CrowdStrike Holdings, Inc. Price & Performance (CRWD)

We do not undertake and expressly disclaim any obligation to update or alter our forward looking statements, as a result of new information, future events, or otherwise. Further information on these and other factors that could affect the company's financial results included in the filings we make with the SEC from time to time Including the section titled Risk Factors in the Company quarterly and annual report Additionally, unless otherwise stated, excluding revenue, all financial measures disclosed on this call will be non GAAP. A discussion of why we use non GAAP financial measures and a reconciliation schedule showing GAAP versus non GAAP results is currently available in our earnings press release which may be found on our Investor Relations website at ir.crowdstrike.com or on our Form eight ks filed with the SEC today.

With that, I will now turn the call over to George.

Thank you, Maria, and thank you all for joining us today. For our Q4 twenty twenty five earnings call. I'm extremely proud of the engagement we've had with customers, partners, prospects in the market navigating a year that tested CrowdStrike. Q4 showcases the fruits of our labors, giving me strong conviction in our AI native single platform and accelerating market opportunity. Q4 and FY twenty twenty five highlights include Q4 net new ARR of $224,000,000 well ahead of our expectations closing FY twenty twenty five at $4,240,000,000 in ending ARR. FY 2025 ending ARR for cloud security identity protection, and next gen SIM of over $1,300,000,000 growing nearly 50% year over year. Gross dollar retention of 97% as customers remain firmly committed to the Falcon platform. Q4 free cash flow of $240,000,000 And for the full year, we delivered free cash flow of $1,070,000,000 or 27% of revenue, setting a new record and for the first time exceeding $1,000,000,000 in annual free cash flow. CrowdStrike is the first cybersecurity ISV to cross $1,000,000,000 in deal value on AWS Marketplace in a single calendar year setting a new standard for ecosystem execution, [indiscernible] record and accelerating FY 2025 total contract value of $6,000,000,000 the first and only pure play software cybersecurity company reported to achieve this metric which increased 40% year on year showcasing the scale and commitment of customers long term cybersecurity consolidation on the Falcon platform.

Everyone loves a comeback story, and that's exactly what we've started experiencing in Q4 as we've closed out the year. The results tell our story. One, we've never been closer to our customers and partners with market leading customer satisfaction levels. To we're playing best in class defense as well as offense with our Falcon Flex model, and three, our innovation engine hasn't missed a beat. The Falcon platform has never been more market competitive whether that's winning new logos, or a third party analyst research. We find ourselves placed at the epicenter of a rapidly evolving demand environment. A new administration a new wave of technology, and a new threat landscape necessitate all businesses to evolve their cybersecurity programs Consolidation cost reduction and automation are now the accepted enterprise and federal priorities. These priorities are accelerating the shift from ineffective narrow or duplicative point products. I'd like to share AI specific trends on the broader demand environment and how these trends relate to CrowdStrike. First, AI experimentation is just starting to evolve into AI outcomes. Second, we're in the midst of a rapidly accelerating geopolitical AI arms race And third, winning the AI war requires the very best data and battle tested innovation engine.

Commenting on the shift from AI experimentation to AI outcomes, we're still in the early but rapidly evolving innings of the AI revolution. Businesses and governments across the globe are looking for their AI investments to yield both improved efficiencies and novel outputs. CrowdStrike we're requiring every team and function to leverage the power of AI. We expect these investments to play critical top and bottom line roles on our path to $10,000,000,000 in ARR. In the broader market, businesses are equally AI age. Here's my take on what this means. First, more AI everywhere means more data, more access, and more processes [indiscernible] and products requiring cybersecurity The locales of AI adoption are either in cloud workloads or data centers or even on edge devices all of which we are market leaders in securing with AI native technology that stops the breach. Second, more access to more third party and in house Agentic applications and services requires rethinking identity and data protection. Who is accessing data and where is it traveling, matters more now than ever before. And third, securing AI starts a broader enterprise data discussion. I'm seeing CISOs CIOs and CEOs going to the drawing board to reinvent their technology stack with AI powered platforms of record for their next decade and beyond.

And for security, it's even more pressing. For our customers, Falcon has quickly become their AI native SOC. Charlotte, our generative AI security analyst, is a SOC analyst best friend and already driving tangible AI outcomes. Charlotte AI detection triage accelerates SOC operations and threat response times. Across more than January Charlotte AI deals, customers are seeing outcomes Sharing feedback like what we've received from a European financial services firm which stated Charlotte AI has been very useful for us. It's done summarization of activity on host, and users in ten to fifteen seconds which would have taken us twenty to thirty minutes to do manually. Returning to my second point on the geopolitical AI arms race. Our threat intelligence practice sees nation state cyber craft proliferation at all time new highs. A new wave of nationalism and threat actors is creating adversary stockpiling akin to the Cold War era.

