Five months after CrowdStrike (CRWD) introduced a faulty update to its cybersecurity software that brought a large slice of corporate America to a halt, most of the issues surrounding the massive information technology meltdown seem to be resolved. And CrowdStrike stock appears to have recovered.
That’s the verdict from stock analysts, crisis management experts and industries impacted by the July 19 outage. The outage cost an estimated $10 billion in damages and affected thousands of clients using CrowdStrike’s cybersecurity software. It also interrupted the lives of millions of people.
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The company still faces some financial headwinds as it continues to compensate clients over the episode. Indeed, many analysts say it’s not out of the woods just yet. But it’s getting high marks for its recovery efforts.
“It’s been a master class in how to handle that kind of situation,” Citizens JMP analyst Trevor Walsh told Investor’s Business Daily. He added: “I haven’t heard anything in the months and weeks since from anyone talking about how it was badly handled.”
Others on Wall Street echo those sentiments. D.A. Davidson analyst Rudy Kessinger said in a September note to clients that his brokerage surveyed two dozen CrowdStrike customers and came away with the “clear assurance” that CrowdStrike did everything it could to address customers’ needs following the outage, and it was forthcoming about it.
“Some customers indicated they had never seen such levels of transparency before, with some even suggesting they would ‘double down’ on (CrowdStrike) because of it,” Kessinger wrote.
A Return To Normal For CrowdStrike Stock
Indeed, CrowdStrike’s stock price suggests a return to normalcy. Its share price fell nearly half in less than a month — from the stock’s July 9 peak to its Aug. 5 trough. Since then, CrowdStrike stock has surged 80%. It’s back above where it was on July 18, the day before the outage, and is approaching that July 9 peak again.
Investor’s Business Daily currently ranks CrowdStrike stock second in its computer software-security group, right behind Fortinet (FTNT). It gets a Composite Rating of 95, out of a possible 99. Its Earnings Per Share Rating is 97 while its Relative Strength Rating is 84.
But there are some lingering effects that could put some speed bumps in the road for CrowdStrike stock.
For one, it still faces a major lawsuit from one of its customers, Delta Air Lines (DAL). The carrier estimated it canceled more than 6,000 flights over five days, affecting 1.3 million passengers as a result of the outage. It seeks $500 million in damages.
Offering Free Services
Further, CrowdStrike continues to compensate affected customers through various means — including deep discounts on expanded services. Those are expected to impact the company’s financials well into next year.
For the company’s 2025 fiscal third quarter, which ended in October, analysts said at the time that CrowdStrike indicated lower estimates on a key metric, net new annual recurring revenue or ARR, for the fourth quarter ending in January. ARR is tied to subscription services growth.
“The ongoing headwinds from more customer commitment packages will likely move consensus ARR estimates lower for the next few quarters,” BMO Capital Markets analyst Keith Bachman said when the company reported earnings in late November.
The bright side is the cybersecurity company is reporting a 97% customer retention rate.
“Depending on need, our customer commitment packages encompass additional modules, professional services, flexible payment terms as well as discounts and extended duration to a customer’s subscription,” the company said in a prepared statement. “The leading mechanism for these packages is our Falcon Flex program, which provides customers with access to any and all modules they wish at compelling economic values.”
‘Blue Screen Of Death’
On July 19, millions of workers were greeted with a “blue screen of death” on their computers. That screen shows up when Microsoft‘s (MSFT) Windows operating system gets jammed.
The reason for the jam was that CrowdStrike issued an automatic update to its Falcon Sensor security software, designed to detect attacks on certain Windows-based systems. But the update provided too many “input fields,” causing system crashes on an estimated 8.5 million computers worldwide. Those who rebooted found that it reintroduced the error to their computers.
Factories, hotels, retailers, emergency services and government offices were all hit. Particularly hard hit were financial institutions and health care providers. Airlines took a body blow, forcing them to strand passengers for some time.
About six weeks after the outage, in late August, CrowdStrike itself cut its financial outlook for the year as a result. At the time, however, it managed to beat second-quarter earnings predictions.
CrowdStrike’s quick response won the company praise from a number of circles. It also didn’t hurt that the company’s president, Michael Sentonas, showed up at an industry conference days after the outage to accept a trophy for the “most epic fail” in the industry.
A Razzie award of sorts, the move probably won over a sizable number of those affected by the outage. Sentonas vowed to display the award prominently to remind staffers of what could happen.
“It always helps to own up to a mistake and take responsibility,” said Kelcey Kintner, senior vice president at Red Banyan, a crisis management PR firm based in Fort Lauderdale, Fla. “There was no way for CrowdStrike to hide from this. The company had to lean in, and own it.”
CrowdStrike Stock: Holding It Accountable
In written responses to IBD, Kintner praised CrowdStrike for its response to its clients. But she says they could have done more to communicate with the customers of those clients.
“They missed the mark on apologizing to all the people that sat in airports for days, the everyday individuals that missed weddings, funerals, and other impactful life events,” she said. “The company needed to communicate to those folks directly in a really transparent, impactful and human way. That was the missing piece in their response.”
Kintner says it’s difficult for consumers at the end of the chain to hold the cybersecurity firm accountable.
“It’s a lot easier to stop eating Chipotle or stop drinking Budweiser — both brands that suffered from severe customer backlash after a crisis,” she said.
CrowdStrike officials point out Chief Executive George Kurtz delivered an apology on “The Today Show” shortly after the outage occurred on July 19.
“We have continually expressed our regret and apologies to customers, travelers and everyone impacted by the incident and for the disruption that resulted,” the company said in a written statement to IBD.
Making Lemonade From Lemons
Still, the company appears to be making lemonade from lemons. It’s offering trial runs to affected customers on additional products — much like a cable company offering free HBO to subscribers. That gives CrowdStrike a chance to ultimately sell more goods and services.
“As our (Chief Executive) George Kurtz stated in our Q3 earnings, Q3 gross retention was over 97%, and customers are spending more, entering into longer subscription terms, and taking the opportunity to achieve their consolidation objectives faster,” a CrowdStrike spokesperson said in a written statement for IBD.
Kintner notes that CrowdStrike has become more high profile as a result of the crisis. She says that could work in the company’s favor.
“Most people had never heard of CrowdStrike before July 19th. Now they certainly have,” she said. “And even though the whole experience was an enormous PR nightmare, the company can potentially build on that name recognition as they move in the right direction. Everybody loves a comeback story.”
Seeking Delta Lawsuit Dismissal
Perhaps the biggest obstacle for CrowdStrike is the Delta lawsuit, which alleges negligence against the cybersecurity software maker. Delta claims CrowdStrike “forced untested and faulty updates to its customers.”
CrowdStrike called Delta’s allegations “spurious” in a recent a 39-page motion to dismiss the case. It added that the pact between the two precludes the airline from seeking $500 million in damages.
Neither Delta nor its attorneys returned messages seeking comment on the proposed dismissal. But CrowdStrike points out the airline remains a customer.
Ultimately, CrowdStrike stock analysts are largely pleased with how the company has handled the crisis so far.
“While the company will face some lingering headwinds over the next 12 months as a consequence of the IT outage, it does not change our positive long-term view of CrowdStrike,” Wedbush Securities analyst Daniel Ives said in a recent note to clients. He added the company “remains the gold standard for cybersecurity with the outage only representing a dark chapter” in its growth path.
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