed an upsurge in incident response engagements in Q4, particularly with organizations utilizing next-generation endpoint detection and response (EDR) solutions. Successful competitive displacements were reported with a logistics software vendor, a national packaging company, and a security software provider. The effectiveness and ease of deployment of Falcon make CrowdStrike the go-to choice for stopping breaches.

Additionally, we’ve introduced Falcon Flex, a subscription model allowing customers the flexibility to adopt modules as needed throughout their subscription term. This approach resonates with prospects, current customers, and ecosystem partners alike. Following a recent incident, CrowdStrike developed customer commitment packages (CCPs) to assist affected clients, resulting in heightened Falcon Flex adoption.

In Q3, accounts embracing the Falcon Flex model represented over $1.3 billion in total deal value, with Q4 alone contributing an additional $1 billion. Total deal value for Falcon Flex has now skyrocketed to $2.5 billion, reflecting an 80% quarter-over-quarter increase and more than a tenfold annual rise. This rapid growth demonstrates clients’ long-term commitment to CrowdStrike, significantly contributing to our total contract value (TCV) acceleration.

Support for this commitment translates into expanded deployments of Falcon modules among clients. With over 60% of Falcon Flex deal value already deployed, we are pleased with these adoption rates. Falcon Flex is a transformative offering, expediting module deployment and facilitating customer consolidation on our platform. With the summer’s challenges now resolved, we are concluding our CCP program.

The CCP initiative effectively strengthened our relationships with impacted clients and led to greater platform adoption. This progress fuels my confidence in our potential for net new ARR reacceleration in the second half of the year, as deployed products drive renewals and contract enlargements. Notably, the Falcon Flex program has expedited the adoption of our key platform solutions—cloud, identity, and next-generation SIEM.

Moreover, our exposure management sector is swiftly replacing outdated vulnerability management options, targeting a significant contribution of around $300 million in ARR. Our cloud security business demonstrated robust growth in Q4, increasing by more than 45% and surpassing $600 million in ARR. The cloud’s role is central to the AI revolution, serving as the essential infrastructure that empowers enterprises to leverage AI effectively.

The importance of cloud security has never been more pronounced, with two key trends emerging in the market. The primary mechanism for safeguarding cloud environments is runtime protection, an area where CrowdStrike is uniquely positioned to offer the most comprehensive solutions.

CrowdStrike Reports Strong Growth and Innovation in Cybersecurity Solutions

In the competitive landscape of cloud security, CrowdStrike has established itself as a leader. While other companies are still catching up, CrowdStrike has successfully provided frictionless Cloud Workload Protection (CWP) for several years, proving effective in preventing cloud breaches. The market for cloud security is also shifting, with customers eager for an integrated platform where the overall benefits exceed that of individual solutions. Falcon Cloud Security stands at the forefront of this trend, securing AI infrastructure comprehensively from workload to large language models (LLMs) and enabling enterprises to leverage AI securely.

Major Financial Successes

A highlight of the quarter included an eight-figure Falcon Flex deal with a leading global financial services company, where we replaced a competitor’s multi-platform cloud offering. This success was supported by our CrowdStrike Financial Services, which facilitated a commitment to a substantial multiyear deal. By minimizing the complexity of multiple consoles and enhancing seamless Security Operations Center (SOC) operations, Falcon Cloud Security emerged as the easier solution to manage while providing crucial security controls to thwart cloud breaches.

Identity and Security Innovations

Our identity business reached over $370 million in annual recurring revenue (ARR) by capitalizing on several vital trends, particularly the expanding identity threat landscape. We also saw promising results from the recently acquired Adaptive Shield, now rebranded as Falcon Shield, which secures identities across various environments including on-premises systems, SaaS applications, and hyperscale infrastructures. A notable achievement in this area was a seven-figure deal with a large university hospital system that transitioned to our identity protection solution after dissatisfaction with their previous vendor, which generated excessive false positives.

