CrowdStrike reported a solid QQ1 FY2026 to kick off the year, underscoring the strength of its AI-native Falcon platform and the rapid adoption of FalconFlex. Total revenue rose 19.8% year over year to $1.103 billion, with subscription revenue up 20% YoY to $1.05 billion and a subscription gross margin of 80%. Management emphasized the acceleration of ARR growth driven by FalconFlex, reflex deals, and deeper platform adoption across cloud, identity, exposure management, and next-gen SIEM. Ending ARR reached $4.44 billion, with net new ARR of $194 million, reflecting a continued strength in customer retention (gross retention 97%) and expansion. Free cash flow remained robust at $279.4 million (25% of revenue), and CrowdStrike announced a share repurchase authorization of up to $1 billion, underscoring confidence in its long-term ARR target of $10 billion.
Management guidance for Q2 calls for revenue of approximately $1.145–$1.152 billion (about 19% YoY growth) and non-GAAP earnings per share of $0.82–$0.84 on about 255 million diluted shares. For FY2026, the company expects revenue of $4.7435–$4.8055 billion (20%–22% growth) and non-GAAP net income of $878.7–$909.7 million (~$3.44–$3.56 per share). A temporary ARR-to-revenue mismatch is anticipated due to CCP-related programs and partner amortization, with a run-rate impact of roughly $10–$15 million per quarter slated to subside in Q4. CrowdStrike also signaled a strategic realignment to invest in cloud, identity, exposure management, AI, and next-gen SIEM, with a target to improve FY2027 free cash flow margin to above 30%.
Operating income: -$124.656M; Operating margin ≈ -11.30% (as a percentage of revenue).
Net income: -$110.207M; Net income margin ≈ -9.99%.
Earnings per share (diluted): -$0.44; Weighted avg shares: 248.432M.
Financial Highlights
Overview of QQ1 FY2026 metrics and recent trends:
- Revenue: $1.10334B; YoY growth 19.8%; QoQ growth 4.24%.
- Gross Profit: $814.291M; Gross margin (gross profit / revenue) ≈ 73.80%; Subscription gross margin ≈ 80% of revenue.
- Operating income: -$124.656M; Operating margin ≈ -11.30% (as a percentage of revenue).
- Net income: -$110.207M; Net income margin ≈ -9.99%.
- Earnings per share (diluted): -$0.44; Weighted avg shares: 248.432M.
- ARR and growth: Ending ARR $4.44B (YoY +22%); Net new ARR $194M in Q1.
- ARR mix and retention: 97% gross retention; 60% of Q1 deal value sourced from partners; 48% (6+ modules), 32% (7–8 modules), 22% (8+ modules) in subscription customers.
- FalconFlex momentum: Total FalconFlex account value $3.2B; 820 accounts; average flex customer deal size >$1M in ending ARR; average flex subscription length ≈ 31 months; >75% of flex contracts deployed; reflex activity driving broader platform adoption (9-figure reflex in some cases).
- Cash flow: Operating cash flow $384.107M; Free cash flow $280.919M (25% of revenue); Cash and cash equivalents end period $4.615B; Net Change in Cash +$290.957M.
- Balance sheet health: Total assets $8.72B; Total liabilities $5.229B; Total stockholders’ equity $3.450B; Net debt position strongly negative (net debt ≈ -$3.828B) due to large cash balance and limited debt.
- Guidance highlights: Q2 revenue guidance $1.145–$1.152B; Non-GAAP operating income $226.9–$233.1M; Non-GAAP net income $209.1–$213.8M; Diluted non-GAAP EPS $0.82–$0.84; Full-year revenue guidance $4.7435–$4.8055B; FY2026 non-GAAP net income $878.7–$909.7M; FY2027 free cash flow margin >30% anticipated via strategic realignment and platform-scale efficiencies.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.10B
19.80%
4.24%
Gross Profit
814.29M
16.99%
3.79%
Operating Income
-124.66M
-1 897.23%
-46.14%
Net Income
-110.21M
-357.37%
-19.42%
EPS
-0.44
-344.44%
-17.74%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management themes and quotes from the QQ1 FY2026 earnings call:
- FalconFlex adoption and reflexes: George Kurtz described FalconFlex as a
"Falcon Flex has been a real home run for us, Saket. And... a real game changer for adoption."
— George Kurtz
"CrowdStrike Holdings, Inc. will be the protector of autonomous AI agents."
— George Kurtz
Forward Guidance
Outlook and drivers for the next quarters and year:
- Near-term ARR visibility: Management expects Q2 sequential net new ARR growth to be at least double the rate seen in the prior year's Q2, aided by FalconFlex and product momentum in cloud, identity, exposure management, and next-gen SIEM. They anticipate back-half ARR acceleration as Flex deployments scale and customers “reflex” into larger, longer commitments.
- CCP impact and revenue recognition: Acknowledge temporary separation between ARR and subscription revenue due to CCP programs and partner-related amortization; the impact is expected to be about $10–$15 million per remaining quarter in FY2026, subsiding in Q4.
- Margin and cash flow trajectory: Post-realignment, expect FY2027 free cash flow margin to exceed 30% and non-GAAP operating margin to improve; Q2 cash charges of ~$26 million and Q2 outage-related cash impact of ~$29 million are acknowledged near-term costs.
