CrowdStrike Holdings, Inc. · Q2 FY2027 call

Our previous guidance foreshadowed this conviction, and CrowdStrike's Q2 was our very best quarter in company history. Inflection has become acceleration.

all-time record net new ARR of $333 million, accelerating to 51% year-over-year growth and beating the high end of our guidance by more than $45 million.

We are seeing agents go rogue, swarming to attack and moving beyond their guardrails to autonomously harm. Agents are proving capable of data theft, permission alteration, and full-on command and control at scale, leading to organizational compromise. The agent of today is both a friend and foe.

In sampling our customer base, we have seen more than 400% growth in Claude usage and more than 100% growth in custom agent usage on endpoints in recent months.

Last quarter, we raised our forward net new ARR growth guidance by 520 basis points, and this quarter, we're raising our FY 2027 year-over-year net new ARR growth outlook by an additional 630 basis points, even more than last quarter. That's a raise to our net new ARR guidance of more than $100 million since the start of the year.

In Q2, customers converting from standard subscriptions to Flex delivered an average ending ARR uplift of more than 40%. From that new baseline, customers completing their first reflex this quarter generated an additional average ending ARR expansion of 25%. Looking at the cumulative uplift of customers who have re-flexed at least twice, in Q2, these customers had average ending ARR 53% higher than their initial Flex starting point

Second quarter non-GAAP operating income was a record $372 million, exceeding our guidance, and non-GAAP operating margin was 25%, up 350 basis points over the prior year. The outperformance was driven by strong top-line execution, continued gross margin expansion, and increased operating efficiency.

In Q2, we delivered $5 million of GAAP net income attributable to CrowdStrike, marking the third consecutive quarter of positive GAAP earnings.

We generated Q2 record cash flow from operations of $530 million and Q2 record free cash flow of $377 million, or 26% of revenue, exceeding our free cash flow margin expectation of 24.5%.

At the midpoint, we now expect $1.355 billion of net new ARR for the full year, an increase of approximately $116 million from our initial FY 2027 outlook. This equates to expected year-over-year net new ARR growth of approximately 34%, compared to 22.5% in our initial FY 2027 outlook, representing an increase of 1,150 basis points.

The magnitude of this increase reflects more than our Q2 outperformance. As AI expands the attack surface and increases the urgency around cybersecurity, we believe it is driving a broader security modernization cycle that creates durable demand across the Falcon platform.

the acquisition of XM Cyber's technology assets is expected to close in the second half of FY 2027 and will not bring any ARR or revenue to CrowdStrike, nor are we including any ARR or revenue from this transaction into the FY 2027 guidance.

As I said in a prior earnings call, I think the AI DR business can be bigger than the EDR business, just given the pure number of agents which each person will have, which is estimated to be about 90.

You think about cloud, over $905 million in ending ARR, up 29%. You've got next-gen identity, which is a big piece of the AI story. That's up 33% year-over-year. Then you've got, obviously, next-gen SIEM. Just a home run for us. That's coming up on almost $700 million, and that's up 60% year-over-year. All three of those can be an IPO by themselves.

On the first point, it is separate, and incremental. It's another module, and it's priced separately, which is again, where we're seeing a lot of the growth.

We actually have token-based pricing as part of AI DR, so we already have that today. What is important from a customer perspective is they do want some certainty on what they are paying. So we provide a certain number of tokens across an environment, and obviously we scale that to how big the customer is.

given the fact that there is an exponential increase in vulnerabilities that are found via frontier AI and patches that can be created via frontier AI, that is great. The problem is you have hit the sound barrier of actually rolling out a patch.

we actually have the ability to count tokens and track cost. […] We have heard EAs spending $10,000 just on tokens because of the way they were using the models.

a lot of the AI is being consumed on the endpoint. It might be created in the cloud, but it is being consumed on the endpoint. […] If we think about the market, about half the market is still using legacy AV.