Next-Gen SIEM Growth

Our Next-Gen Security Information and Event Management (SIEM) business exhibited remarkable growth, exceeding 115% year-over-year to end the fiscal year with over $330 million in ARR. This emerging sector is becoming a crucial element of the integrated Falcon platform, offering unparalleled speed, scalability, and cost-effectiveness in comparison to legacy SIEM systems. The combination of Next-Gen SIEM with our in-house data and Charlotte AI positions CrowdStrike as a frontrunner in the evolving AI security landscape.

A significant win in this area was with a major U.S. airline, which ranks among the top global airlines by passenger volume. This airline opted for CrowdStrike to replace its outdated antivirus and legacy QRadar SIEM systems. The intuitive design of the Falcon Next-Gen SIEM, paired with effective data ingestion capabilities, allowed us to outmaneuver a competition from both a network security vendor and a hyperscale SIEM.

Innovative Solutions in Exposure Management

For the first time, we are proud to reflect on our exposure management business, which has quickly emerged as a market disruptor. It combines native vulnerability management with integrated attack surface management, offering features such as attack path analysis and enhanced vulnerability prioritization. We’re witnessing a significant number of our clients transitioning from outdated vulnerability management systems.

Recent successes include partnerships with a large digital radio station, a multinational shipping firm, and a healthcare provider in the Asia-Pacific region. Our forward-thinking cybersecurity partners recognize CrowdStrike as a tremendous opportunity, and our ecosystem serves as a vital growth component in our journey towards achieving $10 billion in ARR. For the fiscal year, partners accounted for 60% of our new business, underscoring the effectiveness of our partner-first strategy.

Strategic Partnerships and Marketplace Integration

Our Managed Security Service Provider (MSSP) strategy is flourishing, catering to small and medium-sized businesses in need of comprehensive cybersecurity management. MSSP contributed nearly 15% to our new business in FY ’25, illustrating the growth we have experienced in this domain over the past two years. Additionally, our deep investments in cloud marketplaces have paid off; we became the first cybersecurity Independent Software Vendor (ISV) to surpass $1 billion in sales on the AWS marketplace in just one calendar year.

We also had an outstanding year with Google Marketplace, achieving over $150 million in deal value in our first year of partnership. Our collaboration with hyperscaler marketplaces positions us for larger deal sizes and expedited transaction times. In summary, we present ourselves as the AI-native platform that effectively combats breaches, leading the charge in secure AI transformation.

Strong Market Performance and Customer Trust

All seven of our product modules have now surpassed $300 million in ARR, highlighting our commitment to innovation and widespread adoption of the Falcon platform. Our go-to-market momentum is at an unprecedented level, indicating robust business investment in CrowdStrike as a safeguard for future security needs. Currently, CrowdStrike is trusted by over 74,000 organizations, a 30% increase year-over-year, affirming our credibility as a cybersecurity provider.

In the fourth quarter alone, we achieved record sales across all deal segments, closing over 20 deals valued at more than $10 million, over 350 deals exceeding $1 million, and over 2,300 deals above $100,000. The data illustrates that our customers, partners, and the market have strong confidence in CrowdStrike.

In closing, I reiterate the importance of our journey, built on customer trust, partner loyalty, and our team’s dedication. As the cybersecurity landscape evolves alongside advancements in AI, the need for robust security systems will be imperative.

Now, I will hand the discussion over to Burt Podbere, our Chief Financial Officer.

Burt W. Podbere — Chief Financial Officer

Thank you, George, and good afternoon, everyone. As a quick reminder, unless otherwise…

CrowdStrike’s Q4 Success Highlights Strong Growth and Resilience

All financial figures discussed today, except revenue, are on a non-GAAP basis. CrowdStrike reported a robust fourth quarter, exceeding our expectations across all metrics. This performance reflects our adaptability to unforeseen challenges and shows how we can emerge stronger. The strength of our results underlines the effectiveness of our business model and sales strategy. Notably, total contract value reached $6 billion for FY ’25, marking a growth rate of 40% year over year.

Key Performance Highlights

First, our customer commitment program successfully accelerated platform adoption and strengthened customer relationships. Falcon Flex customers contributed over $1 billion in account value during Q4, with a strong gross retention rate of 97%. Looking forward, we are optimistic about improving visibility for net new Annual Recurring Revenue (ARR) reacceleration and expanding operating and free cash flow margins in the second half of FY ’26.

