Summary
CrowdStrike closed the third quarter of fiscal 2023, ended October 31, 2022, with revenue of $580.9 million, up 52.8% from $380.1 million in the same quarter a year earlier. Nine-month revenue reached $1.6 billion, up 57.2%. Annual recurring revenue grew 54% to $2.34 billion as of October 31, 2022, and included $198.1 million of net new ARR added in the quarter. The Reposify acquisition contributed less than $1.0 million to that figure. Subscription customers reached 21,146, up 44% year over year, with 1,460 net new customers added in the quarter versus 1,607 a year earlier. Module adoption was deep: 60% of customers run five or more modules, 36% run six or more and 21% run seven or more. Dollar-based net retention was above 120%. At the Fal.Con conference the company introduced Falcon Insight XDR, Falcon Discover for IoT, Falcon LogScale, Falcon Complete LogScale and new cloud native application protection platform features.
Gross profit was $422.7 million, up 51.8%, while gross margin slipped to 72.8% from 73.2%. Management blamed higher cloud services costs per sensor, partly offset by slower growth in employee-related expenses. The GAAP operating loss widened to $56.4 million from $40.3 million, yet operating margin improved to -9.7% from -10.6%. Net loss attributable to CrowdStrike was $55.0 million against $50.5 million a year earlier. Diluted loss per share was $0.24, compared with $0.22, so the loss widened. Stock-based compensation of $140.1 million explains much of the gap between GAAP and non-GAAP results. Non-GAAP income from operations was $89.7 million versus $50.7 million, and non-GAAP diluted earnings per share was $0.40 versus $0.17.
Cash generation was the strongest element of the quarter. Operating cash flow was $242.9 million, up 52.7% from $159.1 million, and nine-month operating cash flow was $667.7 million, up 60.9%. Free cash flow, a non-GAAP measure that subtracts purchases of property and equipment and capitalized internal-use software, was $174.1 million versus $123.5 million. Capital expenditures were $61.3 million, up 106.8% from $29.6 million. Deferred revenue rose 56.5% to $2.02 billion and remaining performance obligations rose 47.4% to $2.80 billion. Backlog stood at about $782.2 million, and cash and cash equivalents were $2.47 billion.
Guidance covers the fourth quarter of fiscal 2023 and the full fiscal year ending January 31, 2023, with revenue ranges given for both periods. For the quarter, the company targets non-GAAP income from operations of $87.2 million to $93.7 million, non-GAAP net income attributable to CrowdStrike of $100.9 million to $107.5 million and non-GAAP diluted earnings per share of $0.42 to $0.45. For the full year, it targets non-GAAP income from operations of $347.2 million to $353.8 million, non-GAAP net income of $357.6 million to $364.4 million and non-GAAP diluted earnings per share of $1.49 to $1.52. CrowdStrike did not reconcile those non-GAAP targets to GAAP, citing items outside its control that cannot be reasonably predicted.
The ARR result came with a caveat. Management said macroeconomic headwinds lengthened sales cycles with smaller customers and pushed some larger customers to spread subscription start dates over multiple phases, delaying ARR recognition into later quarters. Risk factors in the filing include managing rapid growth, execution challenges, limited experience with new products, the length and unpredictability of sales cycles, integrating acquisitions, and general market, political and economic conditions such as inflation, geopolitical uncertainty and COVID-19. Committed spending is significant: a $600.0 million minimum cloud purchase commitment with AWS through September 2026, of which $223.6 million had been used as of October 31, 2022, plus data center commitments of $141.6 million and other purchase commitments of $117.3 million. Management expects existing cash, operating cash flow and a $750.0 million senior secured revolving credit facility to cover anticipated needs for at least the next 12 months.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $580.9M | $535.2M | +8.5% | $380.1M | +52.8% |
| Gross profit | $422.7M | $394.6M | +7.1% | $278.4M | +51.8% |
| Gross margin | 72.8% | 73.7% | -1.0 pp | 73.3% | -0.5 pp |
| Research & development | $155.3M | $137.9M | +12.6% | $97.6M | +59.0% |
| Sales & marketing | $239.7M | $224.8M | +6.6% | $165.0M | +45.3% |
| General & administrative | $84.1M | $80.3M | +4.8% | $56.1M | +50.1% |
| Total operating expenses | $479.1M | $442.9M | +8.2% | $318.7M | +50.3% |
| Operating income (loss) | -$56.4M | -$48.3M | -16.8% | -$40.3M | -40.1% |
| Operating margin | -9.7% | -9.0% | -0.7 pp | -10.6% | +0.9 pp |
| Net income (loss) | -$54.6M | -$48.3M | -13.1% | -$50.5M | -8.3% |
| Net margin | -9.4% | -9.0% | -0.4 pp | -13.3% | +3.9 pp |
| Diluted EPS | -$0.24 | -$0.21 | -$0.03 | -$0.22 | -$0.02 |
| Net retention rate | 120.0% | 120.0% | ±0.0 pp | 100.0% | +20.0 pp |
Risks
Risk factors state that economic weakness, inflation, rising interest rates, geopolitical turmoil, and supply chain challenges may cause current and prospective customers to delay or cut security and IT spending, lengthen sales cycles, increase churn, and lead to shorter subscription terms and more flexible payment terms. MD&A also notes global macroeconomic conditions could affect future cash flows.