In our recently released Annual Global Threat Report, we exposed China Nexus adversaries escalating state sponsored cyber operations by 150% with targeted attacks in financial services [indiscernible] [indiscernible] and industrial sectors soaring up to 300%. And with tools such as DeepSeq making AI access easier and cheaper, the pace and prevalence of adversarial AI adoption is only accelerating. It is in this intensifying threat landscape that CrowdStrike and our threat intelligence expertise shines. Q4 was our largest threat intelligence quarter in company history. [indiscernible] and enterprises increasingly turn to CrowdStrike, especially in a competitive environment where M and A activity has subsumed many existing threat intelligence vendors. We're the market's leading threat intelligence authority Discovering and naming the adversaries to unite cyber defenders in stopping them. The democratization of destruction AI in the hands of more adversaries intensifies the market need for CrowdStrike. And lastly, My third point, CrowdStrike is manufacturing the instruments to win the AI war. We have the innovation engine and the security data to fuel it. Finally, in this AI fueled demand environment, the point product vendors and those that have failed to deliver open and native single platforms increasingly fall short. CrowdStrike is cybersecurity's AI native SOC.

Our greatest asset is our role as the creator of cybersecurity's richest data We've curated this dataset with millions of Falcon Complete analyst annotations making threat data contextualized and actionable. No one else has this. Our data is liquid gold for creating new adjentic models for continuously improving protection. Falcon is purpose built to win the AI war with market leading protection as the first call for organizations large and small to stop the breach we see where others fall short.

Saw an uptick in incident response engagements in Q4, Thematically, these organizations were using a next gen EDR vendor's technology, where we saw one of our strongest competitive displacement quarters a logistics software vendor a national packaging and marketing firm and security software provider to name a few. Falcon's efficacy and rapid ease of deployment is why Crouch rank is the first call to stop the breach. We've also innovated in devising the most effective model for customers to adopt the Falcon platform. Falcon Flex. Falcon Flex is a subscription model that enables customers to adopt, the modules they want across their subscription term. This model deeply resonates with prospects and customers as well as our ecosystem partners. Following the summer's incident, we worked with impacted largely in the form of additional product and Falcon Flex subscriptions. The CCP program was a Falcon Flex Accelerant In Q3, we shared accounts that adopted the Falcon Flex model representing more than $1,300,000,000 of total deal value. In Q4 alone, we added over $1,000,000,000 of total account flex deal value. With accounts that adopted Falcon Flex soaring, to $2,500,000,000 in total deal value growing 80% quarter over quarter and growing more than 10 times year over year.

Our ability to close 60% of Falcon Flex deal value already deployed by customers to date are pleased with the deployment [indiscernible] Falcon Flex is a game changer accelerating module adoption and making it easier and faster than ever before to consolidate on Falcon. With the summer now several quarters behind us, we're ending our customer commitment package program. The CCP program was an excellent proactive measure which not only built our relationship with impacted customers, but also resulted in in significant platform adoption. This uptake gives me confidence our second half net new ARR reacceleration As products are deployed, onetime discounts drop off and contracts are upsized and renewed. And one of the biggest beneficiaries of Falcon Flex is the accelerated adoption of our rapidly emerging platform solutions. In the past, we've discussed three core solutions, cloud, identity and next gen SIM. This quarter, I'd also like to provide an update on our exposure management business which is displacing legacy vulnerability management products and has swiftly become a meaningful contributor to the business with line of sight to $300,000,000 in ARR. Starting with cloud, Our cloud security business delivered a strong Q4 growing more than 45% with ending ARR more than $600,000,000 The cloud is central to the AI revolution, providing the core infrastructure to enable enterprises to harness the power of AI across their businesses.

Cloud security has never been more important. Seeing two core trends emerge in the cloud security market. First, the core mechanism for protecting the cloud is runtime protection where CrowdStrike is uniquely positioned to deliver the best and most comprehensive workload protection in the industry. While others are trying to catch up, CrowdStrike has delivered frictionless CWP for years battle tested to stop cloud breaches. And second, the market for cloud security is rapidly consolidating. With customers looking for an integrated end to end platform where the sum of the parts is greater than the individual pieces. This is the promise on which Falcon Cloud Security delivers. By securing the entirety of the AI infrastructure CrowdStrike is enabling enterprises to harness [indiscernible] [indiscernible] A key win in the quarter was an 8 figure Falcon Flex transaction for a major global financial services holding company where we displaced a network security vendor's multi platform cloud offering. CrowdStrike Financial Services made it even easier to go all in with Falcon committing to a large multiyear deal. Too many consoles got in the way of seamless SOC operations Falcon Cloud security was far easier to manage in a single console and provided all the right security controls to stop cloud breaches.

