CrowdStrike

As digital transformation accelerates and AI becomes more integrated into applications—which can be exploited by nefarious actors—the importance of cybersecurity continues to grow. CrowdStrike, a cybersecurity firm specializing in cloud and AI-driven protection, released its Q1 2026 financial results last week.

The company reported quarterly revenue of $1.1 billion, representing a 19.8% year-over-year increase. Operating expenses rose to $935 million, up 35.8% from the same period last year. The disproportionate rise in operating costs was primarily driven by increased spending in research and development, as well as general and administrative expenses.

CrowdStrike has outpaced many of its peers in revenue growth, largely due to the ease with which its customizable suite of cybersecurity tools can be deployed. These services are managed through a platform that allows customers to monitor and control their security environments. Behind the scenes, CrowdStrike leverages large-scale AI models to accelerate breach detection and response.

In July 2024, the company experienced a setback when a software update caused outages on Windows-operated devices. CrowdStrike promptly resolved the issue and engaged directly with clients to reinforce confidence in its platform. In some cases, the company offered discounted rates to larger clients as a goodwill gesture. From Q1 2025 to Q1 2026, CrowdStrike’s gross profit margin declined from 75.57% to 73.8%.

While software companies typically enjoy high gross margins due to the scalable nature of their offerings, they also face substantial operating costs—particularly during growth phases to increase and improve features and to grow market share. These costs can lead to negative operating margins unless offset by strong revenue growth. Achieving scale is essential for long-term profitability in the software sector.

On July 19th, a faulty update, from cybersecurity firm CrowdStrike, caused a global outage on Windows devices, leading to major IT disruptions worldwide. Businesses and governments faced operational issues, with losses estimated in the billions. CrowdStrike’s share price dropped by over 40% after the incident.

CrowdStrike has addressed the issue and claimed to have implemented more robust internal processes to ensure the proper functioning of their updates and products. The company has also engaged extensively with its customers to reaffirm the quality of its products in terms of protection, ease of use, and cost-effectiveness at scale. Post-outage, CrowdStrike’s customer retention rate was 97%, slightly lower than the 97.5% reported in the same quarter last year. The company attributed this decline primarily to the outage.

Despite the outage, CrowdStrike’s revenue for the third quarter of the 2025 financial year reached $1.01 billion, marking a 29% increase compared to the same quarter in the previous year. Their annual recurring revenue was $4.02 billion, reflecting a 27% increase year over year. CrowdStrike noted that customers are seeking to consolidate service providers. Currently, 66% of customers use 5 or more security modules on CrowdStrike’s security platform, Falcon. The platform allows customers to manage their cybersecurity from a single platform.

With ongoing geopolitical tensions globally and ever-increasing connectivity, cybersecurity has become crucial for governments and organisations. Cybersecurity firms have benefitted from this trend as more organisations seek to protect themselves from online threats. Despite the July outage, CrowdStrike’s stock has risen by over 40% year-to-date. Although still about 11% from its peak.