Cybersecurity Firm CrowdStrike Experiences Slowdown in Revenue Growth
Cybersecurity is a crucial aspect of modern-day business operations. Companies worldwide are investing to protect their online presence and data. However, as it turns out, even the cybersecurity industry is not immune to the challenges that come with economic downturns and increased competition.
George Kurtz, CEO of cloud cybersecurity firm CrowdStrike, stated that online threats to businesses do not disappear with economic downturns. While the company registered a 42% revenue growth in the first quarter, it expects a drop to around 35% for the full year. This marks the slowest growth ever recorded for the cybersecurity firm. CrowdStrike is not alone in this challenge as other technology companies such as Okta are also experiencing revenue growth slowdowns.
Despite this, CrowdStrike is making strides in the generative AI market with an “AI security analyst” named Charlotte. She uses artificial intelligence to identify threats via the Falcon software platform. However, investments in AI by software companies have yet to produce tangible increases in revenue.
As one of the bumper crop of initial public offerings in 2019, CrowdStrike’s stock soared from its listing price by $34 to over $157, while others in the group such as Uber and Lyft struggled to live up to initial market interest. On projected sales, it trades at around 15x, a relatively high price but not unusual for software companies like Snowflake and Datadog.
CrowdStrike’s “go-to-market” strategy deserves recognition, with the provision of free trials and demonstrations that have attracted enterprise customers. As the company’s customer base grew, users bought and used more of its services, increasing by 62% YoY in the most recent quarter.
However, like many software companies, CrowdStrike is shifting its focus from growth towards profitability. In the last quarter, the company recorded a net profit for the first time and is expected to deliver a full year of profitability next year.
Why is the growth slowing down?
Microsoft has made its presence known in cloud cybersecurity, with nine mentions in CrowdStrike’s latest earnings call. While Kurtz said that customers prefer their products, competition from Microsoft could pose a permanent problem if the slowdown is competition-driven.
Expanding Perspectives: The Future of Cybersecurity in a Post-COVID World
The COVID-19 pandemic has disrupted traditional operations and has pushed businesses into a new normal, where digital transformation is crucial. With remote work becoming the norm, the number of cyber threats has increased, making cybersecurity more important than ever. While cybersecurity is crucial, companies can’t ignore the costs that come with it, especially when the economy is experiencing a slowdown.
In this section, we will explore how companies can still prioritize cybersecurity while being cost-effective.
Understanding the Cybersecurity Threat Landscape
The first step to understanding the importance of cybersecurity is to understand the threat landscape. It is essential to recognize that cybercriminals are constantly evolving their tactics, techniques, and procedures (TTPs) to stay ahead in their game.
Statistics from a cybersecurity report by Cybersecurity Ventures indicate that by 2021, cybercrime damages could cost up to $6 trillion annually, a significant increase from $3 trillion in 2015. In 2020, more than 80% of organizations experienced an increase in cyber attacks, with phishing attacks being the most common. Furthermore, the pandemic has sped up digital transformation for most organizations. However, it has also created new vulnerabilities and amplified existing ones to make them attack targets.
The Cost of Cybersecurity: Finding a Balance
The costs associated with cybersecurity can pose a significant challenge, leading smaller organizations to ignore it. However, with awareness of the potential costs and damages that cyber attacks can cause, outsourcing cybersecurity services is becoming popular. Contracting an external provider can save on the costs of hiring, training, and maintaining an in-house team of experts. Outsourcing can also offer access to up-to-date technologies that the business might not be able to afford.
Another cost-effective approach is to implement best practices such as employee security awareness training, data backup, access control, and encryption. Employees are the weakest link when it comes to cybersecurity, with phishing attacks being the most significant threat to businesses. Establishing procedures that emphasize strong passwords, multi-factor authentication, and insisting on regular software updates can protect companies significantly.
The Future of Cybersecurity in a Post-COVID World
As digital transformation accelerates globally, so does the need for cybersecurity. Companies must prioritize cybersecurity without compromising financial stability. Outsourcing cybersecurity services, implementing best practices, and investing in employee training can help organizations stay secure while being cost-effective.
The pandemic has created a unique opportunity to rethink and refine cybersecurity priorities and strategies. However, to ensure its success, businesses need to be agile and resilient and adapt to the constantly evolving threat landscape. Cybersecurity training should also become a crucial part of the employee onboarding process.
Summary
CrowdStrike, a leading cybersecurity firm, expects a slowdown in revenue growth from a high of 42% in Q1 to 35% for the full year due to economic downturns and competition from Microsoft. Despite being part of an income of high performing tech companies in 2019, the company faces a challenging cybersecurity landscape.
In a post-COVID world, understanding the threat landscape, balancing cost with protection, training employees, and outsourcing cybersecurity services are cost-effective approaches to ensure business protection. Companies must recognize that cybersecurity is crucial and adapt to the constantly evolving threat landscape to stay ahead.
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Online threats to businesses don’t go away economic downturns. So says George Kurtz, CEO of CrowdStrike. However, after posting 42% revenue growth in the first quarter, the US cloud cybersecurity firm expects full-year growth to drop to around 35%. This is the slowest ever recorded.
CrowdStrike is not alone. Okta also expects a slowdown in revenue growth. Both share prices declined accordingly.
This is despite Crowdstrike adding to the trendy generative AI market with an “AI security analyst” called Charlotte. She says she uses artificial intelligence to identify threats via her Falcon software platform. Furthermore, investments in AI by software companies have yet to produce tangible increases in revenue.
CrowdStrike it was part of a bumper crop of initial public offerings in 2019. As others in the group, including Uber and Lyft, struggled to live up to initial market interest, CrowdStrike’s stock jumped from its listing price by $ 34 at over $157. On projected sales, it trades at about 15x. That may sound high, but software companies like Snowflake and Datadog trade at higher multiples.
The $37 billion company’s so-called “go-to-market” strategy is widely praised, with free trials and demonstrations attracting enterprise customers. As its customer base grew, users bought more of its services. In the most recent quarter, the number of customers using five or more CrowdStrike services increased 62% year over year.
Like many software companies that spent the era of low interest rates focusing on growth, CrowdStrike has also begun to pay much more attention to profits. In the last quarter it recorded a net profit for the first time. It is expected to deliver a full year of profitability next year.
So why is growth slowing down? Note that Microsoft is making its presence known in cloud cyber security. The company was mentioned nine times in CrowdStrike’s latest earnings call. Kurtz said customers prefer his products. But if the slowdown is driven by competition, it could become permanent.
https://www.ft.com/content/4e26f902-5df2-42e7-82fe-c023d2258c44
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