Moving on to our Identity business, which grew to more than $370,000,000 in ending ARR. Our identity business continues to benefit from several key trends, including the rapidly growing identity attack surface. Addition, our vision for the recently acquired Adaptive Shield business now called Falcon Shield, secures identities everywhere whether on premises, in SaaS applications, or within hyperscaler infrastructure. A key identity win was a large university hospital system that consolidated on Falcon a 7 figure deal. The CISO secured independent budget for Falcon because of the operational superiority of our identity protection module. Specifically, this university had enough of a competitor's Identity Protection Bolt on product that produced too many false positives. Moving on to our next gen SIM business, which grew more than 115% year over year finishing the year at more than $330,000,000 in ending ARR. Next gen SIM is rapidly breaking out as a foundational cornerstone of the integrated Falcon platform. Offering unmatched speed, scalability, and cost efficiency compared to legacy SIMs. We believe the coupling of next gen SIM alongside our native first party data and the agentic power of Charlotte AI gives CrowdStrike a unique advantage to continue leading the AI security revolution. This is why CrowdStrike is uniquely delivering the AI SOC of the future. [indiscernible] A key seven figure NextGen SIM win from the quarter was a major US airline which also ranks as one of the top of global airlines by passengers carried.

This airline selected Krauschwerk to replace legacy AV in the fall and then turned to us to replace their legacy QRadar SIM. Falcon Next Gen SIMs ease of use incident workbench and ease of data ingestion Prevailed over a network security vendor and hyperscaler SIEM. In total, our cloud identity and next gen SIEM businesses represent more than $1,300,000,000 in ending ARR, growing nearly 50% year over year. While each of these businesses can stand on their own, it's the combination of these technologies When delivered together alongside the broader Falcon platform, that continues to propel CrowdStrike forward, as the only true single platform on the market today. And finally, for the first time, I'm excited to discuss our exposure management business, which has quickly become a market disruptor. CrowdStrike exposure management offers both native vulnerability management for devices and applications coupled with integrated attack surface management. This enables features like attack path analysis and dramatically improved vulnerability prioritization. Our customers are already replacing legacy vulnerability management products at Gale, Exposure management wins are easy module attaches to Falcon Flex deals and we're closing them with regularity as we consolidate out legacy vulnerability management vendors, Representative wins include a large digital radio station, a multinational shipping line, and a large healthcare provider in Asia Pacific.

Cybersecurity's leading [indiscernible] see CrowdStrike as a generational opportunity Our ecosystem is a key growth lever on our $10,000,000,000 ARR journey, already returning significant dividends. From a deal origination standpoint, partners sourced 60% of our new business in the fiscal year, validating our partner first strategy and ecosystem investments. In particular, NextGen SIM has attracted the interest of the GSI community given their experience configuring the SIEMs of yesterday and the market opportunity to displace these legacy products In addition, the Falcon Flex subscription model fits the GSI selling motion with incentives for customer, flex utilization. Our GSI business neared the $1,000,000,000 milestone in FY 'twenty five, growing north of 40% year over year. Leading GSIs like Accenture, Deloitte HCL, Wipro, NTT, TCS, Infosys and Cognizant Our investing in their Falcon services practice, and I expect us to see continued growth from these partners this fiscal year. Our MSSP go to market continues to expand at hyper growth pace, addressing the needs of small to medium business MSSP contributed nearly 15% of our new business in FY 2025, signifying a route to market which has quickly grown and scaled over the past two years. All of our go to market partners benefit from our deep investment and strategic focus on cloud marketplaces.

We recently announced being the first cybersecurity ISV achieve more than $1,000,000,000 in sales on the AWS Marketplace in calendar year. We also had a noteworthy year with Google Marketplace, where in our first year of partnership, we did over $150,000,000 in deal value out of the gate. We have aligned our partner ecosystem around hyperscaler marketplaces where we see larger deal sizes and faster deal cycle times. In closing, we are cybersecurity's AI native AgenTek platform that stops the breach.

Our innovation engine enables us to be a consolidating force for secure AI transformation. Our platform wins. Seven modules are each now individually over $300,000,000 in ending ARR demonstrating the power of our innovation in driving record adoption and Falcon's MultiAct platform opportunity that continues to drive growth. And our go to market execution momentum is unprecedented. Businesses are speaking with their wallets investing in CrowdStrike to secure their futures, Today, including our end customers and those of our MSSPs, CrowdStrike is trusted by more than 74,000 organizations as their cybersecurity platform of choice. Growing more than 30% year over year, And in Q4 alone, we've closed new records [indiscernible] every total deal value segment. Over 20 deals greater than $10,000,000 over three fifty deals greater than $1,000,000 over 2,300 deals greater than $100,000 and that was all in Q4. The data tells me that customers trust CrowdStrike. Partners trust CrowdStrike, and the market [indiscernible] [indiscernible] I open with everyone loving a good comeback story. Ours was forged by the trust of our customers The dedication of our team and the loyalty of our partners. For that, I am truly grateful. One thing is certain, in our AI evolving world, cybersecurity will be an increasingly essential ingredient for life in the AI era.

And now more than ever, the world needs CrowdStrike. I'll now turn the call over to Bert Podbear, CrowdStrike's CrowdStrike CFO.