We anticipate this momentum will pave the way for further acceleration into FY ’27. Overall, in the full fiscal year, we recorded a 23% growth in ending ARR and a total revenue growth of 29%. Our operating income increased by 27% year over year to a record $837.7 million, representing 21% of total revenue. Net income attributable to CrowdStrike rose 31% to $987.6 million, or $3.93 per diluted share.

Fourth Quarter Financials

Free cash flow also saw a year-over-year increase of 14%, reaching $1.07 billion or 27% of revenue. In Q4 alone, we achieved a net new ARR of $224 million, bringing ending ARR to $4.24 billion—an annual increase of 23%. The success of our go-to-market and single platform strategies contributed to these results, with increased Falcon Flex momentum driving platform adoption.

Moreover, entering the new fiscal year, our sales pipeline remains healthy, reflecting sustained demand from both new and existing customers. In Q4, our customer commitment program exceeded expectations, providing approximately $56 million in ARR value, with an estimate of $80 million for the fiscal year. Although the majority of deals included additional product offerings rather than time extensions or services, we view this positively as it indicates enhanced trust in our long-term partnerships and promotes larger deals and platform consolidation.

Platform Adoption and Customer Retention

Our increased adoption of the Falcon platform is noteworthy, with a substantial acceleration attributed to our Falcon Flex subscription model. In Q4, customer engagement metrics showed significant growth: 48% of subscription clients utilized six modules, 32% had seven, and 21% had eight or more modules. Customers utilizing five or more modules reached a new high of 67%, with new customers averaging five modules upon acquisition.

This escalation in platform adoption necessitated the discontinuation of our five or more module metric. The Falcon Flex program has been pivotal in propelling platform engagement, with Falcon Flex customers now averaging over nine modules each. Additionally, our newly launched CrowdStrike Financial Services has closed deals worth over $140 million in FY ’25, further enhancing customers’ capacities for larger and longer-term agreements, thereby supporting future platform transitions and Flex deals.

Our strong customer relationships continue to drive exceptional retention rates. In Q4, gross retention remained high at 97%, complemented by a dollar-based net retention rate of 112%, reflecting the positive impact of our customer commitment packages.

Profit and Loss Overview

Analyzing our financial results, total revenue increased by 25% in Q4 compared to the previous year, reaching $1.06 billion, surpassing expectations. Subscription revenue surpassed $1 billion for the quarter, growing 27% year over year to $1.01 billion, while professional services revenue amounted to $50.2 million. Total gross margin was 78%, and subscription gross margin exceeded 80%, consistent with last year’s Q4 figures.

In Q4, non-GAAP operating income reached $217.3 million, yielding an operating margin of 21% that exceeded our guidance. Our commitment to disciplined investments has fostered innovation and resilience. Our focus on customer-centric innovation has played a crucial role in our single-platform strategy, resulting in industry-leading retention rates. Notably, we saw substantial adoption of AI capabilities within our workforce, yielding significant efficiency improvements.

Despite these achievements, GAAP net loss attributable to CrowdStrike stood at $92.3 million, affected by $49.9 million in tax expenses related to acquisitions and $21 million associated with incident-related expenses. Nevertheless, non-GAAP net income attributable to CrowdStrike increased by 10%, reaching $261.0 million, or $1.03 per diluted share, surpassing our expectations.

Outlook for Future Growth

Our cash and cash equivalents rose to $4.32 billion, while free cash flow for Q4 amounted to $239.8 million, or 23% of revenue. Incident-related expenses accounted for approximately $22 million of our free cash flow. Deals financed through CrowdStrike Financial Services had a minimal impact on the quarter’s free cash flow.

As for our future outlook, the fundamentals of our business remain solid. We are encouraged by our exceptional customer retention rates and the success of our customer commitment program, which indicates a promising trajectory for upcoming quarters.

