Why analysts now see a 32% upside to CrowdStrike stock after its 'best quarter'?

CrowdStrike CRWD shares jumped more than 9% in premarket trading Thursday after the cybersecurity company beat second-quarter earnings expectations and raised its full-year revenue forecast, as businesses stepped up spending to protect against increasingly sophisticated threats linked to artificial intelligence.

The Austin, Texas-based company reported adjusted earnings of 31 cents per share, compared with the 29 cents expected by analysts.

Revenue rose 26% from a year earlier to US$1.5 billion (approx. $1.9 billion), topping expectations of US$1.4 billion (approx. $1.9 billion).

Chief Executive George Kurtz described the quarter as a milestone for the company, pointing to the growing realization among enterprises that adopting AI also creates new cybersecurity risks.

The second quarter "was the best quarter in CrowdStrike's history," Kurtz said in a statement.

"The Mythos moment translated into mass-market acceptance that AI adoption needs security."

“Every enterprise will run on AI, and securing it is the largest market opportunity in our history.”

CrowdStrike's shares have already gained more than 66% this year, supported by expectations that the rapid adoption of generative and agentic AI will expand the market for cybersecurity products.

AI expands the threat landscape

The cybersecurity industry has been closely watching the emergence of AI systems capable of finding and exploiting software vulnerabilities.

Anthropic's release of its advanced Mythos model, which can exploit previously unknown software vulnerabilities, has highlighted the potential for AI to make cyberattacks faster and more sophisticated.

That has created a corresponding opportunity for companies such as CrowdStrike, which provide tools designed to detect and respond to threats across corporate networks and devices.

The company said its annual recurring revenue rose 25% year over year to US$5.8 billion (approx. $7.5 billion).

Net new ARR reached a record US$333 million (approx. $429.6 million), pointing to strong demand for additional products and services among existing and new customers.

CrowdStrike also swung to a net profit of US$5.3 million (approx. $6.8 million), or 1 cent per share, from a loss of US$70.2 million (approx. $90.6 million), or 7 cents per share, a year earlier.

The results suggest that AI is not simply creating a new source of cyber threats but is also encouraging companies to modernize their security infrastructure.

Falcon Flex helps drive larger deals

One of the strongest areas of growth was CrowdStrike's Falcon Flex offering, which allows customers to deploy and switch between different security tools within the company's broader platform.

CrowdStrike said Falcon Flex more than doubled from a year earlier. Kurtz said on the earnings call that the company added 935 Flex accounts during the quarter, with those customers accounting for its 10 largest deals by value.

Chief financial officer Burt Podbere said the model is helping CrowdStrike secure larger and longer-term contracts by allowing customers to purchase multiple cybersecurity products through a single platform.

“At the end of the day, it’s the platform sale,” Podbere said. “They want better outcomes at a cheaper cost.”

The development is significant because CrowdStrike's strategy increasingly revolves around expanding spending from existing customers rather than relying solely on new customer additions.

The company can use its endpoint security foothold to sell additional products covering areas including cloud security, identity protection, security information and event management, and AI security.

CrowdStrike raises full-year outlook

CrowdStrike raised its full-year revenue forecast to between US$6 billion (approx. $7.7 billion) and US$6 billion (approx. $7.8 billion), above the US$5.9 billion (approx. $7.7 billion) expected by analysts.

The company also lifted its adjusted earnings-per-share forecast to between $1.25 and $1.26, compared with Wall Street's estimate of $1.23.

For the third quarter, CrowdStrike expects revenue of US$1.5 billion (approx. $2 billion) to US$1.5 billion (approx. $2 billion) and adjusted earnings of 31 cents per share. Both forecasts were broadly in line with analyst expectations.

The raised outlook indicates that management expects demand to remain strong despite the company's already rapid growth.

Analysts also pointed to accelerating recurring revenue as an important signal.

TD Cowen noted that net new ARR growth reached 51% year over year during the quarter, describing the results as a potential inflection point for faster growth in coming periods.

Analysts raise price targets but valuation concerns remain

Several Wall Street firms raised their price targets following the earnings report, reflecting growing confidence in CrowdStrike's ability to benefit from the expansion of AI-related security threats.

Scotiabank raised its target to $250 from $227 while maintaining a Sector Outperform rating.

This reflects a 32% upside from the stock's Wednesday close.

The firm said conversations with chief information security officers pointed to growing demand for what it called "Mythos Preparedness."

Scotiabank said companies are looking to CrowdStrike to modernize core security systems while also protecting their growing use of AI through products such as AIDR and Shield.

The firm acknowledged that CrowdStrike's valuation remains expensive but said it views the stock as a medium-term compounder and a potentially important security platform in an environment reshaped by advanced AI.

TD Cowen also raised its price target to $250 from $235 and maintained a Buy rating.

The firm said AI is expanding the attack surface for cyber threats and argued that CrowdStrike's Falcon platform is well positioned to benefit as enterprises increase spending on endpoint detection and response.

Baird raised its target to $230 from $220, although it retained a Neutral rating.

The firm highlighted AI-driven security modernization across CrowdStrike's business but cautioned that valuation remains demanding.

Mizuho raised its target to $250 and maintained an Outperform rating, while Jefferies increased its target to $240.

Jefferies pointed to CrowdStrike's raised fiscal 2027 ARR guidance of US$6.6 billion (approx. $8.5 billion) as evidence of stronger momentum.

Citizens retained a Market Outperform rating and a $230 price target, citing the company's ability to act quickly on emerging growth opportunities.

The AI cybersecurity trade gathers momentum

CrowdStrike's latest results reinforce an increasingly important theme in technology markets: AI could simultaneously increase the number and sophistication of cyber threats while driving greater spending on security.

For CrowdStrike, that creates an unusually favorable setup.

Companies adopting AI need to secure new endpoints, applications, identities and data, while autonomous AI agents could introduce additional vulnerabilities that traditional security systems were not designed to handle.

The company's ability to bundle those capabilities through Falcon Flex could further increase customer spending and improve retention.

The key question for investors is valuation. After a gain of more than 61% this year, CrowdStrike already reflects considerable optimism about its AI opportunity.

The latest earnings report, however, suggests that demand is continuing to accelerate rather than fade.

With revenue growth still above 25%, recurring revenue expanding rapidly and analysts raising price targets, investors appear increasingly willing to pay a premium for CrowdStrike's position at the intersection of cybersecurity and AI.

Moves like Thursday's tend to draw fresh attention from investors who follow high-growth tech names through investment platforms.