Thank you, George, and good afternoon, everyone. As a quick reminder, unless otherwise noted, all numbers except revenue mentioned during my remarks today are non GAAP. CrowdStrike delivered a strong fourth quarter and finish to the year. Achieving results above our stated expectations across all guided metrics. Demonstrating our ability to adapt to unexpected challenges and emerge stronger. Several key areas from our performance and outlook demonstrate the strength and resilience of our business including first, the strength of our results demonstrates the power of our business model and sales execution highlighted by our record total contract value reaching $6,000,000,000 in FY 2025, with growth accelerating to 40% year over year Second, the successful completion of our customer commitment program which accelerated platform adoption and deepened customer relationships. Our success is demonstrated by Falcon Flex customers adding over $1,000,000,000 in Q4 account value and our strong gross retention rate of ninety seven percent and third, as we look ahead, our visibility is improving. We expect net new ARR reacceleration as well as operating margin and free cash flow margin expansion in the second half of FY twenty twenty six. We believe this momentum will set the stage for further acceleration in FY twenty twenty seven over FY 'twenty six and position us well to achieve our long term targets.

For the full fiscal year, we achieved 2329% ending ARR and total revenue growth, respectively. Operating income grew 27% year over year to reach a record $837,700,000 or 21% of revenue, Net income attributable to CrowdStrike and EPS grew 3127% respectively to reach a record $987,600,000 or $3.93 per diluted share. Free cash flow grew 14% year over year to reach a record $1,070,000,000 or 27% of revenue. For the fourth quarter, we achieved net new ARR of $224,000,000 and ending ARR grew 23% over last year to reach $4,240,000,000 Our fourth quarter results showcase the success of our go to market and single platform strategies. Falcon Flex momentum is increasing. Accelerating platform adoption and our strong sales execution positions us to extend our market leadership with the AI native Falcon platform. Additionally, we entered the new fiscal year with a healthy pipeline as we continue to see robust demand for both prospective and existing customers. In Q4, we completed our very We estimate that the ARR value of customer commitment packages provided in Q4 was approximately $56,000,000 bringing the estimated value for the fiscal year to approximately $80,000,000 While this exceeded our expectations in Q4 as we concluded program The majority of deals that closed with customer commitment packages in the quarter included additional product or flex dollars rather than extended time and professional services.

We view this as a positive for the business as it demonstrates customers' trust in our long term partnership and importantly drives bigger deals and increased levels of platform adoption as customers further consolidate onto the Falcon platform.

And as George stated, the success of the program combined with the strong uptake of Falcon Flex gives us confidence in future net new Air R reacceleration as products are deployed, onetime discounts expire and contracts are upsized and renewed. This dynamic also limited the impact on Q4 revenue which was de minimis and well below our $30,000,000 expectation contributing to our strong revenue beat for the quarter. As mentioned earlier, we are seeing substantial increases in Falcon platform adoption. Accelerated by our Falcon Flex subscription model. In Q4, subscription customers with six seven and eight or more modules grew to 483221% of subscription customers, respectively. Notably, customers with five or more modules reached an all time high of 67% and on average new customers are landing with at least five modules. Given this new heightened level of platform adoption on a broad scale, we will discontinue the five or more metric. Our Falcon Flex program fueled an acceleration in platform adoption in FY 'twenty five. With Falcon Flex customers adopting more than nine modules on average, Flex is our future. Additionally, in Q3 of FY 'twenty five, we announced the launch of CrowdStrike Financial Services, or CFS, and have already closed deals worth over $140,000,000 through the program in FY 'twenty five.

CFS enhances our customers' ability to do larger and longer term deals with us. Further enabling future platform adoption and strategic Falcon Flex deals. As our growing module adoption demonstrates, customers are purchasing the Falcon platform for strategic long term single platform standardization and increasingly leveraging Falcon Flex as the vehicle for these purchases. In addition to accelerating module adoption, our strong customer relationships underpin our exceptional customer retention. Gross retention in Q4 remained high at 97% and our dollar based net retention rate was 112% reflecting the impact of customer commitment packages. Given the size and scale of our business, we're very pleased with our net retention. Moving to the P and L, total revenue grew 25% over Q4 of last year to reach $1,060,000,000 ahead of our expectations. Subscription revenue reached a new milestone of over $1,000,000,000 in quarterly revenue growing 27% year over year to $1,010,000,000 while professional services revenue was $50,200,000 Total gross margin was 78% and subscription gross margin was over 80% of revenue both in line with last year's Q4 performance. Total non GAAP operating expenses in the fourth quarter were $607,800,000 compared to $448,100,000 in the prior year. In Q4, continued our disciplined approach to investing, prioritizing investments in platform innovation and resiliency.