Strong Demand and Strategic Growth Highlight CrowdStrike’s Q1 Guidance

The continued adoption of CrowdStrike’s Falcon Flex is facilitating module adoption, enhancing strategic relationships with customers and positioning the company for long-term growth. Demand remains robust across multiple expanding markets, particularly in Next-Gen Security Information and Event Management (SIEM), where CrowdStrike is beginning to disrupt a significant legacy market. Additionally, newer markets such as agentic AI for cybersecurity, where CrowdStrike’s data advantage is setting it apart, are contributing to its growth trajectory.

While CrowdStrike does not provide specific guidance on net new annual recurring revenue (ARR), they anticipate a typical seasonal decline of 21% to 23% from Q4 to Q1. The company expects net new ARR acceleration in the second half of FY ’26, which will lay the groundwork for growth in FY ’27. CrowdStrike is targeting an ending ARR of $10 billion by FY ’31, and this anticipated acceleration sets the stage for improved operating and free cash flow margins, particularly in Q4 of FY ’26. The guidance on operating margins reflects strategic investments aimed at providing a clear return on investment in the latter half of FY ’26, underpinning their growth and innovation.

For fiscal year 2026, CrowdStrike projects a non-GAAP operating margin around 21% and expects to achieve GAAP profitability in Q4. Looking ahead, they anticipate a 23% non-GAAP operating margin for FY ’27, rapidly approaching their target model by fiscal 2029, which includes a free cash flow margin target between 34% and 38%. It is important to note that in Q1 FY ’26, CrowdStrike expects cash impacts totaling approximately $73 million from outage-related costs, as well as $43 million due to flexible payment terms provided under customer commitment packages for deals concluded in the latter half of FY ’25. The company plans to end fiscal year 2026 with a free cash flow margin of around 27% and aims to exceed 30% annually by FY ’27.

Financial Guidance for FY 2026

For the first quarter of FY 2026, CrowdStrike expects total revenue between $1,100.6 million and $1,106.4 million, reflecting an approximate 20% year-over-year growth rate. Non-GAAP income from operations is projected in the range of $173.1 million to $180.0 million, while non-GAAP net income attributable to CrowdStrike is expected to fall between $162.1 million and $167.5 million. This translates to an anticipated diluted non-GAAP net income per share attributable to CrowdStrike of approximately $0.64 to $0.66, based on an expected weighted average of around 254 million diluted shares and a 22.5% non-GAAP effective tax rate, representing a $0.19 impact on EPS at the midpoint.

For the full fiscal year of 2026, revenue is expected to range from $4,743.5 million to $4,805.5 million, signifying a growth rate of 20% to 22% over the previous fiscal year. Non-GAAP income from operations is anticipated to be between $944.2 million and $985.1 million, with fiscal 2026 non-GAAP net income attributable to CrowdStrike predicted between $851.2 million and $883.0 million. Based on a diluted weighted average of approximately 256 million shares and a 22.5% non-GAAP effective tax rate, CrowdStrike expects non-GAAP net income per share to reach between $3.33 and $3.45.

For more details, please refer to our earnings release and presentation, which provide additional information regarding changes in the presentation of non-GAAP measures and modeling notes. George and I will now take your questions.

Maria Riley — Vice President, Investor Relations

Operator, we are now ready for questions.

Questions & Answers:

Operator

[Operator instructions] Our first question will come from Saket Kalia with Barclays. Please unmute your line.

Saket Kalia — Analyst

Good afternoon, everyone. Thank you for taking my question, and well done on finishing the year strong.

George Kurtz — Co-Founder, President, and Chief Financial Officer

Thank you, Saket.

Saket Kalia — Analyst

George, could you elaborate on how Falcon Flex is enhancing value for customers and provide examples of how current customers are increasing their spending with CrowdStrike through this initiative?

George Kurtz — Co-Founder, President, and Chief Financial Officer

Of course. Falcon Flex emerged from customer demand for greater consolidation with CrowdStrike and a flexible procurement model for additional modules. Customers can commit to larger purchases for better discounts, which they can seamlessly integrate into their systems. For instance, last quarter, we worked with a large transportation company, consolidating their cloud, SIEM, and multiple endpoint vendors under Falcon Flex, leading to a remarkable 67% increase in their ARR. This is just one example of how we are facilitating customer growth significantly. In general, we see that customers are ahead of schedule in adopting Falcon Flex, which is a positive indicator for us.

