The "Global Blue Screen" incident's initiator CrowdStrike's Q4 performance exceeded expectations, but profit outlook is bleak

According to the Zhitong Finance APP, the stock price of CrowdStrike Holdings Inc. (CRWD.US), a key player in the cybersecurity field, quickly fell after the release of a disappointing earnings outlook, indicating that the company may still be struggling to recover from a significant software update failure last year that caused millions of computers worldwide to crash, resulting in the widely impactful "global blue screen" incident.

After releasing the latest quarterly financial report data and future performance outlook, the company's stock price dropped more than 9% in after-hours trading in New York.

In a recent performance report released on Tuesday, CrowdStrike stated that it expects adjusted earnings per share for the three months ending April 30 to be between $0.64 and $0.66, far below Wall Street analysts' previous expectations of $0.96. However, the performance for the fourth quarter of fiscal year 2025 appeared optimistic, exceeding market expectations on several key metrics from the previous quarter and fiscal year.

Tuesday's performance report was the company's third report since the major software update with significant flaws on July 19, 2024, which caused a global crash of the Windows operating system, affecting nearly all industries and leading to widespread computer disruptions.

Since that major crash led to thousands of flight cancellations, significant banking disruptions, and hospitals postponing medical procedures and online payments, the company has repeatedly issued disappointing earnings forecasts, disappointing investors who have been closely monitoring signs of recovery.

The company is also facing investigations initiated by U.S. prosecutors and regulatory agencies regarding a transaction of approximately $32 million with technology product distributor Carahsoft Technology Corp.

Despite the disappointing earnings outlook, CrowdStrike performed better than market expectations on several key metrics measuring its software subscription business for the fourth quarter of fiscal year 2025. Specifically, the cybersecurity company reported recurring revenue of approximately $4.24 billion for fiscal year 2025, a year-on-year increase of 23%, exceeding analysts' general expectation of $4.12 billion. The net new annual recurring revenue also surpassed expectations.

In the fourth quarter, the company's total revenue grew by 25% year-on-year to $1.06 billion, exceeding analysts' general expectation of $1.03 billion; CrowdStrike's non-GAAP operating profit for the fourth quarter was approximately $217.3 million, compared to $213.1 million in the fourth quarter of fiscal year 2024.

In the fourth quarter, the company's total free cash flow was $239.8 million, although lower than the same period last year, it was higher than the market's general expectation of $215.7 million.

If the global "blue screen incident" had not occurred last year, CrowdStrike's prospects in the cybersecurity field under the AI era would be very optimistic. In terms of stock price, it took CrowdStrike four months to recover all the losses caused by the negative event after the "blue screen incident." Cybersecurity leader CrowdStrike triggered a brief global crash of the Microsoft Windows operating system due to a botched software update, severely impacting various industries worldwide, causing flight cancellations, medical procedures to be canceled/interrupted, disruptions in stock trading and other financial services, as well as significant impacts on major program broadcasts, leading to its stock price experiencing the worst two-day drop in history in 2024.

Statistics show that after a surge of over 140% in 2023, the stock price of CrowdStrike, one of the "AI blue-chip stocks" in the U.S. market, had already risen by 40% before the crash incident in 2024, mainly due to investors' expectations that global enterprises' investments in cybersecurity would continue to soar, and the anticipation that CrowdStrike's valuation would rise amid the ongoing global AI investment frenzy by integrating AI technology into the cybersecurity field.

With the support of new generative AI technology, cybersecurity services offer unparalleled convenience due to their low technical barriers, as well as an exponential increase in efficiency brought by AI technology. These two aspects are highly attractive to companies that are laying out AI software applications. Developing AI software applications relies on the support of two core technologies: AI large models and enterprise-level big data. The focus on low technical operation barriers and high efficiency in "AI + cybersecurity services" will undoubtedly provide stronger cybersecurity support for these two technologies.

CrowdStrike strives to fully integrate breakthrough generative artificial intelligence technology into its cybersecurity platform services, particularly by introducing an AI security analyst named "Charlotte." This feature aims to empower every user of the CrowdStrike Falcon® platform, enabling them to quickly create workflows assisted by generative AI. By asking questions and interacting with the virtual AI analyst Charlotte, users can quickly and conveniently operate various core modules with low barriers, gaining real-time insights into cybersecurity vulnerabilities, threat factors, and other security issues, significantly enhancing the platform's effectiveness and user experience