AI Adoption And Cybersecurity Evolution Will Fuel Enduring Demand

Key Takeaways

• Increased cyber threats and AI-driven digital complexity are fueling sustained demand for CrowdStrike's advanced security platform and recurring revenue growth.
  
• Regulatory shifts and expanding product offerings are boosting customer adoption, enabling cross-sell opportunities, and supporting long-term profitability.
  
• Mounting competition, core business maturity, reliance on upsell contracts, fading incentive tailwinds, and rising compliance costs could limit long-term growth and margin expansion.

Catalysts

Provides cybersecurity solutions in the United States and internationally.

• Growing adoption of AI across industries is driving an exponential increase in endpoints, cloud workloads, and machine identities that require advanced protection-positioning CrowdStrike's AI-powered platform as an essential, "must-have" layer, which should translate into sustained double-digit revenue and ARR growth as organizations prioritize cybersecurity spend even in volatile macroeconomic conditions.
  
• Cyber threats are escalating in both volume and sophistication, with adversaries leveraging GenAI for novel attack vectors, forcing enterprises to prioritize best-in-class, next-generation security solutions; this persistent threat landscape supports durable demand for CrowdStrike's offerings, bolstering recurring revenue streams and driving high net retention.
  
• Increased regulatory scrutiny and expanding data privacy requirements worldwide are prompting more organizations to consolidate onto compliance-ready security platforms, such as CrowdStrike's Falcon suite, which should accelerate module adoption rates, expand average revenue per customer, and support gross margin sustainability.
  
• Ongoing expansion of the Falcon platform ecosystem-including new modules in identity, SIEM, and exposure management-combined with rapid customer up-sell through the Flex/re-Flex licensing model, is enhancing cross-sell potential while supporting higher net dollar retention and driving long-term margin leverage.
  
• Strategic channel partnerships, international expansion, and disruptive cloud-native platform pricing (e.g., in Next-Gen SIEM and identity) are unlocking new markets and segments, broadening the customer base, and setting up CrowdStrike for durable topline growth and potential earnings outperformance.

CrowdStrike Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming CrowdStrike Holdings's revenue will grow by 22.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from -6.8% today to 8.6% in 3 years time.
• Analysts expect earnings to reach $685.9 million (and earnings per share of $2.53) by about September 2028, up from $-297.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 234.8x on those 2028 earnings, up from -349.2x today. This future PE is greater than the current PE for the US Software industry at 36.6x.
• Analysts expect the number of shares outstanding to grow by 2.38% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.42%, as per the Simply Wall St company report.

CrowdStrike Holdings Future Earnings Per Share Growth

Risks

• Intensifying competition in the cybersecurity industry, including large platform vendors offering integrated solutions (e.g., Palo Alto's acquisition of CyberArk), could pressure CrowdStrike's ability to maintain premium pricing and win new customers, potentially compressing net margins and limiting future revenue growth.
  
• Slower growth in CrowdStrike's core EDR (Endpoint Detection and Response) business-now only growing 11% annually versus 18% last year-suggests the business is maturing, possibly leading to decelerating overall top-line growth as newer modules may not fully offset the slowdown.
  
• Reliance on recurring Flex contracts to drive sales and upsells exposes CrowdStrike to risks if customer upsell rates diminish or if large renewal cohorts do not "re-Flex" as anticipated, which could limit ARR expansion and pressure long-term revenue forecasts.
  
• Temporary revenue tailwinds from special partner rebate programs and customer care packages (CCP) after a prior outage may fade as these incentives subside, making recent reacceleration in ARR potentially unsustainable and risking sequential slowdowns in revenue and earnings as these one-off factors normalize.
  
• Increasing regulatory pressures, data residency, and privacy requirements across global markets could raise compliance costs and complicate CrowdStrike's international expansion, potentially shrinking margins and increasing operating expenses as the company seeks new growth geographies.

Valuation

• The analysts have a consensus price target of $469.68 for CrowdStrike Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $610.0, and the most bearish reporting a price target of just $330.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $8.0 billion, earnings will come to $685.9 million, and it would be trading on a PE ratio of 234.8x, assuming you use a discount rate of 8.4%.
  
• Given the current share price of $413.2, the analyst price target of $469.68 is 12.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.