The sales cycle for the Falcon platform is long and unpredictable because customers view the subscription as a significant strategic decision; large enterprises and government entities often require lengthy evaluation. Uncertain economic conditions have led to additional budget scrutiny and longer sales cycles for products and services.
The security and IT operations market is intensely competitive and fragmented, with competitors including legacy antivirus providers, alternative endpoint security providers, network security vendors, and service providers, many with greater financial, technical, marketing, and sales resources. Competitive pricing pressure may reduce gross profits and margins; subscription gross margin slightly decreased to 75% from 76% for the three months ended Oct 31, 2022.
Customers have no obligation to renew after subscription terms that are generally one year, and some have elected not to renew; customers that signed multi-year contracts may renew for shorter lengths or cease certain cloud modules. ARR grew to $2.3 billion as of Oct 31, 2022, up 54% year over year, and dollar-based net retention was above 120%, but the company notes expansion can be affected by large upfront purchases.
As a cybersecurity provider, CrowdStrike has been and expects to continue to be specifically targeted by sophisticated cyber adversaries, including nation-state actors, and such efforts may intensify if geopolitical tensions increase. An actual or perceived compromise of internal systems or customer data could be especially detrimental to reputation and customer confidence.
Future success depends on key technical, sales, and management personnel, including CEO George Kurtz; competition for cybersecurity and cloud engineering personnel is intense. Many employees have become or will soon become vested in substantial equity awards, which may make retention and motivation more difficult.
Headcount grew from 2,309 employees as of Jan 31, 2020 to 6,959 as of Oct 31, 2022, requiring significant financial and operational resources and continuous management attention. Failure to integrate and train new employees or improve systems could impair platform quality and operations.
The company hosts the Falcon platform using third-party data centers, primarily AWS, and its own colocation data centers. It committed to purchase a minimum of $600.0 million of AWS cloud services through Sept 2026, with $223.6 million utilized as of Oct 31, 2022; service disruptions or unfavorable renewal terms could harm platform availability and costs.
Future growth depends in part on increasing sales to government organizations, where demand is unpredictable, subject to budgetary cycles, and often involves long sales cycles. Certification requirements such as FedRAMP are costly to maintain and losing certification would restrict sales to government customers.
International customers generated 31% of total revenue for the nine months ended Oct 31, 2022, compared with 28% for fiscal 2022, exposing the company to regulatory, tax, foreign exchange, and compliance risks including the FCPA and data localization requirements.
The revolving facility and the indenture for the Senior Notes impose restrictive covenants, require specified financial ratios, and contain cross-default provisions. A breach could result in an event of default and acceleration of indebtedness, limiting operational flexibility.
The OECD two-pillar plan includes a global minimum tax rate of at least 15% for in-scope multinational enterprises with annual consolidated group revenue above 750 million euro, which may increase tax obligations. As of Jan 31, 2022, U.S. federal net operating loss carryforwards were $1.6 billion and California carryforwards were $168.9 million, subject to expiration and ownership-change limitations.
SaaS KPIs
All quarters →Free Cash Flow Margin
Non-GAAP Operating Margin
Net New ARR
Free Cash Flow
Annual Recurring Revenue (ARR)
Non-GAAP Subscription Gross Margin
Backlog
Dollar-Based Net Retention Rate
Subscription Customers
Net New Subscription Customers
Customers with 5+ Modules
Customers with 6+ Modules
Customers with 7+ Modules
Non-GAAP Gross Margin
Summary, forecast, risks and KPIs are extracted from CrowdStrike Holdings, Inc.'s SEC filings for Q3 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.