Maria Riley — Vice President, Investor Relations

We are ready for our next question.

Operator

Our next question will come from Brian Essex with JPMorgan. Please unmute your line.

Brian Essex — Analyst

Thank you for taking my question. I’d like to discuss your emerging products.

It appears that the growth rates for cloud and identity services have slowed compared to log scale. Are these trends related to customer incentives, or do they indicate varying consumption patterns and costs associated with these services? Additionally, how are your customers engaging with these emerging segments to ensure their ongoing sustainability?

George Kurtz — Co-Founder, President, and Chief Financial Officer

This is a great question. Recently, in our threat report, we noted the increasing importance of identity protection to customers. Since 2019, 40% of attacks have been identity-based or nonmalware-based, and currently, the number stands at 79%. The CCP packages are driving significant interest in identity and cloud services as they are critical for enhancing security.

CrowdStrike Analysts Discuss Future Growth and Customer Strategies

As we look ahead, it is clear that the second half of the year presents unique opportunities. The existing contracts tied to our Customer Commitment Program (CCP) are set to expire soon. This will allow us to revisit terms with customers who are already familiar with our services, ultimately benefiting our strategy and customer retention efforts.

Maria Riley — Vice President, Investor Relations

We’re now ready for our next question, please.

Operator

Our next question comes from Gabriela Borges with Goldman Sachs. Please go ahead.

Gabriela Borges — Analyst

Good afternoon. Thank you. Burt, can you elaborate on how you arrived at the guidance for this year? We’ve observed a pause in external demand generation around July, coupled with delays in enterprise sales cycles. You mentioned a 15% growth target. Could you explain how you considered these factors for the second half of the year as some of these trends begin to reverse? Additionally, regarding the CCP contracts, how are you interpreting these dynamics? Thank you.

Burt W. Podbere — Chief Financial Officer

Sure, Gabriela. Thank you for the question. As George mentioned, the incentives associated with the CCP programs play a critical role in our outlook for the second half of the year. The upcoming expirations give us confidence in upselling opportunities to our customers who are already enjoying our offerings. The renewal process should be seamless.

Moreover, we have seen aggressive engagement from clients regarding the use of their Flex pools, from which we derive optimism about a reacceleration in growth. Our diverse product lineup includes 29 modules, providing ample opportunity to both upsell to existing customers and attract new clients. The anticipation of regaining new Annual Recurring Revenue (ARR) in the latter half of the year is particularly exciting.

Maria Riley — Vice President, Investor Relations

And now, let’s move on to our next question.

Operator

The next question is from Tal Liani with BofA. Tal, please go ahead.

Tal Liani — Analyst

Thank you. I have two questions; I’ll focus on one. Regarding your Gross Retention Rate (GRR) and Net Retention Rate (NRR), it’s clear there’s consistency in new customer acquisitions, maintaining around 10-11% annual growth. However, your performance with existing customers appears to have declined, with percentages dropping from 21% in Q1 to 15% by year-end. Could you address your approach to regaining higher NRR, mainly through upselling to existing clients? Thanks.

Burt W. Podbere — Chief Financial Officer

Sure, Tal. There are several factors affecting our dollar-based retention. Recent trends have seen fluctuations due to the CCP program, but it’s important to remember that our dollar-based net retention (DBNR) can be quite volatile.

We don’t predominantly manage it in any single quarter. Larger, longer-term deals may affect DBNR slightly, but this strategy ultimately benefits us as we engage more comprehensively with clients. Our Flex program, for example, opens pathways to enter larger agreements that can temporarily impact our retention metrics. Conversely, the growing client base allows us more opportunities for upselling and cross-selling, which is a favorable dynamic for long-term growth.

Maria Riley — Vice President, Investor Relations

We are ready for our next question.

Operator

Our next question comes from Joel Fishbein with Truist Securities. Please proceed.

Joel Fishbein — Analyst

Thanks for taking my question. George, could you provide additional insights on your AI strategy in Charlotte? Specifically, how do you view pricing and the competitive landscape in the AI security sector?

