CrowdStrike Q3 FY26 Earnings

In the fast-moving world of cybersecurity, few names carry the weight—or the recent headlines—of CrowdStrike (NASDAQ: CRWD). Following a tumultuous summer marked by a high-profile global outage, all eyes were on the Austin-based giant’s third-quarter earnings for Fiscal Year 2026. The question on investors’ minds was simple: could the company shake off the dust and prove its platform remains the industry standard?

The answer appears to be yes. With record profitability, accelerating Annual Recurring Revenue (ARR), and deepening partnerships with tech titans like AWS and NVIDIA, CrowdStrike is making a strong case that it is not just a security vendor, but the operating system for the modern, AI-driven enterprise.

What Does CrowdStrike Do?

At its core, the company provides cloud-native cybersecurity. Its flagship product, the Falcon Platform, replaces legacy antivirus software with a single lightweight agent that protects endpoints (laptops, servers, mobile devices), cloud workloads, identities, and data.

Today, its also aiming to position itself as the enabler of the Agentic Era a future where AI agents perform autonomous tasks for businesses. CrowdStrike secures these AI agents, preventing them from being hijacked or manipulated, while using its own AI, Charlotte AI, to help security teams hunt down threats faster.

Stock Performance: A Volatile but Upward Climb

CrowdStrike’s stock has been a battleground of volatility, reflecting the high stakes of the software sector.

• 1-Year Performance: Despite the dip following the July 19, 2024 incident, the stock has shown remarkable resilience, up approximately 49% over the last 12 months. It has traded between a low of ~$298 and a high of ~$567, currently hovering near at $516.
• 5-Year Performance: Long-term investors have been handsomely rewarded. Over the last five years, CrowdStrike has cemented itself as a market leader, with the stock up 208% in the past 5 years, outperforming many peers in the SaaS (Software as a Service) sector and up over 700% since it’s IPO in 2019.

The stock’s recovery suggests that Wall Street views last summer’s outage as a temporary stumbling block rather than a structural failure of the business.

Q3 FY26 Financials: Acceleration is Back

CrowdStrike’s latest financial report is characterized by one word that all investors want to hear: acceleration. Management emphasized that the business has re-accelerated earlier than forecasted, driven by massive demand for platform consolidation.

The Key Numbers

• Revenue: $1.23 billion, up 22% year-over-year. Subscription revenue specifically grew 21% to $1.17 billion.
• Annual Recurring Revenue (ARR): The holy grail of SaaS metrics, ARR hit $4.92 billion, growing 23% year-over-year.
• Net New ARR: The company added $265 million in new business this quarter, a staggering 73% increase compared to the same period last year. That may seem like a huge number but it’s likely impacted by the fact that last year’s quarter was right after the July outage.
• Profitability:
  • Non-GAAP Net Income: A record $245.4 million, or $0.96 per share.
  • GAAP Net Loss: The company posted a GAAP loss of $34.0 million, an improvement from previous periods, though it included $26.2 million in costs related to the July 19 incident. The sizable difference in the two is mainly driven by stock-based compensation costs.
• Cash Flow: A cash-flow positive, CrowdStrike delivered record operating cash flow of $397.5 million and record free cash flow of $296 million (24% of revenue) although once again it’s important to remember the nearly $300m in stock-based compensation and related payroll taxes.

What’s Going Well: The Falcon Flex FLEX

Several strategic levers are pulling in CrowdStrike’s favor, differentiating it from a crowded field of competitors like Palo Alto Networks and Microsoft.

1. Falcon Flex: The key for consolidation

The standout star of the quarter was Falcon Flex, a flexible licensing model that allows customers to use any product in the Falcon portfolio without complex procurement cycles.

• Ending ARR from Flex customers exceeded $1.35 billion, growing over 200% year-over-year.
• Customers are not just signing up; they are expanding. The number of “Re-Flex” customers (those renewing or expanding Flex agreements) doubled quarter-over-quarter.
• Management noted that 10 customers “Re-Flexed” at more than 2x their initial spend, proving that reducing friction leads to higher spending.

2. Module Adoption

CrowdStrike’s strategy relies on land and expand—getting a customer to buy one product and eventually selling them the whole suite. The numbers prove it’s working:

• 6+ Modules: 49% of customers.
• 7+ Modules: 34% of customers.
• 8+ Modules: 24% of customers. This deep entrenchment makes CrowdStrike incredibly sticky and difficult to rip out.

3. Next-Gen SIEM and Cloud Security

The company is aggressively attacking the SIEM (Security Information and Event Management) market, historically dominated by legacy players like Splunk. CrowdStrike’s Next-Gen SIEM saw record net new ARR, fueled by customers tired of slow, expensive legacy logs.

