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Nov 30 (Reuters) - A warning from Crowdstrike Holdings Inc (CRWD.O) that clients were cutting back on spending and delaying purchases due to an economic slowdown slammed cybersecurity stocks on Wednesday, inflicting fresh pain on the battered sector. "Increased macroeconomic headwinds elongated sales cycles with smaller customers and caused some larger customers to pursue multi-phase subscription start dates," Crowdstrike Chief Executive Officer George Kurtz said. The results are the latest in a series of dour reports from cybersecurity firms, whose business boomed during the pandemic but is now seeing a slowdown, making them a hot target for private equity buyouts. "Resilient, but not immune is a theme that will likely dominate the narrative during our October quarter-cohort earnings cycle," Piper Sandler analysts said. Still, some analysts see long-term benefits from the rising demand for cybersecurity as more businesses take to the web and high-profile hacks force companies to be more cautious.
CrowdStrike shares fell more than 17% in premarket trading Wednesday, a day after the cybersecurity company reported third-quarter results that said new revenue growth was weaker than expected. More than $198 million was net new ARR added in the quarter, which ended Oct. 31. Last year, CrowdStrike's ARR increased by more than 67% in the third quarter, and the company added 1,607 net new subscription customers for that same period. Analysts at Morgan Stanley also said CrowdStrike's results were "disappointing," but they said estimates did not reflect the current macroeconomic environment. An analyst at Stifel said CrowdStrike's results were "disappointing" and downgraded the stock from buy to hold.
CrowdStrike shares plunged 18% in extended trading on Tuesday after the cybersecurity company reported third-quarter results that top estimates but said new revenue growth was weaker than expected. More than $198 million was net new ARR added in the quarter, which ended Oct. 31. The company also added 1,460 net new subscription customers for the quarter. Last year, CrowdStrike's ARR increased by more than 67% in the third quarter, and the company added 1,607 net new subscription customers for that same period. Prior to the after-hours move, shares of CrowdStrike were down more than 32% so far this year.
The S & P 500, meanwhile, is down 15.5% this year, dragged down by the communication services and information technology sectors, along with consumer discretionary. The Nasdaq is up 6% in the fourth quarter, while the S & P 500 has surged 12% in that time. But, some investors think tech's cooperation will be needed for the market to bounce back from this bear market. "[Tech stocks] have to participate, they have to move up to get a big market move," the company's co-chief investment officer said. Tech stocks that could lead Given this backdrop, CNBC Pro searched for stocks in the Nasdaq 100 — which is made up of the 100-largest Composite stocks — that could lead tech out of its rut.
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailCrowdStrike's modular format appeals to customers facing economic downturnCrowdStrike Co-Founder and CEO, George Kurtz joins 'TechCheck' to discuss the appeal of CrowdStrike's modular format for companies looking to consolidate, their recent acquisitions, and the scope of vulnerabilities facing cybersecurity.
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