Should You Buy, Sell or Hold CrowdStrike Stock Before Q1 Earnings?

CrowdStrike (CRWD) is expected to report fiscal Q1 2026 revenues between $1.1006 billion and $1.1064 billion, representing approximately 20% year-over-year growth, with EPS projected at $0.64-$0.66. While demand for cybersecurity products is robust, driven by increasing cyber threats and new customer subscriptions, CrowdStrike faces challenges including customer retention efforts following a global IT outage in July 2024, leading to revenue compression and lowered profitability, coupled with a stretched valuation compared to its peers; Zacks Investment Research recommends selling CRWD stock.

Analysis

CrowdStrike is poised to report its first-quarter fiscal 2026 results on June 3, 2025, with revenue guidance between $1.1006 billion and $1.1064 billion, closely aligning with the Zacks Consensus Estimate of $1.1 billion, which suggests a 19.92% year-over-year increase. However, non-GAAP earnings per share are anticipated to be between 64 and 66 cents, with the consensus at 66 cents, marking a significant 29% year-over-year decline. While the company has historically surpassed earnings estimates and benefits from robust cybersecurity demand, new customer additions, strategic partnerships like with AWS, and AI innovations, it faces considerable headwinds. A global IT outage on July 19, 2024, has led to negative customer sentiment and the implementation of a "Customer Commitment Package," involving product additions and discounts that are compressing revenue recognition and profitability. This situation is compounded by ongoing regulatory scrutiny and intense competition from peers such as Palo Alto Networks, SentinelOne, and Check Point. CrowdStrike's stock has appreciated 34.1% year-to-date, outperforming the industry, but trades at a stretched forward 12-month P/S ratio of 22.29X compared to the industry's 14.24X. The Zacks Rank for CRWD is currently #4 (Sell) with an Earnings ESP of 0.00%, indicating that an earnings beat is not conclusively predicted, reflecting the significant challenges despite strong market demand.

Key Decisions for Investors

• Investors should exercise caution ahead of the June 3, 2025 earnings report, given the projected significant year-over-year EPS decline and the Zacks Sell rating.
• Closely monitor the Q1 fiscal 2026 results for specific details on customer retention, the financial impact of the Customer Commitment Package on revenue and margins, and management's outlook considering the July 2024 IT outage.
• Evaluate the sustainability of CrowdStrike's growth premium against the backdrop of intense competition and potential ongoing reputational and financial repercussions from the outage.
• Consider the current high valuation (22.29X forward P/S) as a material risk, particularly if earnings or forward guidance disappoint due to the identified operational challenges and profitability pressures.