CrowdStrike stock drops after EPS beat; ARR growth lags

CrowdStrike shares slid about 11% in premarket trading after the cybersecurity firm reported first-quarter earnings per share of $1.10 and revenue of $1.39 billion, both above Street forecasts. Annual recurring revenue rose 22% year over year to $4.44 billion, with net new ARR additions of $193.8 million for the quarter.

The company issued fiscal 2027 guidance for revenue between $5.91 billion and $5.96 billion and earnings per share of $4.88 to $4.96, slightly above consensus estimates. Revenue and EPS beat analyst models, with prior estimates near $1.36 billion in revenue and $1.07 in EPS.

Investors focused on ARR after the stock had risen roughly 65% year to date and about 60% in May, elevating expectations ahead of the report. Mark Malek, CIO at Siebert Financial, wrote before the release that the stock was “priced to perfection,” and some traders moved to lock in gains after the results.

Several analysts highlighted that the net new ARR beat was smaller than in recent quarters. Jefferies observed the ARR beat exceeded consensus by about $6 million, versus $15 million to $29 million of upside across the prior four quarters. Morgan Stanley wrote that near-term expectations had been elevated following the rally but said there was scope for “further multiple expansion” if ARR acceleration proves durable.

Analyst price targets shifted after the report. Jefferies reduced its target to $760 from $775 while keeping a Buy rating. Barclays raised its target to $675 from $650 and kept an Overweight rating. TD Cowen increased its target to $700 from $625 and maintained a Buy recommendation. Barclays analyst Saket Kalia noted that in Barclays’ view net new ARR reached $256 million but missed the firm’s more optimistic scenario because some deals tied to the April Mythos launch are expected to take longer to close.

CrowdStrike has expanded AI-related products, including Falcon Data Security and the Charlotte AI AgentWorks Ecosystem developed with major cloud and AI partners. Total operating expenses rose 15% year over year to $1.07 billion, from $934.3 million a year earlier.

Valuation levels were cited as a factor in the reaction. CrowdStrike trades near 138 times estimated earnings for the next 12 months, compared with roughly 69 times for one peer and about 31 times for another, based on LSEG data. Ipek Ozkardeskaya of Swissquote observed that the stock’s drop despite an earnings beat reflected profit-taking when valuations look stretched and may signal vulnerability for names that have rallied on AI-related optimism.

Shares of Palo Alto Networks fell nearly 3% on the same day, even as that company raised its annual profit forecast. Analysts noted continued enterprise spending on security tied to AI interest, and that investors are weighing the durability of ARR growth and the pace at which AI-related products convert into recurring revenue.