George Kurtz — Co-Founder, President, and Chief Financial Officer

Certainly. When we examine our Charlotte AI offerings and the efficiencies gained through agentic AI, feedback from customers has been very positive. We’ve effectively transformed the role of entry-level analysts into more strategic positions. The introduction of Falcon Flex has integrated Charlotte into various workflows, enhancing our service delivery.

Interestingly, we’ve noticed that even senior analysts find great value in using Charlotte, as they can efficiently prompt it for deeper insights. This positive reception is encouraging, signaling that we are leading in this evolving agentic AI landscape.

Maria Riley — Vice President, Investor Relations

Let’s move on to the next question.

Operator

Our next question will be from Matt Hedberg with RBC. Please unmute your line.

Matthew Hedberg — Analyst

Thanks for taking my questions. George, with your focus on exposure management, I sensed tremendous enthusiasm regarding your early achievements. Could you clarify whether this involves full network endpoint replacements? I want to ensure I understand how your platform contrasts with niche solutions in this area.

George Kurtz — Co-Founder, President, and Chief Financial Officer

Yes, indeed. Our technology, particularly in exposure management and vulnerability management, is comprehensive. While we have a history of capabilities aligned with exposure management, we’ve recently made significant enhancements, including the ability to conduct network scans—an essential component that completes our offering.

CrowdStrike Discusses Opportunities and Challenges in Recent Earnings Call

During a recent earnings call, CrowdStrike executives provided insights into the company’s performance and future opportunities, highlighting recent technological advancements and customer feedback. The integration of new capabilities into their product line has positioned CrowdStrike competitively, especially as they seek to prioritize agent-first solutions for their clientele.

Technological Advancements Drive Competitive Edge

One executive emphasized how the ability to scan has enhanced their offerings, allowing for more effective replacements of competing products. This initiative aligns with customer demand and reaffirms CrowdStrike’s commitment to innovation. The technologies integrated into their platform leverage extensive data from their artificial intelligence and workflow infrastructure, indicating a robust next step in their product evolution.

Inquiry on Net New Annual Recurring Revenue (ARR)

Maria Riley, Vice President of Investor Relations, then opened the floor for questions. Andrew Nowinski from Wells Fargo asked for clarity on the net new ARR, specifically concerning the contribution from the recent acquisition of Adaptive Shield in the fourth quarter.

Nowinski noted that, despite adding back the $56 million from their cloud computing platform (CCP), net new ARR appeared to decline by approximately 1% year over year. He pointed out that the gross retention rate remained stable, suggesting that customer churn has not increased; however, he queried whether spending hesitance might be impacting sales growth.

Addressing Customer Churn and Contraction

Burt W. Podbere, Chief Financial Officer, responded, indicating that the churn concerning CCP had been minimal. He voiced optimism regarding their net new ARR, particularly in light of a reacceleration expected in the latter half of the fiscal year. As for the Adaptive Shield acquisition, Podbere described its impact as minor but acknowledged the opportunity it presents for future growth.

Customer Interest in Adaptive Shield

George Kurtz, Co-Founder and President, echoed Podbere’s sentiments by confirming significant customer interest in Adaptive Shield. He noted that Flex customers inquired about its rollout immediately following the announcement, showcasing early adoption just weeks later.

Exploring Falcon Flex Opportunities

Following this, Fatima Boolani from Citi asked about the Falcon Flex program and the value contributed to CCP customers. Kurtz elaborated on the licensing model and how early consumption of Falcon Flex credits could lead to renewed contracts or upsell opportunities. He referenced sales teams’ focus on demand planning, indicating a proactive approach toward customer needs.

Strong Growth in AWS Marketplace

In another question, Gregg Moskowitz from Mizuho highlighted CrowdStrike surpassing $1 billion in sales through AWS Marketplace within a 12-month window. He inquired about future growth projections as the company faces larger customer numbers.

Kurtz affirmed the partnership with AWS and other collaborators. He expressed confidence in continued sales growth, citing an increase in enterprise commitment to cloud marketplaces. Customers prefer flexible procurement options available through platforms like AWS Marketplace, which he expects will further benefit CrowdStrike’s global reach.