Our customer first mindset is central to our approach to innovation and the driving force behind the success of our single platform strategy and industry leading retention rates. In the fourth quarter, non GAAP operating income grew to $217,300,000 and operating margin was 21% well ahead of our guidance. Our investments in AI are driving significant internal efficiency enabling our teams to focus on high value activities across the business. In Q4, we saw strong employee adoption of AI capabilities with average reported time savings per employee of over one full workday a month equating to more than 24,000 work weeks saved if annualized across our entire workforce. We are also leveraging AI to automate key sales processes and streamline reporting and workflow. By automating the hours of manual work involved in these tasks, we can deliver new efficiencies in the business while continuing to execute on growth initiatives. GAAP net loss attributable to CrowdStrike was $92,300,000 and included $49,900,000 of tax expenses related to acquisitions and $21,000,000 of incident related expenses with the remaining loss related to the ongoing impact of one time programs for employees and one time incentives for the sales team. Non GAAP net income attributable to CrowdStrike grew 10% over Q4 of last year to $261,000,000 or $1.03 on a diluted per share basis well ahead of our guidance.

Cash and cash equivalents grew to $4,320,000,000 Free cash flow was $239,800,000 or 23% of revenue, Incident related expenses impacted Q4 free cash flow by approximately $22,000,000 The $93,000,000 in deals financed through CrowdStrike Financial Services in Q4 had a de minimis impact to the quarter's free cash flow as expected. Moving to our outlook, [indiscernible] The fundamentals of our business remain strong. And we remain committed to our long term target model. We are encouraged by first, best in class customer retention rates and the success of our concluded customer commitment program. Second, continued strong and rapid adoption of Falcon Flex, which is accelerating module adoption rates helping drive deeper strategic relationships with our customers and positioning us for long term growth and third, a robust demand environment across multiple large and growing markets including next gen SIM, where we are in the early stages of disrupting a large legacy market and newer markets such as Agentic AI for cybersecurity where our unique data advantage positions us as the natural innovation and category leader. Visibility is improving, While we do not guide to net new ARR, our assumptions include a typical Q4 to Q1 seasonal decline of approximately 21% to 23% quarter over quarter.

The net new ARR acceleration we expect in the second half of FY 'twenty six sets the foundation for further acceleration in FY 'twenty seven over FY 'twenty six as we scale the business to our goal of $10,000,000,000 of ending ARR by FY 'thirty one. It also sets the stage for operating and free cash flow margin improvement in the back half of the year particularly in Q4. Our operating margin guidance reflects the upfront [indiscernible] we're making in key areas of the business which we expect to yield clear ROI by the back half of FY 'twenty six fueling our growth and innovation. The high end of our guidance implies a fiscal year twenty twenty six non GAAP operating margin of approximately 21% and we plan to return to GAAP profitability in Q4. Looking beyond this year, we plan to deliver 23% non GAAP operating margin in FY twenty twenty seven, As we quickly ramp to our target non GAAP operating model by fiscal twenty twenty nine, which includes a free cash flow margin target between 34% Please note, in Q1 of FY 'twenty six, we expect cash impacts of approximately $73,000,000 for outage related including incremental sales compensation as well as $43,000,000 due to the impact of flexible payment terms provided under customer commitment packages for deals closed in the back half of FY 'twenty five. [indiscernible] We expect to exit fiscal year twenty twenty six with Q4 free cash flow margin at approximately 27% and to return to 30% or more free cash flow margin on an annual basis in FY twenty twenty seven.

Moving to our guidance. For the first quarter of FY twenty twenty six, we expect total revenue to be in the range of $1,100.6 to $1,106,400,000 reflecting a year over year growth rate of approximately 20%. We expect non GAAP income from operations to be in the range of $173,100,000 to $180,000,000 and non GAAP net income attributed with Krautschweig to be in the range of $162,100,000 We expect diluted non GAAP net income per share attributable to CrowdStrike to be approximately $0.64 to $0.66 utilizing a weighted average share count of approximately $254,000,000 shares on a diluted basis and a 22.5% non GAAP effective tax rate which is a $0.19 impact to EPS the midpoint. For the full fiscal year 2026, we currently expect total revenue to be in the range of $4,743.5 to $4,805,500,000 reflecting growth rate of 20% to 22% over the prior fiscal year. Non GAAP income from operations is and $985,100,000 We expect fiscal twenty twenty six non GAAP net income And a 22.5% non GAAP effective tax rate which is a $0.98 impact to EPS at the midpoint, we expect non GAAP net income per share attributable to CrowdStrike be in the range of $3.33 to $3.45 Please refer to our earnings release and earnings presentation for additional details regarding our changes in presentation of non GAAP measures related to tax, and presentation and additional modeling notes.

George and I will now take your questions.

Operator, we are now ready for questions. Which can be found on the bar on the bottom of the Zoom window. You may remove yourself from the queue at any time by lowering your hand. When it is your turn, you will hear your name called and receive a message on your screen notifying you that you may unmute yourself. In the interest of time, participants will be limited to one question. Our first question will come from Saket Kalia with Barclays. Please unmute your line.

Okay, great.

Hey, good afternoon, folks. Thanks for taking my question here and nice finish to the year. Thank you, Saket.

Sure.