• Cloud Security: Record net new ARR in the cloud vertical, with major wins displacing competitors like Wiz and Microsoft Defender.
• Identity Security: Continued strong performance, particularly with their new Falcon Shield product for SaaS security.

4. Strategic Partnerships

The partnership ecosystem is firing on all cylinders. A notable highlight was the expanded relationship with AWS, where Falcon Next-Gen SIEM is now deeply integrated into the AWS security console. Additionally, a new partnership with F5 allows CrowdStrike to secure hardware appliances, opening a brand-new total addressable market (TAM).

What’s Going Poorly: The Cost of Incidents

Despite the rosy report, there are lingering shadows that investors must watch.

1. GAAP Profitability Remains Elusive

While the company does generate cash and shows solid Non-GAAP profits, it is still technically losing money on a GAAP basis ($34 million loss). This is largely due to stock-based compensation and one-time costs. End of day, SBC is a real cost and while it may make certain numbers look pretty like non-GAAP eps or free cash flow, it does dilute you as a shareholder. CRWD has added 25m shares of stock since 2021 due to the high levels of SBC

2. The Hangover of July 19

The July 19 Incident (the global outage caused by a faulty update) is still costing the company money. CrowdStrike recorded $26.2 million in incident-related expenses this quarter. While management notes that these costs are dwindling, they represent a tangible financial impact and a reputational scar that requires constant soothing of customer sentiment.

3. Valuation Concerns

CrowdStrike is priced for perfection. With a price-to-sales (P/S) ratio hovering around 24x and a forward P/E ratio in the triple digits, the stock is expensive. Any deceleration in growth or future execution stumbles could lead to significant multiple compression.

Highlights from the Analyst Q&A

The Q&A session with analysts offered a glimpse under the hood of management’s confidence.

• On SIEM Displacement: Analysts asked about the velocity of replacing legacy SIEMs.
  • Management’s Response: CEO George Kurtz compared the current SIEM market to the antivirus market years ago—ripe for disruption. He noted that because CrowdStrike already holds the endpoint data (which makes up 80% of security logs), they can offer disruptive pricing that legacy vendors can’t match.
• On AI & The Agentic Workforce: Questions arose regarding how AI impacts security spend.
  • Management’s Response: The leadership team framed AI not just as a tool they use, but as a massive new risk vector for customers. As companies deploy AI agents to do work, those agents need security. CrowdStrike views itself as the armor and intelligence layer for this new non-human workforce.
• On Discounting & Pricing: Analysts probed whether the company had to discount heavily to win deals after the July outage.
  • Management’s Response: Management dismissed the idea of unusual discounting. While they admitted to using tools in the toolbox like the Customer Commitment Program (CCP), they emphasized that gross margins actually increased to 81%, suggesting they maintained pricing power despite the headwinds.
• On Competition: When asked about competition from Microsoft and startups like Wiz.
  • Management’s Response: Kurtz cited specific rip and replace wins where customers ditched Microsoft Defender and Wiz for Falcon, specifically highlighting the need for a single platform rather than a stitched together solution.

Valuation: Is CRWD a Buy?

CrowdStrike is a high-octane growth stock. At a market cap of roughly $126 billion, the market is pricing in dominant future growth and a lot of market share coming Crowdstrike’s way. After all, PaloAlto Networks, one of their competitors sits at a market cap of $130 billion today and has twice the revenue and already generates $2.5B in free cash flow after adjusting for stock based compensation. Crowdstrike’s free cash flow after that same adjustment is around $100 million.

• The Bull Case: The company is successfully executing a platform strategy that is rare in cybersecurity. By consolidating Endpoint, Identity, Cloud, and SIEM, they are becoming indispensable. The 73% growth in Net New ARR is a solid signal that demand is accelerated.
• The Bear Case: The valuation is steep. A forward P/S of ~24x and forward P/E of ~120x(non-gaap as well) means the stock is vulnerable to macro shifts. Additionally, the operational risk of another update failure remains a background anxiety for investors. They have to execute perfectly and take market share from bigger players and do it for many many years. After all, it’ll take them some time to reach Palo Alto’s revenue and free cash flow and they’re both basically valued at the same level.

For long-term investors with a large tolerance for volatility, CrowdStrike remains a Best-in-Class holding in the cybersecurity sector. The acceleration in fundamentals suggests the business is stronger than ever. However, value-conscious investors might find the current entry point rich.

I’m no value investor but I have a hard time buying it at these prices given that it basically assumes 5+ years of growth at this rate to make the valuation make sense and more beyond that and that’s hard to achieve consistently without any stumbles. This is a company I like with a fantastic product but I’d want to see it at a lower price point before adding it to my portfolio.

Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. The author is not a registered investment advisor. All investment strategies and investments involve risk of loss. Nothing contained in this article should be construed as investment advice. Any reference to an investment’s past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit. Please consult with a professional financial advisor before making any investment decisions.