CrowdStrike Shares Up 20% in August. Here’s Why the Gains Could Continue into September

July 19th was a memorable day for CrowdStrike (NASDAQ: CRWD) investors. The company had issued a routine update to its cybersecurity software when it crashed, bringing down about 8.5 million Windows computers. The outage cost CrowdStrike’s largest customers — from airlines to banks — an estimated $5.4 billion.

By August 2, CrowdStrike shares had fallen 36% to a low of $218 as investors feared the incident would lead to customer churn and a significant drop in the company’s revenue. But the stock rebounded in August, rising 20% ​​for the month as the fallout appeared to be less damaging than originally predicted.

That was reinforced by CrowdStrike’s Aug. 28 earnings release for its fiscal second quarter of 2025 (ended July 31), when CEO George Kurtz told investors that many upcoming customer deals would likely be delayed rather than canceled. So here’s why CrowdStrike stock could continue to rally in September (and potentially beyond).

CrowdStrike continues to be a leader in cybersecurity

The cybersecurity industry has a history of fragmentation, with different vendors specializing in different product segments. This has led to companies having to piece together their cybersecurity stack from multiple vendors. However, the CrowdStrike Falcon platform is unique in that it can address all of an organization’s cybersecurity needs.

Artificial intelligence (AI) has been at the heart of Falcon for more than a decade, facilitating automation across the platform. This is critical as cyberattacks grow in both sophistication and frequency, and human managers simply cannot keep up with the sheer volume of alerts.

CrowdStrike AI models are trained on over 2 trillion security events every day and make 180 million attack indicator decisions every second to determine the intent of a potential threat. In other words, the company’s AI models are continually refined to become faster and more accurate at identifying and responding to incidents.

In addition, CrowdStrike last year launched Charlotte AI, a virtual assistant embedded in Falcon. It can be deployed immediately to detect threats and reduces the need for employees to manually review every security alert. CrowdStrike says customers save an average of two hours per day with Charlotte AI because it adds another layer of automation to Falcon.

Falcon offers 28 modules spanning cloud security, identity protection, endpoint security, and more. In Q2, CrowdStrike reported that 65% of its customers were using at least five modules. Additionally, the number of signed contracts for eight or more modules (where spending really grows) increased 66% year over year, underscoring the growing need for cybersecurity, especially among larger, more complex organizations.

Image source: Getty Images.

CrowdStrike’s Q2 Revenue Beats Expectations

CrowdStrike generated $963.9 million in revenue in Q2, up 32% year-over-year. That was also above the high end of management’s $961.2 million guidance, suggesting the outage didn’t have a large financial impact in the quarter.

Perhaps that’s not surprising, since the outage occurred less than two weeks before the end of the quarter. But management’s guidance for the full fiscal year 2025 (ending January 31, 2025) also indicates a relatively small impact. The team had originally expected to generate $4 billion in revenue this year, which it revised down by just 2.5% to $3.9 billion. That result would still represent a 27.5% increase in revenue compared to fiscal 2024, which, all things considered, is good news for investors.

As I mentioned at the beginning, the company’s CEO said that some deals that were supposed to close at the end of Q2 have been pushed to future quarters, but the “vast majority” of them remain in the works. In other words, it seems that potential customers have taken a break to make sure CrowdStrike’s issues are resolved before they sign on, but few are looking to walk away entirely.

Looking to the long term, despite recent headwinds, the company actually reiterated its goal of reaching $10 billion in annual recurring revenue (ARR) by fiscal 2031. At the end of the second quarter, ARR was $3.86 billion, so that goal would represent a whopping 159% increase over the next six years.

CrowdStrike stock is still expensive, but less than before

CrowdStrike generated $47 million in net income in Q2, a staggering 455% increase from the same period a year earlier. However, the company broke even just a year ago, so it’s still relatively early in its journey to profitability. That means it’s more appropriate (for now) to value it using a price-to-sales (P/S) multiple that focuses on revenue.

Based on CrowdStrike’s $3.5 billion in revenue for the last 12 months and its $67.5 billion market capitalization, the stock is trading at a P/S ratio of around 19. That’s a significant drop from July, when the ratio was hovering around 30, but the company is still expensive compared to its main rival, Palo Alto Networkswhose P/S ratio is 15.9:

PS CRWD data by YCharts

CrowdStrike deserves a premium on its P/S multiple—in this case, the company’s revenue grew 32% last quarter, while Palo Alto’s revenue grew just 12%. But if the July 19 incident has unexpected consequences that force management to further lower its fiscal 2025 revenue guidance, investors may want to reconsider the valuation they’re willing to pay for CrowdStrike stock.

With that in mind, given the facts available today, I believe the stock could build on the 20% gain from August and continue to recover in September. If the 2.5% decline in fiscal 2025 revenue guidance is as bad as it gets, there’s a good chance CrowdStrike stock will revisit its all-time high of $390 over the next year or more. The company could see further growth in the future as it approaches its $10 billion ARR goal.

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Anthony Di Pizio has no position in any stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and Palo Alto Networks. The Motley Fool has a disclosure policy.