George, maybe for you. You. We heard on the call that that Falcon Flex is the future. Was wondering if you could just talk a little bit about how Falcon Flex is driving better value for customers And any examples you have of maybe how current customers are growing their existing spending with CrowdStrike through Falcon Flex. Sure. Thanks, Saket. And as we've talked about for some time, Falcon Flex was really born out of customer demand.

Wanting to consolidate more with CrowdStrike and wanted to create a flexible way to procure more modules. So when we think about Falcon Flex, again, it opens the entire product catalog up to our customers, and then they can add new modules without necessarily going through a procurement cycle. They commit The more they commit, the better the discounts, and they can basically use that very seamlessly in their environment. So, let me just give you one example Last quarter, we had a large transportation company where we consolidated three vendors cloud, SIEM, and multiple endpoint vendors, and we moved them to a flex. And in this particular case, large enterprise, we increased the ARR by 67%. That's just one of many examples, that we've seen. And in general, what we're finding is that customers are, as we go through the demand plan, ahead of schedule their demand plan in consuming the Flex which is a great stat for us. And we called out some of those in the earnings script. So excited about Falcon Flex and its our really market leading way to engage with customers as we go forward.

We are ready for our next question. Our next question will come from Brian Essex with JPMorgan. Please unmute your line.

Okay. Hopefully, you can hear me. Thank you for taking the question. I guess, I want to talk about emerging products. And if I look at the growth rate, it seems as though cloud and identity decelerated at a faster rate than log scale Is that a function of the incentives and how customers may have spent it in cloud and identity as opposed to log scale, which may have more ingestion costs associated with it. Just maybe if you could give a little bit of color on how your customers are consuming those so you understand the sustainability of those emerging segments.

Yeah, good question. So I just recently, as you may have seen in our threat report, we talked about identity and how critical it is to customers. Since 2019, as an example, 40% of the attacks were identity based or non malware based. And, in the current report, 79% are nonmalware based. A lot of it is around identity. So what we've seen as part of the CCP packages is that identity have been a big driver of what people have been taking. Because they know it's so critical for, their protection going forward. So when we look at that and as we talked about the back half of the year, CCP sort of elements will be burning off. And obviously, it's a great opportunity to be able to renew what they're already using and how we're ready protecting them.

So we view it as a net positive and seeding the customer base.

And we're ready for our next question, please. Our next question will come from Gabriela Borges with Goldman Sachs. Please unmute your line.

Hi, good afternoon. Thank you. Bart, I wanted to ask you a little bit about how you thought about guidance for the year because we had the pause in the external demand gen around the July timeframe. We had the enterprise sales cycles pushing out by I think you said 15%. Maybe just talk us through how did you think about the puts and takes to the back half of the year and some of those dynamic reverse and then to Brian's earlier question, you also have the CCP contracts renewing Maybe just walk us through how you thought about some of those dynamics. Thank you.

Yes, sure, Gabriela. Thanks for that. So I think George touched on some of it already. With respect to the CCP programs, the one time incentives with respect to those.

Coming due in the back half of next year, it gives us confidence that we're going to be able to have take advantage of the opportunity to upsell and our customers, they're already using it, they're already loving it, it's going to be easy for them to renew. And of course, as we continue to think about new products that we're coming to market with, it's a great discussion to have We've already gone through, as George said, the demand plan. We're ahead of the demand plan in terms of where customers are at in terms of drawing down from their flex pools. So this gets us excitement about our ability to actually go and have that reacceleration in the back half And I think that it really talks to not only the emerging products that we've had great success in, but even even the rest of our products, we have 29 modules to sell to our customers. We have this opportunity to upsell them, to take out costs and show the value of CrowdStrike. That's why we get excited about the reacceleration of net new ARR in the back half. And we'll move to our next question, please.

Our next question will come from Taliani with B. A. Tal, your line is now open. Please feel free to unmute.

There you go. Thank you. I have two questions, so I'll choose one.

Contribution from existing customers. If I look at your GRR and NRR, and I calculate contribution from existing customers versus new customers, your performance on new customers is very consistent. You're growing between 10% to 11% a year. From new customers. But the growth from existing customers had gone down, which means there are some there is a decline in the growth in upselling to existing customers. So you started the year when 2115% and every quarter it goes down. Can you talk about your ability to take NRR back up which is the function of sales to existing customers or upsell to existing customers?

Sure, Tal. Thanks. So So there's a few dynamics that are impacting obviously dollar based on retention, obviously Our CCP had an impact But remember, DBNR is a noisy metric for us.

As you know, we don't manage to it. In any given quarter, we can land bigger.

Longer deals, which does put pressure on our dollar based on retention. George talked about what Flex does to that environment. Flex gives us the opportunity to enter into a larger longer deals, which could impact DBNR, but that's a good thing for us. We want customers to engage with us with bigger deals, longer deals, that's exciting. Conversely, we now have a bigger base to sell into.