- Strategic realignment: Realignment focuses on platform growth areas (cloud, identity, exposure management, AI, next-gen SIEM), AI-driven efficiency, and GTM/customer success improvements to sustain long-term growth and shareholder value.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CRWD Focus
73.80%
N/A
N/A
N/A
SPLK
72.40%
-27.50%
1.26%
-17.84%
ADBE
89.10%
37.90%
13.80%
26.40%
PLTR
80.40%
19.90%
3.95%
231.54%
ZS
77.50%
-4.88%
-0.84%
-572.17%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Base-case: CrowdStrike remains the leading AI-native cybersecurity platform with a differentiated Falcon platform that drives multi-module adoption through FalconFlex, reflex deals, and AI-enabled SOC automation. The QQ1 results show solid top-line growth and improving ARR dynamics, supported by a robust balance sheet and meaningful free cash flow. The near-term challenge is a reported revenue-reconciliation gap tied to CCP and partner amortization, which management expects to normalize in the back half of FY2026. Upside scenarios center on continued acceleration of ARR in H2, further MSSP and partner-driven wins, and stronger AI-driven modular expansion that sustains margin expansion in FY2027. Key factors investors should monitor include: (1) trajectory of net new ARR growth in Q2 and H2, (2) progression of reflex deals and their impact on ARR mix and gross retention, (3) progress of strategic realignment benefits on operating margin and free cash flow, (4) responses to regulatory inquiries, and (5) competitive dynamics in the SIEM and cloud security markets. Overall, CrowdStrike’s growth story remains compelling given its recurring subscription revenue, high gross margins, strong cash flow, and long-duration customer contracts, albeit with near-term CAC and revenue-recognition considerations to monitor.
Key Investment Factors
Growth Potential
Catalysts include FalconFlex-driven platform consolidation (8+ modules as standard in large deals), reflex-driven ARR expansion, and AI-native security solutions across workloads, identities, and data. The expanding TAM includes cloud security (Falcon Cloud Security), exposure management (AI-powered vulnerability assessment), next-gen SIEM (Falcon Adversary Overwatch), and identity protection (Falcon Privilege Access). Management highlighted a 31-month average term and reflex-based multi-module expansions with customers spending >$1M End ARR; 39 reflexes already deployed and returning for more, signaling strong stickiness and potential for ARR reacceleration in H2 FY2026.
Profitability Risk
Key risks include: (1) near-term CCP-related revenue-recognition headwinds that could dampen reported revenue while ARR grows, (2) regulatory/regulatory-compliance risk stemming from DOJ/SEC inquiries into revenue recognition and ARR reporting, (3) competition from legacy SIEM and endpoint security incumbents (e.g., Splunk, QRadar) and rising SMB competition in the MSSP channel, (4) macroeconomic uncertainty affecting enterprise IT spend, and (5) execution risk related to integration of acquisitions and scale of FalconFlex go-to-market movements.
Financial Position
CrowdStrike maintains a fortress balance sheet: cash and cash equivalents of ~$4.61B, minimal debt (total debt ~$785M) with a net cash position of approximately -$3.83B, and record operating cash flow of ~$384M leading to free cash flow of ~$281M in Q1. The company also announced a share repurchase authorization of up to $1B, reflecting confidence in sustained FCF generation and long-term ARR growth. The strategic realignment aims to improve FY2027 free cash flow margin to >30% and lift non-GAAP operating margins, supported by higher mix of high-ARC, multi-module FalconFlex deals and ongoing efficiency gains from AI-assisted execution.
SWOT Analysis
Strengths
Industry-leading ARR growth and high gross retention (net retention consistently strong; 97% gross retention in QQ1).
FalconFlex model driving rapid platform adoption, higher deal sizes, and longer commitments (average flex deal >$1M ending ARR; 31-month average subscription length).
AI-native capabilities (Charlotte AI) and expansion into identity, cloud, exposure management, and next-gen SIEM.
Robust cash flow generation and a strong balance sheet (cash ≈$4.61B; net cash position; large buyback authorization).
Broad partner ecosystem contributing ~60% of Q1 annual deal value; MSSP channel strong (15% of Q1 deal value).
Weaknesses
GAAP net loss in QQ1 (-$110.2M) despite solid top-line growth, reflecting heavy investment and CCP amortization effects.
Near-term revenue-recognition volatility from CCP-related programs and partner amortization impacting reported revenue vs ARR.
Execution risk around large-scale strategic realignments and integration of FalconFlex offerings across multiple product lines.
Opportunities
Expanding TAM via FalconFlex across cloud, identity, exposure management, AI, and next-gen SIEM; reflex-driven expansion across multiple modules.
Growing value from MSSP partnerships and enterprise-scale deals; AI-driven automation (Charlotte AI) improving SOC efficiency.
Potential to gain share versus incumbents in legacy SIEM (Splunk, QRadar) and traditional CSPM/VM providers through integrated platform approach.
Threats
Regulatory scrutiny linked to revenue recognition and other disclosures (DOJ/SEC inquiry) could pose execution or reporting risks.
Competitive pressures from established security incumbents and pricing/terms in a rapidly consolidating market.
Macro slowdown or prolonged enterprise IT spending cycles could dampen near-term ARR acceleration.