As CrowdStrike continues to adapt to market dynamics, executives remain optimistic about leveraging new technology and maintaining customer relationships, setting the stage for future success.

# Cloud ARR Grows 45%: Insights from CrowdStrike’s Latest Earnings Call

Maria Riley — Vice President, Investor Relations

We are ready for our next question.

Operator

Our next question comes from Joseph Gallo with Jefferies. Please go ahead.

Joseph Gallo — Analyst

Thanks for taking my question. It’s excellent to see the $600 million in cloud ARR growing at 45%. Could you discuss the competitive landscape? Has it stabilized? One of your major cloud competitors mentioned on its earnings call that customers are shifting toward workload protection and agent architecture. Are you observing the same trend? Given your strength in workload protection, when do you anticipate customers might consolidate onto a single cloud solution?

George Kurtz — Co-Founder, President, and Chief Financial Officer

Absolutely, Joseph. Examining the market, we see a strong presence of CSPM and workload protection technologies. While CSPM offers valuable reporting and compliance features, it does not actively prevent breaches. Therefore, if organizations seek to avert breaches, workload protection becomes essential. This is where our expertise lies; we’ve refined our approach over the last decade and have established a reputable presence in managing critical workloads in cloud infrastructure. We continue to witness consolidation in these areas.

We have expanded our CNAPP capabilities across CSPM, ASPM, and DSPM, among others. These enhancements allow us to consolidate customer spending effectively, and we’re pleased with the $600 million milestone and the ongoing success within cloud environments.

Maria Riley — Vice President, Investor Relations

Thank you, George. We’re ready for our final question.

Operator

The last question will come from Patrick Colville with Scotiabank. Please proceed.

Patrick Colville — Analyst

Thank you for taking my question. I’m curious about the bottom line; it seems there’s limited discussion regarding it. You’re guiding towards a 20% operating profit margin in fiscal ’26. Could you elaborate on what factors influence this? Is the lower forecast reflective of challenges in the first half of the fiscal year before experiencing a reacceleration in the latter half? Additionally, will you be lower than the 23% operating margins anticipated for fiscal ’27, indicating a rebound after next year?

Burt W. Podbere — Chief Financial Officer

Thank you, Patrick. To address your question, our guidance reflects the successful CCT program. The expected profitability accounts for sales and marketing expenses related to FY ’25 CCP packages spread across the year, which will affect our margins. We’ve also invested in key business areas to scale effectively. This includes rejuvenating our marketing strategies following recent outages.

Moreover, we’re excited about our innovation in high-growth products, including cloud security, identity protection, Next-Gen SIEM, and AI. Investments involving our internal use of AI tools are anticipated to yield substantial long-term savings. We’ve also increased our investments in platform resiliency, a strategy we believe will provide a competitive edge against our rivals in ensuring top-tier security and reliability. We project that operating margins and free cash flow margins will improve in the latter half of FY ’26.

Maria Riley — Vice President, Investor Relations

Thank you all for joining. Please remember to refer to our earnings presentation on our investor relations website for additional modeling notes and updates on non-GAAP measures. Now, I’ll hand the call over to George for closing remarks.

George Kurtz — Co-Founder, President, and Chief Financial Officer

Thank you for your time today. We appreciate your continuing support and look forward to our upcoming investor events. Have a great day.

Duration: 0 minutes

Call Participants:

Maria Riley — Vice President, Investor Relations

George Kurtz — Co-Founder, President, and Chief Financial Officer

Burt W. Podbere — Chief Financial Officer

Saket Kalia — Analyst

Brian Essex — Analyst

Gabriela Borges — Analyst

Burt Podbere — Chief Financial Officer

Tal Liani — Analyst

Joel Fishbein — Analyst

Matthew Hedberg — Analyst

Andrew Nowinski — Analyst

Fatima Boolani — Analyst

Gregg Moskowitz — Analyst

Joseph Gallo — Analyst

Patrick Colville — Analyst

For more detailed analysis on CRWD, please see additional earnings call transcripts.

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