We have this opportunity to go after more logos. So on any given quarter, we're going to get different dynamics and different pressures. But I think the good news is we've got a lot of room with respect to new logos and we've got this ever expanding base where we can sell into an upsell and cross sell. So that's how I look at that dynamic.

And we are ready for the next question. Our next question will come from Joel Fishbein with Truist Securities. Please go ahead.

Thanks for taking the question.

Hey, George, thanks for the color around AI and AI strategy in Charlotte. Would just love to get a little bit more color around pricing and competitive environment around the AI security, that'd be really helpful.

Thank you. So I mean, when you look at Charlotte AI and what we've been able to do from an agentic AI perspective, we talked about some of the efficiencies in terms of hours saved. We've talked about taking a level one analyst, turning into a level three. And with Falcon Flex, we have a lot of attach of Charlotte, in the deals and we continue to wired into our workflows, which is a key part of being agentic. I think overall, we're getting feedback from customers. They like it. They're using it. And, one of the interesting facts that has come out since we released this is that we certainly geared it towards that level one analyst, but we're actually finding that the level three analysts are using it even more because they they understand how to prompt it and and get information out of it. So overall, it's, I think, been very encouraging, the uptake [indiscernible] save our customers a tremendous amount of time and effort. So we'll have updates on Charlotte, but full steam ahead. And as you and I have talked about in the past, it's still early innings in this agentic world, and, we continue to lead the way.

And we're ready for the next question. Our next question will come from Matt Hedberg with RBC.

Great. Thanks for taking my questions guys.

George, for you, exposure management is near and dear to your heart. And you could sense the enthusiasm with some of your early wins. I'm just curious to put a finer point on that. Are we talking about full like network endpoint replacements there? I just want to make sure that I understand like the composition of your platform versus some of the PurePlace?

Yes, we are. When we look at our technology there, whether it's exposure management, vulnerability management is an element of exposure management. We've done some acquisitions. We've had some capabilities for a while particularly on the agent side.

And we have released the ability to actually scan over the network which was a missing element that we didn't have in the past. So that really allows for fuller replacements in a competitive environment. And our customers have been asking for it. We focused on the agent first. Of course, that's where we where our strength is. And now with the ability to scan it really has unlocked the potential to replace a lot of the competitive products in that market. So we remain excited. It's fully integrated. It leverages the full base of data that we have in our AI and workflow infrastructure. We'll continue to give you updates on it because we think it's a real added element to the repertoire of the modules that we have, and we're proud to tell you about the success And we're ready for the next question. Our next question will come from Andrew Nowinski with Wells Fargo. Please go ahead.

Great. Thank you, and congrats on a really strong recovery quarter here. Would like to just dig a little bit deeper on your net new ARR.

If you could just clarify how much the Adaptive Shield acquisition contributed this quarter in Q4? And then if you add back the $56,000,000 you talked about in CCP, it looks like net new ARR was still down about 1% year over year. Gross retention was unchanged. So it doesn't look like churn increased at all. I'm just wondering if you think customers might still be holding back on spending as a reason why net new is still down 1%.

Hey, Andrew. So let me take the churn and contraction question first. So basically, For us, what we saw for CCP, any churn contraction with respect to CCP was really de minimis. There was not much there at all. And with respect to China contraction overall, it was really in line with what we been seeing. There's been no anomalous behavior with respect to churn and contraction. So we're actually really excited about where we're headed with respect to NetNewAR. And certainly with the reacceleration in the back half, With respect to adaptive shields, it was a very small number. With respect to ARR. So it's a diminished from our perspective But when you think about the opportunity that's a very different story and I'll turn it over to George to talk about the opportunity with BAPAShields.

Yes. This is one where our customers are really excited. The day it was announced, all of our Flex customers asked when they can have it and twenty days later, it was part of their rate card. It's So we've seen amazing adoption of it in the early days here.

Obviously, we'll continue to to give you updates, but it's a fantastic technology and something that's really needed in the environment today.

We're ready for our next question. Next question will come from the line of Fatima Boulani with Citi.

Good afternoon. Thank you for taking my question. George, you referenced the staggering in the period deal value that you would contracted for Falcon Flex specifically I specifically wanted to ask you about the Falcon Flex dollars that you have given in kind to some of your CCP customers. And I wanted to get an understanding of how quickly they're burning through those in kind flex dollars that you've given them. Such that it is triggering earlier renewal, earlier upsell events. And if that was a contributing factor to how robust the in quarter deal value was? For Falcon Flex? Thank you.

Sure. Well, what we've seen, as we've moved to Falcon Flex and certainly CCP is just leveraging the licensing model of Falcon Flex to to provide some value back to our customers. But as Bert and I have talked about the back half of the year, we certainly look towards that where those Falcon Flex CCP dollars would burn off. A lot of our sellers now, again, are focused not on just selling new modules, but demand planning with our customers. And, we're seeing the demand plans, be ahead of schedule. Right? So that's a good thing. And, obviously, the more they consume, within a shorter period of time, the better for us. And and, obviously, we want to be there to provide value in any of the modules we have or some of the newer ones like Shields. So any other comments on that Bert?

