CrowdStrike (CRWD) isn’t a cheap stock. A premium valuation of 136 times fiscal 2027 earnings would normally send value-focused investors running in the opposite direction. Nonetheless, investors continue pouring into the cybersecurity leader. CrowdStrike shares have climbed 42% year-to-date (YTD), surpassing the broader market gain.
So, what’s the reason investors keep buying CRWD stock?
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www.barchart.com The Valuation Looks Expensive, Until You Look at the Growth
Crowdstrike's premium valuation may appear difficult to justify at first. But when you look at its growth numbers, you will notice that investors are pricing in years of future growth. Currently, analysts predict Crowdstrike’s earnings will increase by 32% to $4.93 per share in fiscal 2027, followed by 26.7% to $6.25 per share. CrowdStrike continues to deliver rapid growth despite having billions in annual recurring revenue (ARR), which is the subscription revenue generated by all active clients. Another solid first quarter explains why investors are willing to pay a premium.
In Q1 of fiscal 2027, revenue climbed 26% year-over-year (YoY) to $1.39 billion, marking the fourth consecutive quarter of accelerating revenue growth. Net new ARR of $256 million grew 32% YoY. Ending ARR, which includes the net new ARR, stood at $5.51 billion. This implies that tomorrow, even if Crowdstrike doesn’t sign any new customers, it will still generate $5.51 billion in recurring revenue. Falcon Flex, CrowdStrike's subscription model, reported more than $1.9 billion in ending ARR, while Q1 saw more than 300 Falcon Flex accounts added.
For years, CrowdStrike just remained an endpoint security company. But now, as enterprises race to deploy AI across their organizations, the more cybersecurity services they require. And CrowdStrike is becoming the security layer for AI. Recently, both Anthropic and OpenAI picked Crowdstrike to help secure their latest AI model releases. The company has also launched AI-specific security products, such as the AI Detection and Response (AIDR). Notably, the pipeline opportunities for AIDR have already exceeded $50 million. Management expects AIDR to eventually become a larger opportunity, as it is meant to safeguard seven attack surfaces: data, models, prompts, agents, identities, infrastructure, and interaction layers.
Additionally, the next-generation SIEM, cloud security, and identity businesses collectively exceeded $2 billion in ending ARR. Despite its continued investments in product development, Crowdstrike generated free cash flow of $468 million.
Finally, CrowdStrike remains optimistic not just about its present but also about its future. Management raised guidance again and raised the full-year net new ARR outlook by more than $50 million. CrowdStrike expects full-year revenue growth of 23% to 24%, ranging from $5.915 billion to $5.959 billion.
Investors Are Paying for Future Potential
CrowdStrike's valuation is not just based on its current earnings. Investors are paying for a company that already generates $5.51 billion in ARR, produces substantial free cash flow, consistently beats expectations, and could continue to capitalize on the AI security opportunity for years to come. It is apparent that many investors believe the premium is justified.
Overall, analysts believe CRWD stock is a “Moderate Buy” with 34 analysts strongly bullish of the 49 analysts covering it, while three are moderately bullish. Eleven of them rate the stock a “Hold,” and two say it is a “Strong Sell.” The average target price of $696.35 is 6% above current levels. The high price estimate of $825 implies the stock can climb by 25% over the next 12 months.
www.barchart.com On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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