New York: CrowdStrike’s earnings report on Wednesday will provide the first glimpse into the financial impact of last month’s global Windows outage, which paralyzed internet services worldwide. Investors are eager to assess the damage to the cybersecurity firm’s reputation and whether it has led to any loss of market share to competitors.
The outage, which occurred on July 19, was triggered by a faulty software update from CrowdStrike. This incident affected millions of users globally, disrupting internet services, grounding thousands of flights, and even forcing broadcasters off-air. Critical sectors, such as banking and healthcare, were also severely impacted.
Microsoft reported that approximately 8.5 million Windows devices were affected by the outage, which has since led to several lawsuits against CrowdStrike, including one filed by Delta Air Lines.
“We worry new customer additions are going to see an impact. Executives may want to get ‘into the weeds’ on why CrowdStrike is the right answer and why their choice is not inviting a future outage,” noted Bernstein analysts in a statement.
The outage has left CrowdStrike vulnerable in its negotiations with clients and new prospects. This has allowed competitors to capitalize on the situation. According to Nikesh Arora, CEO of rival cybersecurity firm Palo Alto Networks, many customers have reconsidered their options since the incident, providing an opportunity for competitors to poach clients by offering steep discounts.
As a result, over half of the 45 brokerages covering CrowdStrike have reduced their annual revenue estimates. Some analysts expect the company to lower its annual revenue forecast from the current outlook of $3.98 billion to $4.01 billion.
Since the outage, CrowdStrike’s stock has dropped by about 20%, erasing roughly $20 billion from its market value. Meanwhile, its rivals, SentinelOne and Palo Alto Networks, have seen their stocks rise by 25.4% and 8.3%, respectively.
Despite this setback, CrowdStrike’s stock is still up over 5% year-to-date, thanks to its leading position in the cybersecurity industry. Clients continue to turn to larger providers like CrowdStrike that offer comprehensive cybersecurity solutions to help lower costs.
Analysts anticipate CrowdStrike will report a 31% rise in revenue for the quarter ending in July, according to a poll conducted by LSEG. Many analysts believe the fallout from the outage will be short-lived, citing CrowdStrike’s entrenched position in the industry and the high costs associated with switching providers.
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“Not all customers felt the pain,” noted Bernstein, adding, “replacing CrowdStrike may be an even riskier move and seems unlikely.”
CrowdStrike’s efforts to restore systems following the outage have been seen as positive by many of its existing clients. However, some analysts argue that the firm will need to work hard to regain trust, as competitors like Palo Alto Networks are poised to absorb any lost business.
Gadjo Sevilla, a senior analyst for technology at eMarketer, stated, “CrowdStrike must launch a charm offensive to win back trust among partners and customers.”
The company is scheduled to participate in a Microsoft-hosted summit in September aimed at improving global cybersecurity systems, which could help restore confidence in its brand.