Yes. Look, I think we have this great opportunity in front of us. I think remember the one thing that really gives us more excitement about the back half that George referring to is we still have a lot of customers to talk about Flex with. Right? We have We have a subset we've already dealt with, but we've got a whole lot more that we can go after that are still coming up for renewal or talking to them about their demand plans. So we're excited about that opportunity that's in front of us.

And we'll take our next question. Our next question will come from Greg Moskowitz with Mizuho. Please go ahead.

Okay. Thank you very much for taking the question. George, exceeding $1,000,000,000 in sales to AWS Marketplace in a twelve month period, I mean, that's really stunning And I'm not sure everyone remembers that you only eclipsed a billion in lifetime sales on AWS in October of twenty twenty three. So clearly, the growth rate that you're showing here is is still very high. But given that we're running into the law of larger numbers, would just be helpful to get your perspective on the growth outlook for CrowdStrike on AWS Marketplace over the next two, three years?

Well, certainly you remember it. So thanks for calling that out. And AWS has been a tremendous partner for us. Not only do we work with them, but we work with our other partner network in conjunction with them, right? So it's important to make sure that we've got all the partners moving in the right direction. I only see it going up I mean, it is the way customers want to consume. And you have to look at the cloud environments and the hyperscalers right now, the larger enterprises are committing more into these marketplaces and cloud providers And the beauty of the marketplace is that customers can use those dollars to burn down and procure CrowdStrike CrowdStrike. So we only see opportunity in this marketplace. And we see it certainly outside of The U. S. A lot of it has been focused in North America. I think the rest of the world really opens up particularly when you look at some of the cloud environments, in different nations and sovereign data requirements things of that nature. So we're very optimistic with our partner. And not only AWS, right, we talked about GCP and others. That have been fantastic routes to market.

Think it is really one of the future ways that customers will continue to procure through CrowdStrike.

And we're ready for our next question. Next question will come from Joseph Gallo with Jefferies.

Hey, guys. Thanks for the question. It was awesome to see the $600,000,000 of cloud ARR growing 45%.

Can you just talk through that competitive landscape? Has that stabilized?

One of your biggest cloud competitors noted on their earnings call that customers are gravitating towards workload protection and agent architecture.

That something that you're seeing as well?

And then, you know, given your strength and workload protection, when, if ever, do you expect customers to consolidate on a cloud solution?

Yes, I think that's absolutely right. When you look at the market, and you've got CSPM and you've got workload protection, I mean CSPM is a great technology, but it's more of a reporting and compliance as opposed to stopping the breach.

So if customers are looking to stop the breach, you're going to need a workload protection. And, of course, that is our DNA. We've been working on that for the better part of a decade, and it's very well refined. And we've earned a trusted spot in running in the most critical infrastructure on these workloads. So we continue to see consolidation in these areas. We certainly have expanded our CNAP capabilities across whether it's CSPM or ASPM or DSPM, etcetera. Lots of PMs in there, but we have all of those and we are root routinely consolidating customer spend in that area. So we're excited about the $600,000,000 milestone and the that we're having in the cloud environments with our customers.

Great. And we're ready for our last question, please. Last question will come from Patrick Colville with Scotiabank. Please go ahead.

All right, guys. Thank you so much for taking my question. And guess I want to ask about the bottom line. We haven't had any questions on the bottom line. So You know, guiding to 20% of [indiscernible] talk us through the puts and takes there? Is that because of the drag on the first half before the reacceleration in the back half. And then did you soft guide Bert to 23% op margins in fiscal twenty twenty seven. So I guess a snap back from from next year.

Yes. Thanks, Patrick. So let me start with the data that we had a very successful C program and our profitability guidance reflects some of the sales and marketing costs of FY 2025 CCP packages amortized over the entire year So that's going to impact our margin. We also have some onetime upfront investments in key areas of the business. That we need to bolster our increasing scale Some of those could be related to the fact that we are fully reigniting our marketing initiatives. Post the outage. We've got innovation across high growth and emerging products across areas including cloud security, identity protection, next gen SIM and AI. We also have ramping investments in our internal use of AI tools. We feel that we can get significant savings in the out periods. The investments that we're going to make [indiscernible] We also have increased in our investments in our which we believe will be a competitive advantage us when we're going up against some of our competitors with respect to our, being the best in not only the best in class in terms of security, but the resilience behind that as well. And then finally, I want to end by saying we expect operating margin and free cash flow margin to expand the second half of FY 'twenty six.

Thank you all for joining. Please I just wanted to make one reminder to please refer to our earnings presentation, which is posted on our Investor Relations website. And for additional modeling notes as well as details on the changes in With that, I'll turn the call over to George for closing remarks.

Thank all of you for your time today. We appreciate your continued support and look forward to seeing you at our upcoming investor events.